Everything you need to know about the purpose and objectives of performance appraisal. Performance appraisal has been used as a tool for making decisions in various areas.

However, organizations do not take adequate care of how such decisions would affect their strategy and, consequently, achievement of their long-term objectives.

The purpose of appraisal system are manifold and diverse. Organizations primarily use an appraisal system to improve individual performance, and in turn, organizational performance.

Yet, the other purposes include linking appraisal with pay, identifying shortcomings, spotting special attributes, discovering and recording hidden potentials, etc. The problem associated with an appraisal plan is that a single plan cannot fulfil too many expectations.


However, a properly designed system can help enhance employee performance and achieve organizational objectives.

Performance appraisal reports are valuable for all human resource functional areas such as human resource planning, recruitment and selection, training and development, career planning and development, compensation management, employee relations, and assessment of employee potential.

Some of the purpose and objectives of performance appraisal are:-

1. Human Resource Planning 2. Recruitment and Selection 3. Training and Development 4. Career Planning and Development 5. Compensation Management 6. Employee Relations;


7. Assessments of Employee Potential 8. Alignment of Strategy and Job Behaviour 9. Feedback Mechanism 10. Developmental Uses 11. Administrative Uses/Decisions 12. Organizational Maintenance/Objectives 13. Documentation.

Performance Appraisal: Purpose and Objectives

Purpose of Performance Appraisal – For All Human Resource Functional Areas

Performance appraisal systems have undergone a sea change in the last two decades. There has been a realization that it is more important to focus on defining, planning, and managing performance than appraising it. However, the concept that has not changed is measuring performance and linking that with recognition and rewards. Most organizations use performance management system to monitor and improve employee performance, which is a welcome change. It is also said, ‘stop appraising, start coaching’.

The need to develop employees is recognized and the development process has gained momen­tum. It is seldom said by managers that, ‘we have good a performance management system.’ Many surveys of Fortune 500 companies indicate a high degree of dissatisfaction with performance appraisal systems. It is presumed that the nature of performance is such that it can bring forth a satisfactory response from its users. Nevertheless, researchers pursue fundamental researches relating to perfor­mance appraisal too.

The use of performance appraisal in organizations is diverse.


Empirical research in this area has been conducted to determine:

i. The extent to which performance appraisal is used in industry,

ii. The extent to which appraisal data may be used for multiple and possibly conflicting uses within the same organization, and

iii. The organizational correlation of these uses.


The purpose of appraisal system are manifold and diverse. Organizations primarily use an appraisal system to improve individual performance, and in turn, organizational performance. Yet, the other purposes include linking appraisal with pay, identifying shortcomings, spotting special attributes, discovering and recording hidden potentials, etc. The problem associated with an appraisal plan is that a single plan cannot fulfil too many expectations. However, a properly designed system can help enhance employee performance and achieve organizational objectives. Performance appraisal reports are valuable for all human resource functional areas such as human resource planning, recruitment and selection, training and development, career planning and development, compensation management, employee relations, and assessment of employee potential.

Purpose # 1. Human Resource Planning:

Appraisal system helps in assessing an organization’s human resources, and in utilizing data available in the human resource information system (HRIS). HR planning takes into consideration the credibility of employees for promotion. The performance appraisal reports help to discover shortage or excess manpower in relation to the targets.

Management succession planning is a key concern for all organizations. A meticulously designed appraisal system depicts a profile of the management’s human resource strengths and weaknesses, which contribute to HR planning.

Purpose # 2. Recruitment and Selection:

Organizations always look out for manpower capable to perform and achieve the business goals. Manpower shows the capacity to achieve production target, and sustain productivity. Requirement of manpower by an organization depends on the workload, which varies from time to time. The requirement of manpower also needs periodic and meticulous planning. As the load of an organization fluctuates, at some point of time, it appears that the available manpower is adequate enough to achieve the target.


