Depending on the employer's industry, workforce size and employee goals, the reasons for conducting performance appraisals vary; however, an article titled "Performance Appraisal" on the Changing Minds website contains a comprehensive statement about performance appraisals. Margaret Francis, the author, writes: "Performance appraisals are important for staff motivation, attitude and behavior development, communicating organizational aims and fostering positive relationships between management and staff. Performance appraisals provide a formal, recorded, regular review of an individual's performance, and a plan for future development. In short, performance and job appraisals are vital for managing the performance of people and organizations."

Meeting Job Expectations

Employers conduct performance appraisals to ensure employees understand their job expectations. Job descriptions and job specifications document the tasks and duties for which employees are responsible; however, communication is another key factor in determining if an employee understands the expectations. A performance appraisal satisfies the communication requirement. During a performance appraisal meeting, the manager generally begins the meeting with an explanation of the employee's job. If there are any questions about performance expectations, these can be addressed immediately.

Achieving Organizational Goals

Employee job performance and quality of work help to predict organizational success. Performance appraisals are excellent tools for measuring employee capabilities, skills and aptitude. One of the reasons human capital is a company's most valuable asset is that employee skills and talent are vital to success. Evaluating the skills and talent employees bring to the workplace assists managers and employees in identifying the employee's professional goals. When employee goals are parallel to the company's goals, the performance appraisal ensures both the employee and the company are on the right track to achieving their goals.

Managing Succession Plans

Succession plans are a key element in human resources management and executive leadership strategy. Employees who possess expertise, leadership capabilities and the desire for promotional opportunities are often tapped for more responsible roles within the company. Performance appraisals document and monitor employee goals and professional development in preparation for higher-level positions. In part, succession planning depends on the most accurate appraisal of employee contributions and successes. Performance appraisal methods such as management by objectives are known for tracking parallels between employee goals and organizational goals.

Maintaining Compensation Structure

Some employers and many employees consider performance appraisals an essential workplace policy because merit increases, rewards and bonuses are often based on an employee's performance level. While employees sometimes find the process intimidating, the good news that follows a performance appraisal can diminish the angst so many employees have about being evaluated. Several other factors comprise an organization's compensation and benefits structure; however, performance appraisals and anticipated performance levels help determine budgets for salaries, wages, bonuses and financial rewards.