The Benefits of Performance Ranking for Employees

By hrlineup | 07.04.2022

The effectiveness of an organization’s human resources will determine its profitability and sustainable growth in the future. But for a company to meet its goals, there should be a performance ranking or appraisal of human resources.

The management should ensure that the employee ranking system is unbiased to get adequate feedback and avoid discrimination lawsuits.

So in this topic, we’ll be learning about the advantages of performance appraisal and its evaluation techniques.

What is Employee Performance Ranking?

A performance ranking or appraisal is a mode of a regular or scheduled review of employees’ performance and contribution to an organization. During this review, several factors are evaluated, including employee skills, growth, and achievements. This is what the company uses to justify pay increases, bonuses, promotions, and in worst-case scenarios, layoffs.

Performance Appraisal Methods

Below are a few methods of how to calculate employee performance rating:

360-degree appraisal

In this method, an employee is given a questionnaire with questions about a colleague’s performance.

Sales appraisal

In this case, the rating of a salesperson is based on the accomplishment of the set financial goals. However, the goals should be realistic and set by both the manager concerned and the employee.

Forced ranking

With the forced ranking performance appraisal method, the employee review is based on comparison with their colleague instead of fixed standards.

General performance appraisal

Here, the manager and employee will have a continuous interaction of setting and meeting goals.

Employee self-assessment

In this ranking method, the employee and the manager fill up two self-assessment sheets before reviewing the difference.

Benefits of Performance Measurement

Motivate employees

Sometimes employees need a little pushing to produce results. With an annual performance review, employees get feedback on their performance. They then discuss the results with the manager and point out areas that need improvement.

Employer-employee communication

For a company to achieve its goals, there must be effective communication between the employer and the employees. For example, it is through performance ranking that an employer can understand and accept subordinate skills and formulate solutions. Also, the employer can clarify the expectations.

Rewards and compensation

Most companies with future goals will strive to keep top-talent. After having a clear view of an employee’s performance level, the company can compensate and reward them accordingly. For instance, the best-performing employees can be considered for promotions, special training, or even pay hikes.

Annual planning and training

With merit rating, managers and supervisors can formulate training policies after analyzing the strengths and weaknesses of their employees. Also, the management can recommend promotions, transfers, or assign roles differently.


Overall, performance appraisal can yield the desired results if done the right way. The employer should, first of all, identify the correct methodology and then ensure that the process is transparent. This will help provide the right value to the organization.