Considering the consistency of the load, an organization goes for internal or external recruitment. Performance evaluation ratings also help in predicting the performance of job applicants in case of internal recruitment by way of promotions. The performance appraisal reports help to ensure the availability of human resource having the attributes essential to perform certain key tasks required in the organization.

In order to make the recruitment and selection process perfect and to get the right man for the right job, an organization should model a competency framework. Mondy (2009) emphases that while validating selection tests, employee ratings may be used as a variable against which test scores are compared. Obviously, in such cases, the determination of the selection test’s validity would depend on the accuracy of appraisal results.

Purpose # 3. Training and Development:

Training is required to be imparted to fulfil specific skills or knowledge gaps, whereas development is generic in nature. Training refers to learning skills and knowledge for doing a particular job, and is job-centered in nature. Training helps to acquire specific operating skills among the workforce to accomplish the tasks successfully assigned to them. Training is concerned with maintaining and improving the current job performance.

It produces short-term effects on the employee and to the organization. In the process of training, the trainer plays a vital role to impart the necessary knowledge and skills. On the contrary, development refers to the growth of an employee in all respects, and the overall growth cannot be attributed to any particular job, or task, or set of jobs or tasks. It shapes and moulds employee attitudes.


Development is also considered to build up the competence of a career-oriented person. Development generates long-term effects both to the employee and the organization. However, an executive must have the urge to develop himself. Unless he is internally motivated for ‘self-development’, any amount of effort put in by the organization may be futile. Appraisers mention the training and development needs in their report, which becomes an input to the training system.

Purpose # 4. Career Planning and Development:

Career denotes all the jobs that are held in one’s working life. Career planning is a process that fixes goals and lays down the path to meet these goals. The purpose of career planning is to provide continuity, order, and meaning to a person’s work life, and hence, it is not an event or end in itself. It aims to integrate individual and organizational goals.

Career counselling is a process of advising employees on setting career goals and assisting them find suitable career paths. Career development refers to the actions undertaken by a person to achieve the career goals. Dynamic appraisers mention about the requirement of career counselling and development.

Purpose # 5. Compensation Management:

Presently, compensation management is a strategic issue. Employee compensation includes all forms of pay and rewards given to employees. Compensation includes both direct and indirect financial payments which employees receive during their employment period. Most organizations are linking compensation with performance.


Performance appraisal results provide a basis for rational decisions with regard to pay, allowance, fringe benefits, and contingency rewards. Most managers believe that outstanding job performances must be rewarded. They believe that, ‘the behaviours you reward are the behaviours you get’.

Rewarding good performers contributing to achieving the business goals is the organizational and moral responsibility of top management and should be mentioned in the strategic plan. A company should develop and implement a system to objectively measure contributions of employees, design compensation programmes, and reward the most productive employees.

The appraisal system manifests its importance in compensation programmes as well. Mondy (2009) highlights that according to a recent study, two-thirds of the companies use performance reviews to determine pay increases, and almost half of them use them to calculate bonuses.

Purpose # 6. Employee Relations:

Employee relations encompass the set of work essential to maintain healthy employer-employee relationships that contribute to satisfactory productivity, motivation, and morale. It is concerned with preventing and resolving problems involving individuals that arise out of or affect work situations. In the prevailing business scenario, the management needs to be flexible to improve the employee relations.

Purpose # 7. Assessments of Employee Potential:

Employees are appraised based on their performances over a period. Past behaviours are considered as predictors of their future behaviours. Employees are promoted based on their performances and this enhances their job responsibilities. After promotion, a salesperson becomes a senior salesperson. At a later stage, he/she may become a sales manager responsible to look after a district.

As a manager, he/she has to supervise many salespeople under his/her control. The tasks need a totally different set of competencies including man management skills. Thus, a successful salesperson may not be successful as a sales manager. In the arena of information technology, a data entry operator may not be successful as a junior programmer.


