What is Performance Appraisal?

In every organization there is 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. 

Performance Appraisal

The ways of performance appraisal includes:

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

Performance Appraisal Meaning and Definition

Definition: Employee performance appraisal system is 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 personality of employee is compared with these expected standard by the organization.

Meaning: A performance appraisal used in the organization is a regular review of employee’s performance to verify their contribution to the company. It is also known as 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 hike, bonuses and termination of employee.

Types of Employee Performance Appraisal in HRM

In most of the organization 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 type 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 work group is responsible for the performance rating of the employee. 
  • 360-degree performance appraisal: In this type of appraisal the performance rating are collected from 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 put focus on the good side of performance rather than the criticism.

What are Different 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 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 is 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 column of ‘Yes’ and ‘No’ for different employee traits. The rater has to put a tick mark based on if the traits exist of does not exist in the employee.

Forced Choice Method: In this method different statements about the performance of the employee is 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 HR department based on the answers of the rater.

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

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

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

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

Performance Tests and Observations: This is kind of a oral test which is conducted to test the skills and knowledge of the employees in their respective field. The employees sometimes receive a situation and 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, team work, integrity, technical ability, attendance etc. The reviewer sends the confidential review to the concern 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 comparison of the performance of co-workers with each other. It is of two types namely 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.

What are the Objectives of Employee Performance Appraisal?

The main objective of the employee performance appraisal is often termed as comparison of the standard performance set by the organization with the actual performance by the employee. However there are some other important objectives served by 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 right person at 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 in 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 make them work oriented.

What are the Advantages and Disadvantages of Performance Appraisal

The employee performance appraisal system is a core part of HR functions and regularly used for the benefits 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 employee 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 a 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 about efficiency of the employee and motivates the individual to improve the performance.

Disadvantages of Performance Appraisal

  • Performance appraisal is totally depends on the factors used for the evaluation of the performance. The use of incorrect or irrelevant factors can lead to 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.

Discuss 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 performance appraisal form and review as given below. The example provided is just for the enhancement of understanding the concept of performance appraisal. The exact replica of the performance appraisal system and review is not recommended.

Performance Appraisal Form

Employee information



Job Title:

Review period:











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 a room for improvement

The efforts are not enough in this category. Seriously need an improvement plan.



















Work Output


































Other Comments






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

Overall Performance:

Rating 82%.

Comments: a) Employee is 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 market and technology. d) Employee provides support, insights, direction and ideas to team member while working together on the project.

Goals Achieved:

Rating 70%

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


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 up the growth journey.