Reviewed by HR & Business Communication Experts Updated for 2026 Professional Communication Standards

What is Performance Appraisal?

Performance appraisal refers to a systematic method of evaluating the performance and the potential for development of the employees working in an organization. Performance appraisal also named as Employee Appraisal, Performance Evaluation or Performance review in HRM. It is a process to compile data of each employee performance on the job and create a document for performance evaluation.

Performance Appraisal in HRM?

In every organization there is a need to understand the abilities of the employees to perform and grow, Performance appraisal acts as a tool to check the development opportunities for the employees. It is a systematic evaluation of the work performed by the employees.

The ways of performance appraisal include:

The pay of employees is compared with the target given to them and the plans on which they act during their daily work routine.
The factors which are responsible for the performance of employees are analyzed by the supervisor.
Further better ways to improve the performance are suggested to the employees.

Performance Appraisal Definition

An employee performance appraisal system has defined a process in which a predefined standard of factors such as work knowledge, work performance, work attitude, leadership quality, team player behavior, consistency, decision-making abilities, and skills is created and then actual performance as well as the personality of employee is compared with these expected standards by the organization.

Performance Appraisal Meaning

A performance appraisal used in the organization is a regular review of employees’ performance to verify their contribution to the company. It is also known as an annual review or performance evaluation. It evaluates the skills, growth, achievement, or failure of the employees. The performance appraisal is often used to justify the decisions related to promotions, pay hikes, bonuses and termination of the employee.

Definition by Eminent Authors / Experts

Find here the definition of performance appraisal given by HR experts:

Edwin B. Flippo defines “Performance appraisal is a systematic, periodic and so far as humanly possible, an impartial rating of an employee's excellence in matters pertaining to his present job and to his potentialities for a better job.”

Gomej-Mejia explained as “Performance Appraisal involves the identification, measurement and management of human performance in organization.”

Slabbert and Swanepoel defined “Performance appraisal is a formal and systematic process by means of which the relevant strengths and weaknesses of the employees are identified, measured, recorded and developed.”

Beach defined as “Performance appraisal evaluates systematically performance of individual with regard to his or her performance on the job and his potential for development.”

Spriegel says “performance appraisal is the process of evaluating the employee’s performance on the job in terms of requirements of the job.”

Alford and Beatty defined performance appraisal as “the evaluation or appraisal of the relative worth to the company of a man’s services on his job”.

Dale Yoder said “Performance appraisal includes all formal procedures used to evaluate personalities and contributions and potentials of group members in a working organization. It is a continuous process to secure information necessary for making correct and objective decisions on employees.”

Douglass mentioned “Performance appraisal is a method of acquiring and processing the information needed to improve an individual employee’s performance and accomplishments.”

Newstrom defines “Performance appraisal is the process of evaluating the performance of employees, sharing that information with them and searching for ways to secure information necessary for making correct and objective decisions on employees.”

C. Heyel says “performance appraisal is a, process of evaluating the performance and qualifications of the employees in terms of the requirements of job for which he is employed, for the purposes of administration including placement, selection for promotion, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.”

Dale S. Beach explained as “Performance appraisal is systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development”.

Types of Performance Appraisal in HRM

Most of the organization's supervisors are in charge of performance appraisal. However, there are different types of employee performance appraisal in HRM based on the people who evaluate the performance of the employee.

The four major types of performance appraisal are as follows:

Self-assessment: Here the employee themselves rate their job performance and work behavior
Peer assessment: Under this assessment, the team members, co-workers, and workgroup are responsible for the performance rating of the employee.
360-degree performance appraisal: In this type of appraisal the performance rating is collected from the employee, their immediate supervisor, and peers.
Negotiated appraisal: In order to avoid the conflicts between employee and their supervisors a new trend of appraisal is utilized. In this type of performance appraisal, a mediator evaluates the performance of the employee and puts focus on the good side of performance rather than the criticism.

Methods of Employee Performance Appraisal?

