What is Performance Appraisal? Definitions, Objectives, Methods

What is Performance Appraisal?

The Performance Appraisal is the Formal, Systematic Assessment of how well employees are Performing their Jobs in Relation to Established Standards, And the communication of that assessment to employees.


Performance appraisal is the systematic, periodic and an impartial rating of an employee‘s excellence in matters pertaining to his present job and his potential for a better job. Flippo

Performance appraisal includes all formal procedures used to evaluate personalities and contributions and potentials of group members in a working organisation. It is a continuous process to secure information necessary for making correct and objective decisions on employees.

From the above definitions we can conclude that performance appraisal is a method of evaluating the behaviour of employees in the work spot, normally including both the quantitative and qualitative aspects of job performance. It is a systematic and objective way of evaluating both work-related behaviour and potential of employees.

Objectives of Performance Appraisal

Performance appraisal is an essential HR function and every organisation relies on its results for future planning. Then decisions regarding promotions. Rewards, trainings etc. are based on the evaluation an employee’s capability and potential Moreover, it also help an organisation in developing its HR policies.

Therefore we can enumerate the objectives of performance appraisals system as below:

1.Provide employees with a road map for improvement. The employee gets to know about his shortcomings and weak points that can be improved through monitoring and using training aids. This help in fulfilling the expectation of the management.

2.Since the evaluation is done by the seniors, PA gives adequate feedback. Now day’s seniors also play the role of personal mentors and coaches for their team members.

3.The results of performance appraisals are the basis of many other HR functions like Compensation management, training plans, rewards and recondition.

4.Performance appraisals help in developing a result oriented organisational culture which is fast becoming a mandatory requirement of successful businesses. It generates self-management skills in employees that are an important requisite for high performance.

5. Identify future leaders. Performance appraisals helps in identifying the most eligible and potential candidates for leadership positions in the future.

Format of Performance Appraisal

Format is the layout or design of the performance appraisal activity. It consists of all the factors that are related to an employee’s performance. The performance format main objective is to collect all the required information for evaluation at one place.

This includes, employee’s personal views of his performance, the supervisors views, recording of behaviours, targets, rating, feedback etc.


It serves as a feedback to the employee. It tells him what he can do to improve his present performance and go up the ―organisational ladder‖. The appraisal thus facilitates self-development. It also makes the employee aware of his key performance areas.

Compensation Decisions

It provides inputs to system of rewards. The approach to compensation is at the heart of the idea that raises should be given for merit rather than for seniority.

Data Base

It provides a valid database for personal decisions concerning placements, pay, promotion, transfer, etc. Appraisal also makes the employee aware of his key performance areas. Permanent performance appraisal records of employees help management to do planning without relying upon personal knowledge of supervisors who may be shifted.

Personal Development

Performance appraisal can help reveal the causes of good and poor employee performance. Through discussions with individual employees, a line manager can find out why they perform as they do and what steps can be initiated to improve their performance.

Training and Development Programme

By identifying the strengths and weaknesses of an employee, appraisal serves as a guide for formulating a suitable training and development programme to improve his quality of performance in his present work. It can also inform employees about their progress and tell them what skills they need to develop to become eligible for pay rises and/or promotions.

Promotion Decisions

It can serve as a useful basis for job change or promotion. By establishing whether the worker can contribute still more in a different or a higher job. It helps in his suitable promotion and placement. If relevant work aspects are measured properly, it helps in minimising feelings of frustration of those who are not promoted.

Personal Development

Performance appraisal can help reveal the causes of good and poor employee performance. It thus helps the employee to overcome his weaknesses and improve his strengths to enable him to achieve the desired performance.

Improves Supervision

The existence of a regular appraisal system tends to make the supervisors more observant of their subordinates because they know that they will be expected periodically to fill out rating forms and would be called upon to justify their estimates. This improves supervision. Performance appraisal helps to gauge comparative worth of employees.

Appraising employee performance is, thus, useful for compensation, placement and training and development purposes. The information can also be used for grievance handling and keeping the record.It helps in improving the quality of supervision and bettering the employeeemployer relationship.

Uses of Performance Appraisal

Performance Management

Performance Management is the process of developing a work environment or setting in which people are enabled for performing to the best of their abilities. Performance Management is a whole system that begins when a job is defined as needed.

