Performance Appraisal also called Performance Review is the methodical assessment of the performance of employees in the workplace. It could also be employed as a tool to understand the abilities of an employee for further growth and development.

Performance appraisal is carried out in a systematic way as follows:

  1. Supervisor measures the performance of employees and compares it with targets and plans.
  2. Supervisor analyses factors behind the work performances of employees.
  3. Managers provide guidance to employees to improve performance.

Organisations appreciate how important employee performance is to their overall success and performance appraisals are a useful tool for coordinating employee performance with corporate objectives. The organization may discover high-performing resources and identify areas for improvement with the help of the appraisal system.

The entire team, from management to the lowest level, must participate in the performance appraisal for the organization to achieve its objectives. All employee performance, whether it be above average or below average, should reflect the performance of the entire company.

Other tactics for enhancing employee performance via performance reviews consist of the following:

  1. Employees should be made aware of their duties and expectations in detail.
  2. Employees should perceive a revitalized sense of responsibility for their work.
  3. Employees are motivated and driven to achieve their personal objectives.
  4. Through training and development, staff members can choose a path for their future professional and career advancement.

Objectives of Performance Appraisal

Performance Appraisal can be employed to achieve the following objectives:1

  1. To maintain records to determine compensation packages, wage, and salary structure, gratuity, pension etc.
  2. To identify the strengths and weaknesses of employees and ensure the right employees are placed in the right positions.
  3. To evaluate and assess the employee potential for growth and development.
  4. To provide feedback to employees regarding their performance and related status.
  5. To serve as a basis for influencing the workplace habits of the employees.
  6. To review and upgrade promotional and other training programmes.

Benefits of Adopting Agile and Continuous Performance Management System

An essential part of any organization is its human resources. Each employee carries out specific tasks so as to contribute to the overall success of the company.

Performance appraisal presents an unbiased evaluation of employee performance and thus improve employee motivation, engagement, and productivity. However, organizations who fail to use performance appraisal effectively may not extract optimal output from employees.

Thus, Employee Performance can refer to how employees fulfill their job responsibilities and execute the required tasks assigned to them. Employee performance can also refer to the effectiveness, quality, and efficiency of employee output.2

Evaluation of an employee's performance helps a firm assess how valuable an employee is to the organization. Performance Appraisal is also defined as "a systematic, general and periodic process that accesses an individual's job performance and productivity concerning certain pre-established criteria and organizational objectives."3 Employee performances are documented and evaluated as part of career development through the utilisation of the organization's performance appraisal forms, to ensure quality, efficiency, and effectiveness of an employee's productivity.

Most Firms are aware that having the right talented people and high-performing resources is essential to their success in the fast-paced business environment of today. Nonetheless, staff members need to be motivated and engaged to guarantee that organizational performance is not negatively impacted.

  1. A well-executed performance appraisal clarifies the objectives to be achieved

When staff understand what their aims and tasks are, and how their efforts are helping the organization's corporate goals, they work to the best of their abilities jointly instead of performing isolated and disjointed tasks. This encourages team work because everybody is working towards a specific goal. Performance Appraisal provides the perfect opportunity for managers and employees to review the job description and identify expected performance outcomes that align well with organizational objectives. This provides employees with better clarity on their role in the organization, the impact they are creating and the expected level of performance. When an employee sees this alignment in a transparent goals-based framework they become engaged and motivated by the bigger organizational purpose that leads to better performance.

  1. Performance Appraisal serves as motivation tools for employees

Performance reviews boost employee morale in the sense that it enables the employees to be formally recognized for their work by their supervisors and directors. When employees are appreciated for their contribution, they are motivated to work towards organizational goals. During the appraisal process, incentives such as promotions, salary hikes, employee development programs, and rewards act as great motivators.

Performance Appraisal motivates employees to work hard, which in return, benefits the company. A consistent appraisal program can have a positive impact on levels of employee satisfaction and motivation. Through evaluating the performance of employees, a person's efficiency can be determined if the targets are achieved. This greatly inspires someone to perform optimally and supports future performance improvement.

Performance appraisal also creates a platform where the employees are recognized for their tremendous contributions to the growth of the firm. In cases where an employee has not performed to the expected standard, it is crucial to still convey to such employee that the company values their growth as an individual as well as their overall contributions to the firm.

