Understand how performance appraisals work, why they matter, and how they help improve both individual and organizational success.

What Is It?

Performance appraisal is a formal system used by organizations to evaluate how well an individual performs in their role. Typically led by the employee’s direct supervisor, it includes a structured assessment form and a feedback discussion.

Key Steps in the Appraisal Process

  1. Planning and Goal Setting: At the start of the year, managers and employees agree on specific, measurable goals.
  2. Delivering Results: Employees work toward these goals with support from their managers, including coaching and feedback along the way.
  3. Assessing Performance: Near year-end, the manager evaluates performance using standardized forms and documents.
  4. Review and Feedback: A formal meeting compares results to the original goals and sets the stage for the next cycle.

Why Do Performance Appraisals Matter?

  • Improves Individual Performance: Helps employees understand what to improve and where to focus.
  • Provides Feedback: Keeps communication open between managers and employees.
  • Motivates Staff: Clarifies what’s considered outstanding and encourages people to strive for it.
  • Supports Goal Alignment: Ensures individual objectives tie into the organization’s bigger picture.
  • Improves Organizational Outcomes: Aligning everyone’s efforts boosts overall performance.
  • Identifies Low Performance: Flags those who need extra support or intervention.
  • Guides Promotions: Helps managers decide who’s ready to move up.
  • Supports Downsizing Decisions: When needed, helps retain top performers.
  • Links Pay to Results: Many companies use it to guide performance-based compensation.
  • Enables Manager Support: Reveals coaching and mentoring needs.
  • Helps with Manpower Planning: Shows where talent is strong or lacking.
  • Reveals Training Needs: Points out skill gaps that training can fix.

Frequently Asked Questions

How often should performance appraisals happen?

Typically once a year, but many companies also use mid-year reviews or quarterly check-ins.

Who conducts the performance appraisal?

Usually the employee’s immediate supervisor or manager, sometimes in collaboration with HR.

What’s the link between performance appraisals and promotions?

Appraisals help managers identify high-performing individuals who are ready to take on more responsibility or move into leadership roles.

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