The performance appraisal reports reflect only past behaviours which necessarily do not speak about the future behaviours. Organizations need to recognize these vital aspects, and should desist from promoting considering the excellent or very good reports. Mondy (2009) emphasizes that recognition of the problem has led some firms to separate the appraisal of performance, which focuses on past behaviours, from the assessment of potential, which is future-oriented.

Purpose of Performance Appraisal – Strategic Use of Performance Appraisal

Performance appraisal has been used as a tool for making decisions in various areas. However, organizations do not take adequate care of how such decisions would affect their strategy and, consequently, achievement of their long-term objectives.

In order to overcome this weakness of performance appraisal, many organizations have started linking their performance appraisal to their strategy. In HRM literature, such a practice has been termed as strategic performance appraisal. The key assumption in strategic performance appraisal is that performance appraisal system provides valuable information which can be used in a number of key HR areas.

Therefore, if emphasis is put on strategic use of performance appraisal, the result of consequent actions would be of strategic importance. In strategic performance appraisal system, the key criteria for appraising performance — performance results, behaviours, etc. — are derived from business strategy. This begins at the top level and goes successively throughout the organization.

As a result, everyone in the organization is clear about what he has to achieve and also why he has to achieve it in organizational context. When performance appraisal is adopted in this form, it tries to ensure two relevant characteristics- alignment of strategy and job behaviour and feedback mechanism. Let us see how both these are achieved.

1. Alignment of Strategy and Job Behaviour:

A critical issue in performance appraisal is to determine criteria on the basis of which employee performance will be appraised. These criteria are very important both for an organization as well as its employees as these become the basis for determining job behaviour for employees and its results for achieving organizational objectives.


Therefore, these criteria should be selected very carefully. Ideally speaking, an organization should derive these criteria from its strategy to ensure that the employees are engaged in behaviours as anticipated by the strategy and the outcomes of these behaviours are relevant for creating and sustaining competitive advantage at the marketplace resulting in achievement of organizational objectives.

Thus, an organization which competes on the basis of providing customer service should determine performance appraisal criteria on this basis. Similarly, an organization which competes on the basis of being cost leader in the industry concerned should define performance appraisal criteria on the basis of cost of minimization.

Further, this process of alignment of strategy and job behaviour should not end at the level of individual employees but should percolate to the levels of section, division, department, and organization as a whole.

2. Feedback Mechanism:

Performance appraisal system creates a feedback mechanism which provides information for various uses. However, this feedback mechanism should be strategically relevant. Human resource management plays role in organization’s strategic management process strategy formulation, strategy implementation, and strategic control.

This role is effective when there is integration between strategic management and human resource management. Performance appraisal is relevant at strategic control stage. However, Caruth and Humphreys feel that whereas performance appraisal has received reasonably sufficient importance in HR, its alignment with strategic control is inadequate.

Without such an alignment, performance appraisal becomes an exercise in futility instead of a vital control measurement, often resulting in not only personnel dissatisfaction but also, more importantly, and an impediment to systematic strategy implementation.


Therefore, there is a need for integrating performance appraisal with strategic control. Very often, strategic control system prescribes criteria for control in the form of end-result variables (financial performance and social performance) and intervening variables (product-related, market-related, and employee-related).

The feedback mechanism of performance appraisal system should monitor and report data on these variables to make the performance appraisal strategically useful.

However, these roles can be performed only when there is systematic performance appraisal, and various relevant decisions are made objectively in the light of result of performance appraisal.

To be systematic and objective in performance appraisal, managers require an understanding of various intricacies involved in performance appraisal like process and methods of performance appraisal, problems in performance appraisal, and how these problems can be overcome.

Purpose of Performance Appraisal

Employees take efforts to accomplish the tasks assigned to them. They perform and hence their perfor­mance must be reviewed and appraised periodically to be improved. Performance appraisal is a system of reviewing and periodically evaluating an individual or team performance and giving feedback to the individual or team. Many organizations do not give feedback to the employees who have been apprised.

