Methods of Performance Appraisal (ISC Class 12)
Updated 17 October 2026 · Fact-checked
The ISC syllabus names five methods of performance appraisal: merit grading, appraisal by results, appraisal by superior staff, self-appraisal and 360-degree appraisal. Each evaluates an employee's actual performance on the present job; they differ in who evaluates and what is measured, and each has its own advantages and disadvantages.
All five methods judge the employee's present job performance; they differ in who evaluates and what is measured.
Illustration drawn for QuestionBuddy.
Understand Methods of Performance Appraisal
Performance appraisal is the systematic and objective evaluation of an employee's actual performance on the present job against set standards, with the result communicated to the employee. (Potential appraisal looks at hidden abilities for *future* roles; it is a different topic.)
1. Merit grading (merit rating)
Employees are rated on traits such as quality and quantity of work, punctuality, initiative and cooperation, and are placed in grades (for example, outstanding, good, average, below average, poor). A variant called forced distribution fixes the percentage of employees to be placed in each grade, following a bell-shaped pattern: few in the top and bottom grades and most in the middle. It prevents the rater from giving everybody the same grade or bunching ratings in one part of the scale.
*Illustration (imaginary)*: 60 employees placed 10% outstanding, 20% good, 40% average, 20% below average, 10% poor: 6, 12, 24, 12 and 6 employees respectively (total 60).
*Advantages*: simple and quick; allows comparison among employees; forced distribution prevents leniency and bunching.
*Disadvantages*: ratings of traits are subjective; the grade may reflect the rater's bias; forced distribution may unfairly mark down a group in which everyone is really good.
2. Appraisal by results (management by objectives)
The superior and the subordinate jointly set specific, measurable targets for a period. At the end, performance is judged by the results achieved against those targets.
*Advantages*: objective and result-oriented; participation raises commitment; expectations are clear; helps in planning development.
*Disadvantages*: time-consuming; unsuitable where results are hard to measure (for example, support work); may ignore *how* results were achieved; targets may be set too low or too high.
3. Appraisal by superior staff
The immediate superior evaluates the subordinate, because he observes the work closely. A higher officer may review it.
*Advantages*: the superior knows the job and the person; simple and widely used; fixes accountability on the superior.
*Disadvantages*: personal bias, favouritism or prejudice; the *halo effect* (one good trait colours the whole rating); the subordinate may fear the superior and may not accept the rating.
4. Self-appraisal
The employee evaluates himself, usually on a structured form; the result is then discussed with the superior.
*Advantages*: encourages self-analysis and responsibility; reduces defensiveness; helps in setting development goals.
*Disadvantages*: people tend to overrate themselves; it is not reliable if used alone; may cause disagreement with the superior's view.
5. 360-degree appraisal
Feedback comes from all around the employee, giving a complete picture.
- *Downward*: the immediate superior appraises the employee.
- *Upward*: subordinates appraise their manager (leadership, communication, fairness).
- *Horizontal*: peers assess teamwork and cooperation.
- *Introspective*: self-appraisal by the employee.
- *External*: customers or clients give feedback on service.
*Advantages*: complete and balanced; reduces the bias of one rater; covers behaviour and interpersonal skills; improves self-awareness.
*Disadvantages*: time-consuming and costly; feedback may be biased or used to settle scores; needs trust, training and confidentiality; criticism from subordinates may hurt.
6. Comparison at a glance
| Method | Who evaluates | What is measured | Main strength | Main weakness |
|---|---|---|---|---|
| Merit grading | Rater (usually the superior) | Traits and behaviour | Simple, comparable | Subjective |
| Appraisal by results | Superior and subordinate together | Results against agreed targets | Objective | Time-consuming; hard to measure some jobs |
| Superior staff | Immediate superior | Work as observed | Knows the job | Personal bias |
| Self-appraisal | The employee | Own performance | Self-awareness | Overrating |
| 360 degree | Superiors, subordinates, peers, self, outsiders | All-round performance | Complete picture | Costly; bias possible |
7. Choosing a method (case skill). Look at the job and at what the firm wants: measurable targets (results), a comparison of many staff (merit grading), development of a manager's people skills (360 degree), reflection and ownership (self-appraisal), close supervision (superior staff).
Methods of Performance Appraisal: key facts
- Methods of performance appraisal
- Merit grading
- Appraisal by results
- Appraisal by superior staff
- Self-appraisal
- 360-degree appraisal
- Five methods in the syllabus.
- Parts of 360-degree appraisal
Downward superiors Upward subordinates Horizontal peers Introspective self External customers - Who gives feedback.
- Forced distribution count
- Employees in a grade = Total employees x percentage for that grade | Total must equal 100%
- Check that the counts add up.
How to answer Methods of Performance Appraisal questions
Expect identification of a method, advantages and disadvantages, a short explanation of 360-degree appraisal components, and a choice of method in a case.
