A CEB study shows that 95% of HR leaders feel unhappy with traditional performance review systems.

An underwhelming performance review not only fails to bring about the right kind of change in the workforce but also decreases employee morale. It is extremely important for companies to conduct performance reviews the right way, as it is an excellent tool to reshape the potential of the employees.

Before you decide to go with a particular performance review format, it is wise to take a look at the popular types of performance reviews in 2024 and analyze their pros and cons. 

The time and energy an organization puts into developing a performance review process is substantial. Even when you do everything right, if the type of performance review does not align with the likes of your employees, you might not get the desired feedback from them. So, make sure you do not commit the mistake of picking the wrong type of performance review. 

Let us start with the most comprehensive type of performance review. As the name suggests, 360-degree feedback provides a complete evaluation of an employee from not just the manager but from co-workers and sometimes even clients. They include peer reviews, manager reviews, secondary manager reviews, self-reviews, or upward reviews. The biggest complaint raised by employees when it comes to performance reviews is that they are inaccurate. In order to alleviate this issue, people use 360 degree feedback, where a more holistic approach is used in employee evaluation. 

Pros

• Help employees see themselves from multiple points of view
• Creates a culture that gives importance to openness and collective feedback
• A great way to increase self-awareness among employees

Cons

• Complexity and length of the process can sometimes be overwhelming
• There is a risk of feedback being biased or influenced by personal relationships

Let us move on to a more blunt and a bit controversial type of performance review. Stack ranking or forced ranking is where employees rank their co-workers according to their performance from the highest to the lowest. It is a great way to understand the dynamics among employees as well because employees rank themselves and each other into top, middle, and bottom sections based on various parameters. The results are clear, but it could lead to a competitive energy being generated among employees. 

Pros

• Excellent for creating a performance hierarchy
• Great way to motivate employees to work harder

Cons

• If not done carefully, it can lead to a work environment that is toxic
• Can be demotivating for employees that ranked the lowest

This is a pretty straightforward method of performance review, which has been used by companies for ages. It makes the graphic rating scale one of the traditional types of performance reviews. Here, the managers decide upon certain predefined employee traits or behaviors that are relevant to their specific job role. These traits are then marked against numerical values. 

For example, out of 1 to 10, where 11 being the lowest and 10 being the highest, employees are rated for traits like punctuality, interpersonal skills, attendance, and so on. 

Pros

• One of the simplest types of performance review
• The quantitative data provided here is easy to analyze
• Standardized performance comparisons can be done
• Tracking improvements can be done 

Cons

• The capacity to provide the right feedback is limited
• Could be a bit too generic sometimes

Here, managers evaluate employees as teams rather than individuals. It can be used in situations where the number of employees is too high in an organization, and doing a one-on-one performance review could be nearly impossible. It can also be done when managers want to evaluate certain elements such as group work, cohesion, and cooperation among employees in a team. Also, teamwork is as important as any other factor, because most tasks assigned to departments are done by employees as teams. So, it is crucial to evaluate employees as teams to understand how they perform, as these performances have a direct implication on the final output produced. 

Pros

• The concepts of collective success and shared responsibility can be developed
• Best for companies that rely heavily on teams
• Great way to identify team dynamics and how they contribute to performance

Cons

• There is a chance that individual contributions might be overshadowed
• Specific areas for individual improvement cannot be suggested
• Could inadvertently promote groupthink or discourage individual initiative

This is similar to team assessment, where employees are assessed as teams rather than as individuals. There are organizations that work on projects almost all the time, and move on from one project to the other. In such cases, after the completion of every project, the groups are reviewed to figure out what went well and what did not. This can help organizations give more thought into areas that need improvement and come up with solutions which can be implemented in the next project. 

Pros

• Aligns performance evaluation directly with tangible business outcomes
• Encourages project ownership and accountability among team members

Cons

• Variability in project scope or team role can make equitable assessment challenging
• May not fully account for non-project-related activities and contributions
• Employees not engaged in major projects may feel undervalued
• Can lead to short-term focus, neglecting long-term development and contributions

The dynamics between employees in a workforce are more important than we think. Companies choose peer assessment to understand how effective each employee is in mingling with the rest of their co-workers. These reviews can be extremely useful in understanding and evaluating the interpersonal skills of an employee as well. Such reviews can be kept anonymous so that the employees answer the questions more honestly. Teamwork and collaboration of an employee can be analysed from multiple points of view when companies use peer assessment every once in a while. It is a great way to weed out disputes as well. 

Pros

• A great choice to reveal aspects of performance that supervisors might not see
• Can be more acceptable to employees, since they get the feedback from colleagues rather than management.

Cons

• There could be logistical challenges in collecting, compiling, and anonymizing feedback
• There is a great chance for such reviews to be extremely biased

If you do not want to limit yourself to a particular set of questions or framework while evaluating employees, then it would be best to go for the narrative or essay form of assessment. Here, the manager can write about the performance of an employee over a period of time, including any topic that the manager finds relevant to the performance. If you want a more customized approach to the process of performance review, this method can be extremely helpful. But whenever there comes a need to compare the performance of employees, a narrative assessment can fall short.

Pros

• Flexibility
• Great for customized reviews

Cons

• It requires significant training to ensure evaluators provide balanced and constructive narratives

Managers need not always wait for the yearly or quarterly performance reviews to roll in, to check in with employees. In this type of performance review, the managers can check in with the employee every once in a while and have an informal discussion about how things are going since their last review. It helps build a connection with the employee and increases the chances of them performing their assigned tasks even better. This is a consistent method that makes sure that there is continuous improvement taking place in the workforce. 

Pros

• It is quite adaptable in nature
• Excellent for building a good relationship between managers and employees
• Can quickly address problems and support continuous improvement

Cons

• Without clear structure, these can become informal and less impactful
• Relies heavily on the manager’s commitment to the process for effectiveness

For companies that would like for things to be formal and measurable, BARS can be a great choice for performance review. There are certain set of statements that describe a certain set of behaviors in employees, and each statement is assigned a numerical value. BARS is useful because it uses both qualitative and quantitative tests. The behavioral categories can also help get rid of bias in ranking.

Pros

• The evaluation is clear and objective
• Standardization of evaluation is easy
• Minimizes the influence of evaluator biases
• Facilitates clearer communication about expectations and performance standards

Cons

• May not fully capture the complexity or the dynamic nature of certain roles
• Developing BARS is time-consuming and requires a lot of initial effort

What Is Your Type?

If you feel like you could use some aspect of all of these types of performance reviews, please feel free to do so. The best type of performance reviews are usually an amalgamation of all these types. ThriveSparrow can help create a performance review template for you, if mixing them and finding the right proportion seems like a bit too tedious for you.