Definition of a Performance Appraisal System

by Pallab Dutta; Updated September 26, 2017

A performance appraisal system is an integral employee practice of the macro human resources (HR) framework of an organization. It is a formal--and at times informal--and documented process of the performance of workers, professionals and other staff members of an organization. All professionally managed businesses and enterprises have performance appraisal systems to measure the intrinsic worth and work performance of employees and encourage, motivate and reward them based on their performances.


A performance appraisal system is part of the HR planning process of an organization. Well-defined structures, frameworks and procedures define a workable and effective performance appraisal system. A systematic and timely use of the system reflects the commitment of business owners, enterprise top management and HR personnel toward their employees and extended workforce. Its deployment and usage involves detailed and periodic assessment and grading of an employee‘s overall performance, future potential, organizational commitment and the resulting promotions and rewards.

Detailed Employee Appraisal

Performance appraisals can be done semiannually or annually depending on specific organizational policies. Some appraisals can be of shorter duration for new inductees and trainee employees. IT firms and many technology-centric businesses tend to have quarterly performance appraisals of employees. An employee’s performance over the defined period is placed under scrutiny. He is evaluated on various parameters and organization-centric metrics such as teamwork ethic, consistency in job performance, individual performance, professional attitude, goal orientation and targets achieved.

HR Department’s Strategic Role

The HR department of an organization plays a strategic role in establishing an organization’s performance appraisal system. HR personnel and occasionally external HR management consultants devise the structured templates, employee evaluation worksheets, detailed questionnaires and other performance evaluation documents. Business unit managers, supervisors and other project leaders fill up the forms, develop and scrutinize reports generated and formally assess the employees along with the HR team. Rewards, revised compensation packages, incentives and pay raises are then given based on the recommendations and reviews of respective managers.

Immediate Boss/Manager’s Influence

During the course of employment in an organization, most employees work under or report to immediate supervisors or managers. An immediate boss or senior executive often has the closest and up-front view of an employee’s work ethic, specific roles and responsibilities, capabilities and overall performance during a particular time period. The inputs, reports and reviews of employees under her stewardship play a crucial role in an organizational performance appraisal system and can often make the difference between a timely promotion and maintaining of status quo.

Organizational Benefits

An effectively framed and accepted performance appraisal system showcases the professional working standards and governance ethics of an organization. Performance appraisals and reviews keep employees competitive and committed about their defined roles and responsibilities. HR top management use tools and techniques in performance appraisal systems to keep track of the regular performers and occasional laggards and nonperforming employees. This checks-and-balances system and the cycle of rewards and benefits keep employees motivated and impacts long-term organizational performance.

About the Author

Based out of the metropolitan Washington D.C. area, Pallab Dutta has written on business, technology and management issues since 1994. He has freelanced for “The Wall Street Journal," “The Economic Times” and “The Times of India." Dutta holds a Bachelor of Science in economics from Bombay University and a Diploma in modern information systems from IIT Bombay.

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