- 1Ask who is evaluating: superior, employee, jointly, or everyone around him.
- 2Name the method and state in one sentence what it does.
- 3Give advantages and disadvantages separately, each with a reason.
- 4In a case, justify the method by the type of job or the aim of the appraisal.
Methods of Performance Appraisal in real life
The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.
Appraisal by results
Suppose a sales executive and her manager agree at the start of the year that she will bring 40 new customers and keep returns below 5%. At the end of the year, her rating is based on how many of these goals she met.
Which method of appraisal is used and what is one strength?
Try it first, then show the solutionSolution
- Jointly set, measurable targets and judgement on results achieved.
- It is therefore appraisal by results.
Answer: Appraisal by results (MBO); it is objective and clear about expectations.
Memory hook: Agree the target, judge the result.
360-degree appraisal
Imagine a bank in which a branch manager is rated by her regional head, her clerks, the other branch managers, herself and a few important customers.
Name the method and one risk.
Try it first, then show the solutionSolution
- Feedback comes from all around the employee.
- Feedback might be biased or used to settle scores.
Answer: 360-degree appraisal; the risk is biased or politically motivated feedback.
Memory hook: A full circle of opinions.
Tricks to remember Methods of Performance Appraisal
Short memory aids. Say each one aloud once, then use it on a question the same day.
MR-SS-3
Merit grading, Results, Superior, Self, 360.
Use it when: Five methods.
DUHIE
Downward, Upward, Horizontal, Introspective, External: 'Do U Have Ideas, Everyone?'
Use it when: Parts of the 360-degree appraisal.
Methods of Performance Appraisal: solved examples
Ordered from board level to HOTS. Try each one before you open the solution.
Example 1: Identify the method · 1 mark · Very short answerBoard level
A company asks every manager to fill a form rating his own performance and then discusses the form with his superior. Name the method of appraisal.
Try it first, then show the solutionSolution
- The employee evaluates himself: self-appraisal.
Answer: Self-appraisal.
Example 2: Disadvantage of self-appraisal · 1 mark · Very short answerBoard level
State one disadvantage of self-appraisal.
Try it first, then show the solutionSolution
- People tend to overrate their own performance.
Answer: Employees tend to overrate themselves, so it is unreliable alone.
Example 3: Forced distribution · 4 marks · Short answerHarder board level
A firm with 60 employees uses forced distribution with these grades: outstanding 10%, good 20%, average 40%, below average 20%, poor 10%. Find the number of employees in each grade and explain what problem this method prevents.
Try it first, then show the solutionSolution
- Outstanding: 10% of 60 = 6; good: 20% of 60 = 12; average: 40% of 60 = 24.
- Below average: 20% of 60 = 12; poor: 10% of 60 = 6.
- Check: 6 + 12 + 24 + 12 + 6 = 60.
- The method prevents raters from bunching all ratings at one part of the scale (leniency or giving everyone 'average').
Answer: 6, 12, 24, 12 and 6 employees; it prevents bunching of ratings and rater leniency.
Example 4: Advantages and disadvantages of 360 degree · 4 marks · Short answerHarder board level
A software company plans to introduce 360-degree appraisal for its team leaders. Explain two advantages and two disadvantages of the method, and name two of the groups who will give feedback.
Try it first, then show the solutionSolution
- Advantage: it gives a complete and balanced picture from many sources.
- Advantage: it reduces the bias of a single rater and improves self-awareness.
- Disadvantage: it is time-consuming and costly.
- Disadvantage: feedback may be biased or used to settle scores.
- Groups: subordinates (upward) and peers (horizontal).
Answer: Two advantages (complete picture; less bias); two disadvantages (time and cost; possible bias); groups such as subordinates and peers.
Example 5: Choose the method · 8 marks · Long answerHOTS / competency
Suppose a company has three roles: (i) a field sales team with clear monthly sales goals, (ii) a project manager whose success depends on leading people and working with other departments, and (iii) a large pool of clerks needing a quick comparison to decide on yearly increments. Recommend an appraisal method for each, with a reason and one weakness.
Try it first, then show the solutionSolution
- (i) Appraisal by results: targets are measurable; weakness: it may ignore how the sales were made.
- (ii) 360-degree appraisal: it collects feedback from subordinates, peers and superiors on people skills; weakness: it is costly and feedback may be biased.
- (iii) Merit grading with forced distribution: simple and comparable for many clerks; weakness: subjective traits and unfair marking down of good groups.
- Different methods suit different jobs and aims; some firms combine two methods.
Answer: (i) Appraisal by results; (ii) 360-degree; (iii) merit grading with forced distribution; each with a reason and weakness.
Where students lose marks in Methods of Performance Appraisal
The slips examiners see most often, and what to write instead.