In such cases, they treat the appraisal as an examination in their service life. Hence, appraisal system is not liked by the employees in these companies. However, performance appraisal, actually, is a vital and critical component type measurement, used by companies to achieve success.


Corporate culture influences the process of appraising. It may either assist or hinder the process. A culture lacking from mutual trust cannot provide an environment conducive to smooth appraisal. An environment characterized by respect and trust for one another, information sharing, and socialization encourages high performance by individuals and teams. In such an environment, the appraisal system is welcomed. Let us now study the basic purposes of the appraisal system.

Performance appraisal refers to the evaluation or review of the accomplishment of a person in a specific period of time, say one year. Effective performance appraisal systems contain two basic systems operating in conjunction—an evaluation system and a feedback system.

Identifying the performance gap is the main objective of an evaluation system. This gap is consid­ered to be the reason why performance does not meet the expected standard as set by the organization.

Similarly, the main aim of the feedback system is to inform individuals about their quality of work. The information flow, in this case, is two way. The management gives feedback to its employees and the employees give feedback to their appraisers.

These effective appraisal systems need to be structured to be effective. In the absence of any structured system, no one can be held accountable for anything, especially, in case anything goes wrong. Hence making employees accountable and responsible for their jobs is one of the tasks of appraisals.

This sys­tem also helps in measuring an individual’s performance vis-a-vis the organization’s goals. Hence, one can say that this is an important system and must be present in every organization. The first recorded appraisal system in industry refers to Robert Owen’s use of character books and blocks in his New Lanark Cotton Mills, in Scotland, around 1800.


This system comprises an interview between the appraiser and an appraisee on a regular basis. In this interview, the performance of the employees is examined along with his accomplishments, and fall backs. It is a great way of assessing every employee and working towards their improvements.

Performance appraisals are also essential for career and succession planning. They are important for motivating, and attitude building of the employee. In some cases, behaviour modifications foster relationships between employees and management.

Appraisal is not daunting and time-consuming; it is an essential requirement of an organization. The process is seen as a difficult administrative chore and emotionally challenging. It is an important system for the human resource department, as it relies on evaluation results in determining the soundness of such developmental decision, which have a direct impact on the business surpluses.

Performance appraisal system, if properly structured, can achieve and contribute a lot to the organi­zation. Appraisal is a tool of measuring performance; it should be objective and transparent for short, medium, and long terms.

The purposes include the following:

1. Clarifying, defining, redefining priorities, and objectives

2. Motivating employees through acknowledging their achievement and sharing feedback

3. Guiding employees towards achieving their aims and targets

4. Identifying training needs and learning desires—assessment and agreement

5. Identification of personal strengths (including hidden strengths) and weaknesses

6. Career and succession planning—personal and organizational

7. Team roles clarification and team building

8. Appraisee and appraiser mutual awareness, understanding, and relationship

9. Resolving confusions and misunderstandings

10. Reinforcing and cascading organizational philosophies, values, aims, objectives, goals, strategies, priorities, etc.

11. Delegating additional responsibilities, employee growth, and development

12. Coaching, mentoring, counselling, and feedback

13. Managers’ development enabling them to conduct appraisals objectively.

Job performance appraisals, in whatever form, are vital for managing the performance of people and organizations.

