Importance of Performance Appraisal

by Suchi Moorty; Updated September 26, 2017

Performance appraisals, a very important function of the human resources department for any organization, are conducted to gauge the net worth of all its employees. Appraisal methods benefit the organization immensely. The aim of appraisals is to improve the present performance of the employees and draw on the future potential. The HR department undertakes this processes usually annually in which they procure, analyze and document facts about the performances of the employees of the organization.


Performance appraisals provide feedback on the employee’s performance. On the basis of the obtained feedback, the organization can decide whether to promote, demote, transfer, terminate the employee. Pay hikes and disciplinary actions can also be fixed by these. Resources for rewards are allocated by performance appraisals. These facilitate communication flow, organizational diagnosis and development. The superiors and subordinates both take each other as partners and work toward attainment of organizational goals and objectives.


The human resources department of the organization establishes performance criteria and standards that would eventually act as the benchmarks. Then the superior who is conducting the appraisal communicates the job descriptions, targets and goals to be achieved at the end of the year to the subordinate who is being appraised. Thereafter the actual appraisal takes place and the results are tabulated by the HR department. The tabulated results are analyzed thoroughly and objectively to measure the tangible and actual performance. In the end, the organization takes corrective and remedial measures based on the results derived.


From the employee point of view, there are several benefits that are derived. First, the employee gets a very clear cut understanding of his job duties, authority and responsibility in the organization. Second, the employee is appraised of his highs and lows in performance. When the highs are rewarded, the employee’s morale is boosted tremendously and when the lows are reprimanded, he takes care not to repeat the same mistakes in the future. For the management, performance appraisals bring out the key and non-key performers. The management then takes steps to hone the key performers and develop the non-key performers into putting in their best. Performance appraisals identify the areas where training and development are needed.


Performance appraisal methods are classified under two categories. The first category is the individual person appraisal techniques. This studies the individual's performance in the past year. Examples of this type are annual confidential reports (ACRs), critical incident techniques, checklists and management by objectives (MBO). The second category, multiple person appraisal techniques, compares the performances of all the persons working in a team. All such persons are pitted against one another. The ranking, paired comparison, forced distribution, 360 degree appraisal are all examples of this category.

Time Frame

Appraisals are usually conducted once every year. Though they may also be conducted in the event of an internal vacancy arising. A few candidates are appraised and the best one is promoted to fill in the vacancy.

About the Author

Suchi Moorty has vast writing experience in magazines and on various online portals. She has been associated with the print media since 2003, and is very comfortable in writing on fields such as health care, chemistry, physics, life sciences, management, human resources, finance and accounting. Moorty has a Master of Science in biology.

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