  1. Performance Appraisal creates provisions for training and development

The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps in assessing the strengths and weaknesses of employees so that new roles and tasks can be designed for capable employees whilst framing future development programmes.

Performance reviews assist in determining training and development needs of staff within an organization. Career development is an important aspect of an employee's professional advancement. Through the appraisal process, the employees become more aware of their abilities and skills and their performance levels and contributions within the firm. This ensures that employees can work on the areas that require improvement, for their career development.

Supervisors are also able to identify the discrepancies in the desired performance level vis-à-vis the present level of employee performance. This helps supervisors to devise appropriate plans for training and development to increase the productivity of employees.

During an appraisal meeting, the employer can point out the areas where the employee needs improvement. The employee can look at the assessment data and collaborate with the supervisor in working out a plan for training and development.

The training will help the employees to perform better and will pave the way to future growth. Firms can look at consolidated appraisal data and decide on areas where improvement is needed for each employee and for the whole team, and later plan for training and development.

  1. Performance Appraisal enables review of data for better recruitment

Performance appraisals are used to review the job performance of an employee over a given period. These reviews are used to highlight both strengths and weaknesses to improve future performance and help in monitoring the success of a company's recruitment practices. For instance, the performance of employees hired within the last year or two, the attrition rate, and so forth. The HR division can then plan future recruiting based on it.

  1. Performance Appraisal improves communication between management and employees

Most often, there is a communication gap between the supervisor and the employee, especially when the employee is new to the company.

Sometimes, the supervisor could be too busy to give the new staff the attention they need. Performance reviews will assist in breaking the ice, which benefits both the employee and the manager because better-quality communication leads to increased productivity.

However, effective communication between employees and managers is very important. Through performance appraisal, effective communication can be sought in the following ways:

  1. By means of performance evaluation, employers understand and appreciate the skillset of junior staff.
  2. Junior staff can also understand and create trust and confidence in superiors.
  3. It also helps in maintaining a cordial and friendly relationship between management and employees.
  4. It develops the spirit of collaborative work and boosts the morale of employees.
  1. Performance Appraisal creates room for promotion

Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regard, inefficient employees can be dismissed or demoted in appropriate cases.

  1. Performance Appraisal serves as compensation tool

The process of creating employee remuneration packages is aided by performance appraisals. Performance evaluations can be used to determine merit ratings and a medium to give worth/attach value to a good performance.

  1. Performance Appraisal serves as validation for selection procedure

Performance evaluation helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity, the strengths and weaknesses of the selection procedure and future changes in selection methods can be made in this regard.

  1. Performance Appraisal increases accountability of an employee

Supervisors can better appreciate the significance and validity of the selection process with the use of performance evaluation. Supervisors learn about the legitimacy of the selection process and, consequently, its advantages and disadvantages. This helps in identifying areas for improvement or further development while recognizing accomplishments.

When the employee's performance is reviewed, the challenges and accomplishments of the entire review period are discussed with administrators. Such conversations provide insights for an employee on areas of strength and areas of improvement that pave the way for employee development. Employees that are self-aware are more likely to acknowledge and deal with performance concerns constructively. As they say, the first step toward improvement is boosting one's awareness. Employees become more motivated to boost productivity and assume more responsibility for their actions as a result which ultimately leads to improved productivity.

10. Performance Appraisals increase employee productivity

Performance Appraisals require supervisors to be able to analyze crucial areas of employee performance. Supervisors use this to help employees understand their roles and responsibilities and how they relate to company objectives. This ensures that employees know how integral they are to the firm's success, making them more accountable.

Assessments are a useful tool for supervisors to precisely determine the potential of their employees and provide guidance accordingly. Supervisors can take action to boost employee productivity if they are aware of the current performance levels within the firm.

  1. Performance Appraisal supports perfect organizational performance

Performance Appraisal is not just a tool to analyze employee performance. It helps the management analyze the overall organizational performance as well. Irrespective of the methods employed, the main objective of any organization is to improve the firm's performance and achieve its goals. The appraisal process facilitates communication between companies and their employees regarding expectations and roles.


1. See htm accessed on 15th November 2023.

2. See accessed on 24th November 2023.

3. See appraisals/ accessed on 24th November 2023.

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