Purposes of Performance Appraisal – Multiple Purpose of Performance Assessment

1. Developmental Uses:

i. Identification of individual employee needs and aspirations

ii. Providing performance feedback

iii. Facilitating transfer and job assignments decisions

iv. Identification of individual strengths and developmental needs

v. Forming the basis of training needs assessment

2. Administrative Uses/Decisions:

i. Salary and compensation management

ii. Promotion decisions

iii. Employee retention or termination

iv. Recognition of individual performance

v. Employee lay-offs and termination related decisions

vi. Identification of poor performance

3. Organizational Maintenance/Objectives:

i. HR planning

ii. Determining organization training needs

iii. Evaluation of organizational goal achievement

iv. Information for goal identification

v. Evaluation of HR systems

vi. Reinforcement of organizational development needs

vii. Organizational restructuring and remodelling

4. Documentation:

i. Criteria for validation research

ii. Documentation for HR decisions

iii. Helping to meet legal requirements (Statutory Compliance checks)

Performance reviews can be used as a tool for day to day administrative as well as employee developmental purposes or activities.

5. Others:

(a) To Help Determine Promotions and Transfer- A managerial appraisal, if done properly, may be of invaluable help for promotion purposes. This, however should be supplemented by a proper selection interview. Selection of persons for senior appointments within a concern is very much facilitated by the existence of a systematic and reliable record of the manager’s performance.

Similarly, periodical appraisal and review can provide an important check on initial selection and placement of managers. Many times, because of the wrong selection process or because of the inability to correctly assess the personal qualities during a short interview, a manager may be put on a job where he cannot perform effectively. The performance appraisal may help diagnose this defect which can then be corrected.

(b) To identify area for further training,

(c) To help in deciding the compensation plan,

(d) To uncover the potential of the person,

(e) To decide about confirmation or termination during the probationary period.

Purpose of Performance Appraisal – According to DeCenzo and Robbins

It might seem at first glance that performance appraisals are used for a rather narrow purpose to evaluate who is doing a good job (or not). But in reality performance appraisals are one of the most versatile tools available to managers. They can serve many purposes that benefit both the organisation and the employee whose performance is being appraised.

From the administration point of view, appraisal programmes provide input that can be used for the entire range of HRM activities. For example, research has shown that performance appraisals are used most widely as a basis for compensation decisions. The practice of “pay-for-performance” is found in all types of organisations.

Performance appraisal is also directly related to a number of other major HR functions, such as promotion, transfer, and layoff decisions. Performance appraisal data may also be used in HR planning, in determining the relative worth of jobs under a job evaluation program, and as criteria for validating selection tests.

From the individual development point of view, appraisal provides the feedback essential for discussing strengths and weaknesses as well as improving performance. Regardless of the employee level of performance, the appraisal process provides an opportunity to identify issues for discussion, eliminate any potential problems, and set new goals for achieving high performance.

Newer approaches to performance appraisal emphasize training as well as development and growth plans for employee. A developmental approach to appraisal recognizes that the purpose of a manager is to improve job behaviour, not simply to evaluate past performance.

According to DeCenzo and Robbins, performance appraisal can serve three purposes:

1. It can be used as a basis for reward allocation. Decisions as to who get salary increases, promotions, and other rewards are determined by their performance evaluation.

2. Appraisals can be used for identifying areas where development efforts are needed. Man­agement needs to identify those individuals who have specific skills or knowledge defi­ciencies. The performance appraisal is a major tool for identifying these deficiencies.

3. It can be used as a criterion against which selection devices and development programs are validated so that selection process is successful in differentiating satisfactory perform­ers from unsatisfactory ones. But there must be a standard of satisfactory performance. The development of a valid, reliable, and bias-free performance appraisal system can establish such standards.

For many organizations, the basic purpose of appraisal system is to improve individual and organizational performance. There may be others purposes also. However, a potential problem with performance appraisal is expecting too much from one appraisal plan.

For example, a plan effective for developing employees may not be suitable for determining pay increases. Yet, a properly designed system can assist achieve organizational objectives and increase employee performance.

In fact, a performance appraisal system can achieve the following purposes:

Purpose # 1. Human Resource Planning:

In evaluating a firm’s human resources, data must be available describing the potential and promotability of all employees, especially key executives. Management succession planning is a main concern for all firms. A properly designed appraisal system provides a profile of the organization’s human resource strengths and weaknesses to support human resource planning.