It ends when an employee leaves the organisation. A performance Management System (PMS) includes the following actions:-

  1. Develop clear Job Description.

  2. Select appropriate people with an appropriate selection process.

  3. Negotiate requirements and accomplishment based performance standards, outcomes and measures.

  4. Provide effective orientation, education and training.

  5. Provide ongoing coaching and feedback.

  6. Conducting a quarterly performance development discussion.

  7. Design effective compensation and recognition systems that reward people for their contributions.

  8. Offering a promotional/career development opportunity for staff.

  9. Assist with exit interview for understanding why valued employees leave the organisation.

Performance appraisal is a significant element of the information and control system in an organisation. Performance appraisal is used in order to

  • Performance appraisal provides valuable information for personnel decisions such as pay increases, promotions, demotions, transfers and terminations. The information provided forms the basis for suitable personnel policies.

  • It provides feedback information about the level of achievement and behaviour of subordinate, rectifying performance deficiencies and to set new standards of work, if necessary. It also identifies individuals with high potential who can be groomed for higher positions.

  • It serves as a means of telling a subordinate how he is faring and suggesting changes in his knowledge, behaviour and attitudes. It thus provides information, which helps to counsel the subordinate. It also serves to stimulate and guide employee‘s development.

  • It is useful in analysing training and development needs. These needs can be assessed because performance appraisal reveals people who require further training to remove their weaknesses. By identifying the weaknesses of an employee, it serves as a guide for formulating a suitable training and development programme to improve his quality of performance in his present work.

  • Performance appraisal acts as a means for reviewing the effectuality of devices that are employed for the selecting and classifying employees. It therefore helps to judge the effectiveness of recruitment, selection, placement and orientation systems of the organisation.

Process of Performance Appraisal

Performance appraisal is planned, developed and implemented through a series of steps –

Job Analysis, Job Description and Job Specification

Performance appraisal is a process not to be undertaken in isolation of various human resources functions. It begins with job analysis, job description and job specification. These help in establishing the standard performance.

Establishing Standards of Performance – Appraisal systems require performance standards, which serve as benchmarks against which performance is measured. The standards set for performance must be clearly defined and unambiguous. They should be attainable by a normal employee. To be useful, standards should relate to the desired result of each job.

Communicating Performance Standards to Employees – Performance appraisal involves at least two parties; the appraiser who does the appraisal and the appraise whose performance is being evaluated. The performance standards specified in the second step above are to be communicated and explained to the employees (both appraiser and appraise) so that they come to know what is expected of them.

Measuring Actual Performance – After the performance standards are set and accepted, the next step is to measure the actual performance. This requires choosing the right technique of measurement, identifying the internal and external factors influencing performance and collecting information on results achieved.

Performance measures may be objective or subjective.

Objective Performance Measures – Objective performance measures are indications of job performance that can be verified by others and are usually quantitative. Objective criteria include: quality of production, degree of training needed, accidents in a given period, absenteeism, length of service, etc.

Subjective Performance Measures – are ratings that are based on the personal standards or opinions of those doing the evaluation and are not verifiable by others. Subjective criteria include: ratings by supervisors, knowledge about overall goals, and contribution to sociocultural values of the environment.

Comparing Actual Performance with Standards and Discussing the Appraisal with Employees – Actual performance is compared with the predetermined performance standards. Actual performance may be better than expected and sometimes it may go off track. Deviations if any from the set standards are noted. Along with the deviations, the reasons behind them are also analysed and discussed.

Initiating Corrective Action, if any – The last step in the process is to initiate corrective action essential to improve the performance of employees. Corrective action is of two types.

  • The one, which puts out the fires immediately. Employee can be scolded or warned so that he himself can make necessary attempts to improve his performance.

  • The other one, which strikes at the root of the problem permanently. Through mutual discussions with employees, the steps required to improve performance are identified and initiated. The reasons for low performance should be probed, take the employee into confidence and motivate him for better performance.

Methods or Techniques of Performance Appraisal

Performance Appraisal Techniques

A number of different performance appraisal methods or techniques are available for evaluating the performance of the employees. These methods try to explain how management can establish standards of performance, devise ways and means to measure and evaluate the performance of employees.

There is no fool proof method of evaluating the performance of employees. Every method suffers from certain drawbacks and some merits. These methods can broadly be divided into traditional and modern methods.

Traditional Methods

These are the old methods of performance appraisal based on personal qualities like knowledge, capacity, judgment, initiative, attitude, loyalty, leadership, judgment etc. The following are the traditional methods of performance appraisal.

Unstructured Method of Appraisal

Under this method, the appraiser has to describe his impressions about the employee under appraisal in an unstructured manner. This is a simple method of performance appraisal. The rater has to list his comments specifically on qualities, abilities, attitude, aptitude and other personal traits of the employees. This makes the method highly subjective in nature.

