Purposes of Performance Appraisal

Cite this article as: Palistha Maharjan, "Purposes of Performance Appraisal," in Businesstopia, January 9, 2018, https://www.businesstopia.net/human-resource/purposes-performance-appraisal.

Performance appraisal is evaluating an employee’s current and/or past performance relative to his or her performance standard.

– Gary Dessler

Performance appraisal is the systematic evaluation of employees with respect to their performance on their job and their potential for development. In other words, it is the process of measuring productivity in terms of efficiency and effectiveness.

It evaluates the contribution of each employee to the accomplishment of company’s goals. Other than this, performance appraisal has several other uses, which are as follows.


People are standing on a podium at the first, second and third position.*

The major purpose of performance appraisal is to evaluate how well employees have conducted their duty. Performance appraisal helps to keep a record of each employee’s job performance, including what efforts they have made and what have they achieved. Evaluation differentiates employees on the basis of their job performance, along with other factors like personality, behavior, etc.

Provide continuous feedback

It is essential for the employers to know what performance and achievements have been made by their employees. But, it is also equally important for an employee to know where they stand, where they are going and how they are going to get there. Thus, giving feedback to employees is also a major purpose of performance appraisal.

Measure performance accurately

Every company has to set mutually acceptable criteria or performance standards so that it could compare employee’s performance with it. This helps in accurate measurement of employee’s job performance which is necessary for the company to know where it is heading towards.

Provide clarity of expectation and actual result

Every employee wants them to be told about their duties; what the organization really wants them to do. However, this is not enough to get good output from them.

They should also be told how well they have done their duties and how can they improve their performance. They should be made clear about how near they are to do their expectation.

Identify area of weakness of employees

An employee worrying about the broken graph.

All employees may not be an all-rounder. Some employees may have weak points as well, which if not sorted out in time, might be a liability for the company. Performance appraisal helps in identifying such weak points.

Determine training and developmental needs

Only determining weak points is not enough. A company should also make efforts to abolish them. A properly carried out performance appraisal is a tool to determine what necessary steps are to be taken in order to help the employees in improving their performance. The increment in skills and knowledge develop an overall personality, attitude and behavior of the employees.

Provide career path

Performance appraisal works as a mirror to employees and it clearly shows what they are professionally and where they stand.
On the other hand, it helps the company in recognizing employees with potential. Companies provide career development opportunities to such employees and pave their way to a successful and stable career.

Determine promotion of employees

A man is climbing up the graph to reach a trophy.

Performance appraisal helps in charting progress of employees. Such charts can be used by the employers to determine whether or not to promote their employees. They also help in identifying the employees who most deserves to be promoted.

Take corrective actions

Performance appraisal distinguishes excellent and poor performing employees. Results of performance appraisal help the employers in taking corrective actions. Such actions may be counseling or warning the poor performers to improve performance and to prevent the occurrence of undesirable results.

Decide retention and termination of employees

Progress report of employees does not only help in determining promotion but also in determining termination. Employees, with poor reports, are at first consulted. But, if the supervisors don’t find any growth, they will be forced to take severe action like termination.

Evaluate effectiveness of HRM functions

Recruitment, selection, employee training, rewarding, etc. are some functions of human resource management whose effectiveness can only be analyzed when the performance of employees are appraised.

Decide salary and rewards

This image shows a few stacks of gold coins.

Cite this article as: Palistha Maharjan, "Purposes of Performance Appraisal," in Businesstopia, January 9, 2018, https://www.businesstopia.net/human-resource/purposes-performance-appraisal.

Performance appraisal of employees helps the supervisors in knowing their job performance and the right amount to pay them. The employees will receive wages as per the contribution they have made. The impressive contributors are also rewarded by the company as per the organization’s policy.

Reduce grievances

Grievances may occur in the company when employees feel unfairly treated or biased. For an instance, an employee might feel that his co-worker is being paid more by the company even though both of them are posted at the same job level. During such situation, employers can use the reports of performance appraisal to clarify the employees that they are being paid on the basis of their job performance, rather than the position they hold.

Keep communication lines open

The complete process of performance appraisal includes continuous feedback from the supervisors. This way, performance appraisal works as a bridge of communication between the employers and employees. Also, open communication helps in strengthening the employer-employee relationship or superior-subordinate relationship.

Motivate superior performance

On one side, an employee is receiving affiliation from others while on the other side, another employee is being threatened by his superior.

When performances of employees are timely appraised, they are motivated to make the superior performance. It is because #1 they want to enjoy the perk of being an excellent employee or #2 they fear negative reactions from the supervisors. When employees know that they are heading in right direction, it develops a sense of satisfaction in them.

Improve decision making ability

It becomes easier for the organization to take right decision when it has complete knowledge about what’s going on in their company. Performance appraisal works as a helping hand to the company in making the right decision as it is a source of the company’s complete statistical data.