Purpose # 2. Recruitment and Selection:

Performance appraisal ratings may be useful in predicting the performance of job applicants. It may determine that a firm’s successful managers exhibit certain behaviours when performing key tasks and assist in establishing benchmarks for evaluating applicant responses through behavioural interviews.

Also, in validating selection tests, employee ratings may be used as the criteria against which test scores are compared. In this case, the determination of the selection tests validity would depend on the accuracy or appraisal results.

Purpose # 3. Training and Development:

Another purpose the performance appraisal system can serve is in the planning and execution of training and development plan. An effective performance appraisal system should point out an employee’s specific needs for training and development. If a firm finds that its first-line supervisors are facing difficulty in administering discipline, training sessions addressing this problem may be appropriate.

By identifying deficiencies that adversely affect performance, human resource and line managers are able to develop training and development programmes that allow individuals to enhance their strengths and reduce their deficiencies. Though an appraisal system does not guarantee properly training and developed employees, yet it assists in precisely determining the training and development needs when appraisal data are available.

Purpose # 4. Career Planning and Development:

Career planning and development may be looked at from either individual or organizational perspective. In either case, performance appraisal data are necessary in assessing an employee’s strengths and weaknesses and in determining a person’s potential. Key executives may utilize such information to counsel subordinates and assist them planning, developing and implementing their career plans in the organizations.

Purpose # 5. Assessment of Employee Potential:

Several organizations undertake to assess employee potential as they appraise their job performance. While past behaviours may be the best predictors of future behaviours, an employee’s past performance in one job may not accurately indicate future performance in higher-level or different position. An employee performing best in the position of a salesperson in the company may not be successful in performing his best as a district sales manager, where the tasks are distinctly different.

Similarly, the best computer programmer, if promoted, may be a disaster as an information technology manager. ‘Overemphasizing technical skills and ignoring other equally important skills is a common error in promoting employees into management jobs. Recognition of this problem has led some firms to separate the appraisal of performance from the assessment of potential.

Purpose # 6. Compensation Programs:

The results of performance appraisal provide a basis for rational decisions regarding pay adjustments. Most managers believe that outstanding job performance must be tangibly rewarded with pay increases. They believe that the behaviours rewarded are reinforced. Therefore, rewarding the behaviours necessary for accomplishing organizational objectives is at the center of a firm’s strategic plan.

To encourage good performance, a firm should design and implement a reliable performance appraisal system and then reward the most productive workers and teams accordingly.

Purpose # 7. Internal Employee Relations:

The data obtained from performance appraisal are also frequently used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer. For example, an employee’s performance in one job may be useful in determining his or her ability to perform another job on the same level, as is required in the consideration of transfers.

When the performance level is unacceptable, demotion or even termination may be appropriate. When a labour agreement is effective, seniority is usually the basis for layoffs. However, when management has more flexibility, an employee’s performance record is generally a more relevant criterion.

Purpose of Performance Appraisal – With Limitations

The purposes of rating could be many:

1. Assessment of tasks assigned and fulfilled

2. Suitability for promotion

Administrative use:

1. Transfers, layoffs and termination

2. Evaluation of training needs

3. Personnel research

Self-improvement of the employee:

1. He should know where he stands

2. He should make up for his deficiencies

The most obvious purposes of any rating system are to obtain such personal information which will be useful in assessing the potential of an employee, his good and weak points, and in designing management development programmes.

The objectives of the annual or periodical appraisal should therefore be:

(i) To evaluate results and plan for better performance;

(ii) To understand the gaps in knowledge, skill and training needs; and

(iii) To identify men with potential to man higher positions in the future.

Appraisal at each level may be done annually by the superior (known as the reporting officer) and the next superior manager (known as the reviewing officer). In the case of service department personnel who are attached to other departments, their performance can be assessed by the executive of that department. The responsibility of reporting generally rests with the reporting and reviewing officers. Higher authorities may also record their views on the performance and potential of an employee if they are aware of it.

