Performance Appraisal

Organizations understand the importance of employee performance for its overall success. To align an employee’s performance towards organizational goals, the process of performance appraisal can be effectively utilized. The system of appraisal helps the company identify key performing resources and also highlight areas of improvement. Some other ways performance appraisal can be used to enhance employee performance:

  • Employees have a clear understanding of their responsibilities and outcomes.
  • Employees see a renewed sense of accountability for their performance.
  • Employees are driven and motivated towards their individual goals.
  • Employees can see a path for their career & professional development through training and development.
  • Overall organizational performance can be positively influenced.

For an organization to achieve desired goals, every employee from the CEO to the junior-most level need to contribute. Performance, under-performance, and non-performance of each employee reflect overall organizational performance. To ensure that organizational performance is not affected, employees should be engaged and motivated. Adopting an agile and continuous Performance Management System can enable organizations to drive these benefits regularly.

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Human Resources are an important part of any organization. Each employee performs certain roles and responsibilities to play a part in the organization’s overall success. Performance appraisal (also called Performance Review) should ideally act as unbiased evaluation of employees’ performance and thus improve employee motivation, engagement, and productivity. However, organizations fail to use performance appraisal effectively and don’t see these benefits.

Employee Performance is defined as “how an employee fulfills his/her job responsibilities and executes the required tasks. It refers to the effectiveness, quality, and efficiency of an employee’s output.” Evaluation of an employee’s performance helps a company assess how valuable an employee is for the organization. Performance Appraisal is defined as “a systematic, general and periodic process that assesses an individual’s job performance and productivity concerning certain pre-established criteria and organizational objectives.” Employee performances are documented and evaluated as a part of career development and regular review in the organization via performance appraisal.

Companies understand that to be successful in today’s dynamic business environment, they need to have the right talent and high performing resources. Employees accomplish individual goals to contribute towards the organizational objectives. To ensure quality, efficiency, and effectiveness of an employee’s output, companies need to employ performance appraisal.

There are numerous ways performance appraisal helps improve employee performance such as:

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1. Effective Performance Appraisal Provides Clarity On Goals To Achieve

Employees perform to the best of their ability when they are aware of what they are working towards and how their efforts are helping the organization move forward rather than performing isolated/dis-joint tasks. 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 with the larger organization purpose that leads to better performance.


2. Performance Appraisal Increases Accountability of an Employee

When the employee’s performance is reviewed, the challenges and accomplishments of the entire review period are discussed with managers. Such conversations provide insights for an employee on areas of strength and areas of improvement that pave the way for employee development. This self-awareness ensures that employees make a more personal commitment to accept and improve on their performance issues. As is said, awareness is the first step towards improvement. This makes employees more accountable for their actions and determined to increase their productivity.

Continuous Feedback

3. Performance Appraisal Increases Employee Motivation

Performance Appraisal enables the employees to be formally recognized for their work by their supervisors and managers. When employees are appreciated for their contribution, they are motivated to work towards organizational goals. During the appraisal process, incentives such as promotions, salary hike, employee development programs, rewards, etc. act as great motivators. Motivated employees tend to stay with the organization for a longer period.

Employee Motivation

4. Performance Review Helps Increase Employee Productivity

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

Supervisors use appraisals as a tool to accurately identify the potential of an employee and guide him/her accordingly. When supervisors or managers understand the current level of performance within the organization, they can implement measures to increase employee productivity.

Employee Productivity

5. Performance Reviews Help Identify Areas of Training & Development

Career development is an important aspect of an employee’s professional journey. But most employees don’t have a clear understanding of their strengths and weaknesses. During the appraisal process, the employees become more aware of their performance and contribution within the organization. This ensures that employees can work on the areas that require improvement, for his/her career development.

Mangers are also able to identify the discrepancies in the desired and current level of employee performance. This helps managers to devise appropriate plans for training and development to increase the productivity of employees.


6. Performance Appraisal Process Helps Fine-tune Organizational Performance

Performance Appraisal is not just a tool to analyze employee performance. It helps the management analyze the overall organization performance as well. Regardless of the methods employed, the main goal of any organization is to improve the company’s performance and achieve its goals. The process of appraisal helps the companies open up a conversation about what is expected and what part each employee will play. Once immediate, intermediate, and future goals are set, the company works towards achieving them.


Companies focus on improving employee performance so that objectives are systematically and timely achieved for organizational growth. Some measures to ensure continuous performance improvements should include the following:

  • Set SMART Goals

The clarity of goals has a critical impact on employee performance. To bring that clarity, the goals should be Specific, Measurable, Achievable, Realistic & Timely Goals should be established keeping in mind the capabilities of the employees and the company objectives. Set different milestones as lead measures to check employee performance and the possibility of success.

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    Continuous Feedback System

When employees are informed about their performance annually, the purpose of improving the performance is defeated. This is because the chance to improve the performance is long gone. So, continuous feedback based performance system should be employed for regular feedback on tasks and performance by managers. Real-time feedback will help employees continuously work on their performance. Organizational can utilize tools like Check-Ins & Feedback 360 to drive the culture of continuous feedback across the organization.

  • Employ a Digital Performance Management or Performance Appraisal System

Performance improvement should be a continuous process and not an annual affair. Digital Performance Management Systems make the process of evaluation and analysis of employee performance easy, data-driven, real-time, simple, and objective. Digital systems can collect performance data from multiple sources simultaneously. It can analyze the overall performance of an employee and help identify areas of improvement. It can also help a company devise plans for the training and development of employees.


Annual Performance Appraisal is the traditional way of evaluating an employee’s performance. While most companies still employ an annual system of appraisal, it is less appreciated by employees. A Performance Management System that facilitates a shorter frequency of performance review combined with components of rewards and recognition has proved to be more effective in the past few years. Employees are looking for a daily or weekly feedback rather than annual feedback for their performance and career development. Companies that rely on continuous communication and feedback also have a higher retention rate.

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