Performance appraisal is a formal assessment in an organization to access and measure the performance and productivity of each individual employee. It is also known as performance evaluation or performance review. Performance appraisal is one of the roles and responsibilities of HR managers. It involves the systematic evaluation and documentation of an individual’s behavior towards job related responsibilities.
Performance appraisal involves setting performance goals and expectations, collecting performance data, analyzing those data, providing constructive feedback, awarding benefits and developing performance improvement strategies. Furthermore, performance appraisal assists in aligning individual goals with organizational objectives.
In this article, we will explore all the key reasons for performance appraisal in an organization with its significance in an organization.
Reasons for Performance Appraisal
Some of the key reasons for the need of performance appraisal in an organizational context are:
Performance Feedback and Improvement
Performance Appraisal is necessary as it provinces employees with valuable feedback on their performance. Such review helps employees to understand their performance dynamics and provides feedback about their strengths and weaknesses. Feedback after the appraisal also motivates employees to work on their weaknesses and perform better.
A manager can use the data from performance appraisal to provide feedback to employees from different departments.For instance, a manager can lead a sales representative highlighting the performance of that representative in different fronts. The manager can guide the representative for improvement by highlighting the weak areas.
Employee Growth Development
Performance appraisal system includes all the data regarding the performance of every individual employee in different situations. Such appraisal identifies the common need in the employees and conducts different growth and development workshops. Such input from the performance appraisal process regarding the need of employee development programs help employees to enhance skills and competencies.
For instance, a supervisor may assess and identify the need of communication and leadership programs to the employees either from the direct interaction or from their performance result. After this assessment, companies introduce training and development programs to upgrade and support the communication and leadership skills of the employees.
Make Employees Valued
Before the introduction of performance appraisal, performance evaluation was subjective and informal. Employees consider such subjective and informal approaches as biased, judgmental, and unscientific. There was no equitable approach to appreciate the one who has really worked hard.
Performance appraisal is a scientific approach to performance valuation. Employees also value the frequent praise and recognition for their good work. Also, recognition and appraisal motivates employees to perform and work hard for the company. In modern times, regular performance appraisal helps companies to retain employees. Performance appraisal now has strategic importance both to employees and employers.
Goal and Objective Setting
By utilizing data-driven goals and objectives, organizations can establish targets and objectives that are both realistic and achievable. Appraisal facilitates the process of setting measurable and attainable targets and objectives. Appraisals provide the employee performance parameters which lead the organization to make objectives and targets that are achievable. Also, this helps organizations to assign work to the most competent employees that will surely outperform.
Such careful consideration helps organization in two ways:
- It achieves the job in the most effective and optimal ways
- Performable targets motivates employees and empowers them to perform the task
For instance, a project manager can set measurable targets for team members after understanding their interest and capacity to deliver high quality work.
Appraisals are crucial in and for decision making in any organization. Performance measurement is essential for companies to consider what is important and what needs to be improved. Performance appraisal is required in an organization’s decision for:
- Making promotion decisions by identifying the deserving and high performing individuals.
- Determining compensation levels, salary increments, bonus and benefits, allowances in the most equitable manner.
- Identifying skill gaps and development needs for designing training programs, workshops and other opportunities.
- Identifying potential candidates for key positions within the organization i.e. succession planning.
- Outlining the underperforming and development areas for improvement plans.
- Planning the workforce requirement in present and future days.
Communication and Engagement
Performance evaluation allows cross level communication and involvement. Supervisor and employees at all levels engage to prepare the such appraisal. This strengthens the working environment as it motivates employee interaction. Performance appraisal process also acts as a platform for discussing job expectations, progress, difficulties and any related concerns or challenges.
For instance, during a performance evaluation session, the supervisor can provide recognition for the employee’s performance, present the concern and engage in dialogue regarding the expectations and requirements.
Motivation and Rewards
Performance appraisal recognizes and rewards employees for their achievements and contributions. Appraisal assures that the efforts of employees will be respected. Such recognition allows employees to get motivated. Along with that, performance appraisal lets employees express their concern with the supervisor. Appraisal provides a platform for expression which motivates the employees.
For instance, high performing employees always get appreciation, recognition in cash or kind, rise in pay or receive bonus and promotion which motivates employees to perform better.
Documentation and Legal Compliance
Appraisal process is an official process with a proper guideline and procedure. It is well evaluated and documented. It provides a formal record of employees performance, complaints, plans, proposals etc. for future reference and proof. Such documentation is very crucial in case of any legal matter related to performance based decisions.