The performance of the individual should be assessed on the success of the tasks assigned, and the causes of failure, if any, should also be recorded. The gaps in knowledge and skills should be properly ascertained so that these can be filled by planned guidance and training.

The potential for development should be judged by the reporting and reviewing officers on the basis of performance and results achieved on the present job. Promotion should be like climbing a mountain which requires effort, zeal and willingness to achieve distinction. It should not be like climbing a building by an escalator which requires little effort.

No personal bias should influence the filling up of merit rating forms.

The reporting officer should:

(a) Discuss with the person concerned his achievements/ failures in the performance, and ascertain his difficulties in managing the job, if any.

(b) Find out measures to overcome those difficulties.

(c) Work out action plans for better performance in future.

The discussion should be constructive rather than an inquest as the objective of appraisal is to help the individual in improving his performance. The estimate of potential for higher positions need not be disclosed during the discussions.

While discussing performance, the criteria should be:

1. Objectives

2. Tasks assigned

3. Failures and reasons thereof

4. Suggestions to overcome obstacles

5. Help needed by the subordinate from the superior to improve his performance.

For a person to do his job to the best of his ability, it is pre-supposed that:

(i) He understands what is expected out of him in terms of output, quality, loss, etc.

(ii) He is given adequate resources, necessary freedom and authority to do his work.

(iii) He receives due backing and guidance.

(iv) He has job satisfaction.

That is why the ability to perform well and his understanding of the work assume importance.

Common limitations of improperly designed performance appraisal/merit-rating system are:

(i) It is just a record of opinions;

(ii) There are zones of uncertainty;

(iii) Rating seldom tells the whole story; and

(iv) Rating depends upon the rater’s ability and personal biases.

Purposes of Performance Appraisal – Common Objectives of a Performance Appraisal Plan

Organizations have multiple purposes in mind when they institute performance review systems. Some may take a human relations approach, some, a productivity approach, and others a profit-motive approach. Those who take a human relations approach contend that they are interested in the development of the individual, while those who take productivity and profit views, assume that performance appraisal is a significant tool in achieving these objectives.

Whatever approaches are chosen, the following seem to be the common objectives of a performance appraisal plan:

1. To help the employees to improve their present job performance

2. To stimulate interest in self-development for the purpose of greater personal accomplishment

3. To provide an adequate supply of well-prepared individuals for future promotional opportunities and to help in their selection

4. To provide a tool for comparing an employee’s performance level with his salary level for purposes of a sound salary administration

5. To provide opportunity for the employee to express his feelings about the job or related matters

6. To foster good personal relations

7. To encourage high standards of performance

8. To let each employee know where he stands

The achievement of these objectives improves interpersonal relations, labour-management relations benefits the employees and the organization economically, and results in several fringe benefits. Most of the companies in all sorts of industries engage in some kind of performance assessment system for a variety of reasons. They are used to support their salary decisions, promotions, transfers and other personnel decisions. They tell the employee where he or she stands. Essentially, performance assessment ensures putting the right person in the right place at the right time.

The traditional approach appears to be still in practice in appraising the performance of operative employees. This approach involves the establishment of standards of performance, measuring the performance against these standards and sanctioning rewards or punishments. Whether appraising the performance of managers and supervisors or operative employees, a formalized evaluation or rating system is of great use in eliminating the subjectivity involved in appraisals.

Such a system also increases the importance of this process and forces the superiors to evaluate their subordinates. Some organizations have established policies related to performance appraisal. It is stated in the policy manuals of one of the organizations- “As a matter of policy, each member of the management is expected to appraise the performance of employees who report to him, to review the result periodically in a constructive manner and to provide such guidance and assistance as are needed.”

In the modern approach, responsibilities and expected results constitute the inputs of the performance review process while the outputs are rewards, corrective actions, and potentials.