Straight Ranking Method

In this technique, the evaluator assigns relative ranks to all the employees in the same work unit doing the same job. Employees are ranked from the best to the poorest on the basis of overall performance. This method is also highly subjective and lacks fairness in assessing the real worth of an employee.

Paired Comparison Method

Ranking becomes more reliable and easier under the paired comparison method. This method is an attempt to improve upon the simple ranking method. Under this method, employees of a group are compared with one another at one time.

Grading Method – Under this technique of performance evaluation, certain categories of worth are determined in advance and they are carefully defined. These grades are based on certain selected features of employees such as knowledge, judgment, analytical ability, leadership qualities, self-expression etc. These selected and welldefined categories include: Grade ‗A‘ for outstanding, Grade ‗B‘ for very good, Grade ‗C‘ for average, Grade ‗D‘ for poor etc.

Graphic Rating Scale – Perhaps the most commonly used method of performance evaluation is the graphic rating scale. The evaluator is asked to rate employees on the basis of job related characteristics and knowledge of job. Evaluator is given printed forms. The performance is evaluated on the basis of these traits on a continuous scale.

Check List – A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. The rater checks to indicate if the behavior of an employee is positive or negative to each statement. The performance of an employee is rated on the basis of the number of positive checks.

Free Essay Method – Under this method, no quantitative approach is undertaken. It is an open-ended appraisal of employees. Evaluator describes in his own words what he perceives about the employee‘s performance. While preparing the essay on the employee, the rater considers the job knowledge and potential of the employee. The description is expected to be as factual and concrete as possible. An essay can provide a good deal of information about the employee especially if the evaluator is asked to give examples of each one of his judgments.

Confidential Report – A confidential report by the immediate supervisor is still a major determinant of the subordinate‘s promotion or transfer. This is a traditional form of appraisal used in most government organisations. It is a descriptive report prepared generally at the end of every year, by the employee‘s immediate superior. The report highlights the strengths and weaknesses of the subordinate.

Modern Methods

Modern methods are an improvement over the traditional methods. They are an attempt to remove defects from old methods. The modern methods of judging the performance of employees are developed. They are discussed below –

  • Behaviorally Anchored Rating Scales (BARS) – It is designed to identify critical areas of performance of a job. Under this method, the behaviorally anchored ratings scales are outlined to recognize the critical areas of effective and ineffective performance behavior for getting results.

    The evaluator is required to observe the behavior of the employee while performing the job. He then compares these behavioral observations with the behaviorally anchored rating scales. This method is more valid and expected to give more reliable results as it minimizes the errors in performance appraisal.

  • Management by Objectives (MBO) – It is a process whereby the superior and the subordinate managers of an organisation jointly identify its common goals, defines each individual‘s objectives a responsibility expected of him and use these measures as guides for operating that unit and assessing the contributions of each of its members.

  • Assessment Centre Method – This method of appraising was first applied in the German army in 1930. Later business organisations also started using this method. This is not a technique of performance appraisal by itself. In fact, it is a system, where various experts do assessment of several individuals by using various techniques.

  • Human Resource Accounting Method – Human resources are a valuable asset of any organisation. This asset can be valued in terms of money. When competent and well-trained employees leave an organisation, the human asset is decreased and vice versa. Human resource accounting deals with cost of and contribution of human resources to the organisation.

  • Psychological Appraisals – Psychological appraisals are conducted to assess the employee potential. It is conducted in the areas of employee‘s intellectual abilities, emotional stability, reasoning and analytical abilities, sociability, Interpretation and judgment skills, Motivational responses, Ability to foresee the future.

    Psychological appraisal results are useful for decision-making about employee placement, career planning and development, training etc.

  • 360 Degree Appraisal – It is a method of appraisal in which people receive performance feedback from those on all sides of them in the organisation their boss, their colleagues and peers and their own subordinates.

    Thus, the feedback comes from all around them, 360 degrees. This form of performance evaluation cans he very beneficial to managers because it typically gives them a much wider range of performance-related feedback than a traditional evaluation.

    The purpose of the 360-degree feedback is to assist each individual to understand his strengths and weaknesses, and to contribute insights into aspects of his work for professional development.


What is Definitions of Performance Appraisal?

The Performance Appraisal is the Formal, Systematic Assessment of how well employees are Performing their Jobs in Relation to Established Standards, And the communication of that assessment to employees.

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