Mistake: Writing 'merit' or 'grading' for the forced distribution approach
Students often confuse forced distribution with merit rating. For the method that prevents ratings from bunching, they write merit, grading or merit rating instead of the forced-distribution approach.
Wrong working
Method preventing bunching: merit rating.
Right working
Forced distribution (a form of merit grading) places fixed percentages of employees in each grade.
Do this: Link bunching with forced distribution.
Usually costs: 1 mark.
Mistake: Reading upward appraisal in reverse
Students often read upward appraisal in reverse, taking it to mean a manager evaluating subordinates, when it means subordinates appraise their manager.
Wrong working
Upward appraisal: the manager evaluates the subordinates.
Right working
Upward appraisal: the subordinates evaluate their manager.
Do this: Upward means feedback goes up to the boss.
Usually costs: 1-2 marks.
Mistake: Giving only one independent point per component
Students often fail to give two independent points per component and repeat the same idea in different words.
Wrong working
360 degree: it is good and it is also good for the company.
Right working
360 degree: it gives a complete picture of the employee; it reduces the bias of a single rater.
Do this: Write two different points with a reason.
Usually costs: 1-2 marks.
Mistake: Mixing performance and potential appraisal
Both use the word appraisal.
Wrong working
Performance appraisal identifies the hidden abilities of the employee.
Right working
Performance appraisal evaluates actual performance on the present job; potential appraisal identifies latent abilities for future roles.
Do this: Performance = present; potential = future.
Usually costs: 1-2 marks.
Exam tips
- The syllabus asks for brief explanation, advantages and disadvantages of each of the five methods: prepare two advantages and two disadvantages for each.
- Upward appraisal means subordinates appraise their manager; do not read it as a manager evaluating subordinates.
- Students often confuse forced distribution with merit rating; link it with 'bunching'.
- For 360-degree appraisal, name the components and give two points for each when asked.
Practice questions on Methods of Performance Appraisal
Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.
Q1 · 1 mark · Very short answerBoard level
Name the method of appraisal in which subordinates also give feedback about their manager.
Hint
All-round.
Answer
360-degree appraisal.
Q2 · 1 mark · Very short answerBoard level
In a bank, each manager sits with her regional head at the start of the year, and they agree five targets. Name the method of appraisal that will be used at the year's end.
Hint
Targets set jointly.
Answer
Appraisal by results (management by objectives).
Q3 · 4 marks · Short answerHarder board level
A supervisor rates her favourite worker 'outstanding' on all traits after noticing one excellent job. Name the weakness in appraisal by superior staff this shows and give one more disadvantage of the method.
Hint
One trait colours the whole rating.
Answer
The weakness is the halo effect: one good trait influences the rating of all other traits (and possible favouritism). Another disadvantage is that the subordinate may fear the superior and not accept the rating, or the superior's personal bias may distort the result.
Q4 · 4 marks · Short answerHarder board level
Explain the appraisal by results and merit grading methods with one advantage of each.
Hint
Targets versus traits.
Answer
Appraisal by results: the superior and subordinate jointly set measurable targets, and performance is judged by the results achieved; it is objective and clear. Merit grading: employees are rated on traits such as quality of work and punctuality and placed in grades; it is simple and permits comparison.
Q5 · 8 marks · Long answerHOTS / competency
Suppose an organisation wants to use only self-appraisal for all its managers because it is cheap and quick. Evaluate this plan and suggest a better combination of methods.
Hint
Overrating; add other views.
Answer
Self-appraisal is cheap and quick, encourages self-analysis and responsibility, and helps set development goals. But employees tend to overrate themselves, so used alone it is unreliable and may cause disagreement with superiors. A better plan combines self-appraisal with appraisal by results, where targets are set jointly and judged against results achieved, and with appraisal by the superior to check the ratings. For senior managers, a 360-degree appraisal could add the views of peers, subordinates and clients. The combination keeps the benefits of self-reflection while reducing bias.
Test your recall
Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.
1.Name the five methods of performance appraisal.Show answer
Merit grading, appraisal by results, appraisal by superior staff, self-appraisal, 360-degree appraisal.
2.What does the halo effect mean?Show answer
One good trait influences the rating of the entire performance.
3.In which method are targets set jointly?Show answer
Appraisal by results.
4.Who evaluates in upward appraisal?Show answer
The subordinates.
5.What is forced distribution?Show answer
Placing fixed percentages of employees into each grade.
Methods of Performance Appraisal: frequently asked questions
Is performance appraisal the same as potential appraisal?
No. Performance appraisal judges present performance; potential appraisal judges hidden abilities for future positions.
Which method is the most reliable?
No method is perfect; many firms combine methods. 360-degree appraisal gives the most complete view, but it is costly.
Why is self-appraisal not used alone?
Employees tend to overrate themselves.