Employee performance appraisal has two types of methods namely traditional methods and modern methods used by various organizations. The traditional methods are quite simple and quick to execute while the modern methods are more focused on covering the overall well-being of the organization.

Traditional Methods of Employee Performance Appraisal

Here is a list of different traditional methods which can be used for employee performance appraisal:

Rating Scales: In this scale, the factors such as attitude, initiative, dependability, etc are quantified. A range of excellent to poor is provided to the rater and based on the rating the performance of the employee is calculated.

Checklist: A checklist form of performance appraisal consist of a column of ‘Yes’ and ‘No’ for different employee traits. The rater has to put a tick mark based on if the traits exist or do not exist in the employee.

Forced Choice Method: In this method, different statements about the performance of the employee are provided to the rater and he/she is forced to answer the ready-made statements as true or false. Further evaluation of performance is carried on by the Human Resource department based on the answers of the rater.

Forced Distribution Method: In this method, it is assumed that the performance of an employee conforms to a bell-shaped curve. Thus, the rater has to put employees on provided points on the scale.

Critical Incidents Method: Here the critical behavior of the employee is considered by the supervisor while evaluating the performance.

Behaviorally Anchored Rating Scale: Different statements which are descriptive in nature are prepared about the behavior of the employee. These behaviors are put on the scale points and the rater has to indicate the points which explain the employee behavior in a more exact way.

Field Review Method: In this method, the reviewer of the performance is generally someone outside the department. The people from the HR department or corporate office do the performance evaluation of the employee based on the records and interviews.

Performance Tests and Observations: This is a kind of oral test that is conducted to test the skills and knowledge of the employees in their respective fields. The employees sometimes receive a situation and are asked to demonstrate their skills and then their performance is evaluated based on that presentation.

Confidential Reports: Often the government departments follow this method of performance evaluation. The employees are evaluated based on the parameters such as leadership quality, teamwork, integrity, technical ability, attendance, etc. The reviewer sends the confidential review to the concerned authority about the performance of the employee.

Essay Method: Under this method, the detailed description of the employee performance is written by the rater. The performance of an employee, his relations with other Co-workers, requirements of training and development programs, strengths and weaknesses of the employee etc. are some of the points that are included in the essay. The efficiency of this traditional method of performance appraisal depends on the writing skills of the rater.

Cost Accounting Method: It is a simple method in which the performance of the employee is linked with the monetary benefits of the organization. The rater checks about the cost to the company to keep the employee and the contribution of the employee in terms of monetary business.

Comparative Evaluation Approaches: This approach includes a comparison of the performance of co-workers with each other. It is of two types namely the ranking method and paired comparison method. It is a quite popular method of employee performance appraisal in the corporate world.

Modern Methods of Employee Performance Appraisal

Here is a list of different modern methods which can be used for employee performance appraisal:

Management by Objectives: In this method, the performance of the employee is assessed based on the targets achieved by him/her. The management at the beginning of the financial year conveys the set goals to the employees, at the end of the year the performance of the employee is compared with the set goals and evaluated for the appraisal.

Psychological Appraisals: Psychologists are invited to the companies for the performance appraisal of the employees. Here the performance is in the context of the potential future performance. Psychological tests, in-depth interviews, reviews, and discussions with the managers are the methods used for the evaluation of the performance.

Assessment Centers: A series of exercises are conducted at the assessment center of the company to actually evaluate the performance of the employee. The exercises include discussions, role-playing, computer simulations, and many more. The employees are evaluated in terms of communication skills, mental alertness, emotional intelligence, confidence, and administrative abilities. The rater observes the event and evaluates the performance of the employee at the end.

360-Degree Feedback: It is particularly a 360-degree feedback method in which the information about the performance of the employee is collected from supervisors, peers, group members, and self-assessment. All the remarks are considered to evaluate the overall work performance of the employee.

720-Degree Feedback: In line with the 360-Degree feedback system, here the feedback is collected from the stakeholders within the company as well as the people linked from outside the organization. The customers, suppliers, investors, and other financial groups provide feedback about the performance of the employee.

Performance Appraisal Objectives

The main objective of the employee performance appraisal is often termed as a comparison of the standard performance set by the organization with the actual performance of the employee. However, there are some other important objectives served by the employee performance appraisal system as given below:

The performance appraisal system maintains the records which are used to determine the compensation and wage structure of the employee.
It is very useful to determine the strengths and weaknesses of the employees and helps to place the right person at the right job.
It provides access to the potential in the person for future growth and development
It gives the necessary feedback regarding the performance of the employee and their actual contribution to the growth of the organization.
It guides the HR department about the training needs of the employees.
It influences the working habits of the employees and makes them work-oriented.

Advantages & Disadvantages of Performance Appraisal

The employee performance appraisal system is a core part of HR functions and is regularly used for the benefit of the organization. However, each system has its own benefits and drawbacks. Here are the advantages and disadvantages of performance appraisal.

Advantages of Performance Appraisal

It helps the supervisors to chalk out the promotion for performing employees and dismiss the inefficient workers.
It helps the organization to decide the compensation of the employee. Also, based on the performance and the additional efforts put by the employee the extra benefits and allowances can be decided using records of performance appraisal.
Special actions can be taken for the development of the employees. The performance appraisal system will highlight the weakness of the employee based on which the training program arrangement can be carried out by the organization.
The performance appraisal further suggests the changes in the selection process which will help to hire better employees.
Performance review is an effective way to communicate the status of the performance of the employee. It is a way to provide feedback about how the employees are doing on their job.
The evaluation of the performance can act as a motivational tool. It provides a picture of the efficiency of the employee and motivates the individual to improve their performance.

Disadvantages of Performance Appraisal

Performance appraisal totally depends on the factors used for the evaluation of the performance. The use of incorrect or irrelevant factors can lead to the failure of performance appraisal.
Sometimes the vital factors responsible for the performance are ignored during performance appraisal.
The factors like attitude, abilities, and initiative are very vague and difficult to gauge.
Sometimes the managers who carry out the performance appraisal are not qualified enough to properly assess the abilities of the employees. Thus, it leads to irrelevant data collection and failure of performance appraisal.

Performance Appraisal Example and its Reviews

Every organization has its own performance appraisal system which is relevant to the job structure of the employees. Here is an example of a performance appraisal form and review as given below. The example provided is just for the enhancement of understanding of the concept of performance appraisal. The exact replica of the performance appraisal system and review is not recommended.

Performance Appraisal Form

Employee information
Name:	Date:
Job Title:	Review period:
Supervisor:	Department:
4	3	2	1
Outstanding	Good	Acceptable	Unacceptable
Very impressed by the performance of the individual in this category	The performance in this category is more than expected. Keep on the good work	The performance expectations are fulfilled but there is room for improvements	The efforts are not enough in this category. Seriously need an improvement plan.
Categories	4	3	2	1	Comments
Attitude
Communication
Work Output
Productivity
Creativity
Authority
Dependability
Strength
Weakness
Other Comments

The comments or outputs of performance appraisal are the most important part of this system. Here are some comments on the performance appraisal review session:

Overall Performance:

Rating 82%.

Comments: a) Employee is a disciplined and reliable worker. He/she is always available for team members. b) Employee is well organized and efficient. c) Employee takes efforts to self educate about changing markets and technology. d) Employee provides support, insights, direction, and ideas to a team member while working together on the project.

Goals Achieved:

Rating 70%

Comments: The employee was very efficient while working for the goal attainment. As the set goal is always set higher, 70% ahievement is a significant performance. More can be achieved by carefully planning the work process.

Improvement:

Rating 65%

Comments: The achievement is quite significant still there is a lot of room for improvement. The employee can be proactive in problem-solving and boost the growth journey.

Author & Reviewer

This content is prepared and reviewed by HR and workplace communication professionals and is updated to reflect current professional Standards.