A project report on Performance Appraisal of Employees. This report will help you to learn about:- Meaning of Performance Appraisal 2. Objectives of Performance Appraisal 3. Process 4. Methods 5. Need 6. Factors Distorting Performance Appraisal 7. Benefits 8. Limitations.


  1. Project Report on the Meaning of Performance Appraisal
  2. Project Report on the Objectives of Performance Appraisal
  3. Project Report on the Process of Performance Appraisal
  4. Project Report on the Methods of Performance Appraisal
  5. Project Report on the Need for Performance Appraisal
  6. Project Report on the Factors Distorting Performance Appraisal
  7. Project Report on the Benefits of Performance Appraisal
  8. Project Report on the Limitations of Performance Appraisal

Project Report # 1. Meaning of Performance Appraisal:

Performance means doing a job effectively and efficiently, with a minimum degree of employee-created disruptions. A good worker is one who performs well in terms of productivity and also minimises problems for organisation by being to work on time, by not remaining absent, and by minimising work related problems.

Performance appraisal is sometimes termed as employee appraisal, merit rating, personnel rating and personnel performance evaluation. The appraisal of other’s performance is a fundamental human act.


Performance appraisal is the systematic evaluation of the individual with respect to his performance on the job and his potential for development. Performance appraisal employs rating techniques for comparing individual employees in the work group, in terms of personal qualities or deficiencies and the requirements of their respective jobs.

Scott, Clothier and Spriegel have defined performance appraisal as “process of evaluating the employees performance on the job in terms of requirements of the job.”

According to Yodder, performance appraisal refers to all formal procedures used in working organisations to evaluate personalities and contributions and potential group of members.

Performance appraisal can be defined as, “the process of assessing the performance and progress of an employee or a group of employees on a given job and his potential for future development”.


Flippo defined the performance appraisal as, “the systematic, periodic and an impartial rating of an employee’s excellence in matters pertaining to his present job and his potential for a better job.”

Performance appraisal can also be defined as, the process of obtaining, analysing and re­cording information about the relative worth of an employee.

It is the systematic examination of an employee’s strengths and weaknesses in terms of the job.

It is an on-going or continuous process wherein the evaluations are arranged periodically according to a definite plan.

Project Report # 2. Objectives of Performance Appraisal:


1. To provide feedback to individual employees so that they can know where they stand and can improve their performance.

2. To provide database for the decisions by the management regarding placement, pro­motion, transfer, punishment etc.

3. To diagnose the strengths and weaknesses of individuals so as to identify training needs.

4. To provide counseling, career planning to subordinates.


5. To facilitate research in personnel management.

6. To test the effectiveness of recruitment, selection, placement and induction programmes.

Project Report # 3. Process of Performance Appraisal:

The process consists of following steps:

1. Establish performance standards.


2. Communicate performance expectations to employees.

3. Measure actual performance.

4. Compare actual performance with standard.

5. Discuss the appraisal with the employee.


6. If necessary, initiate corrective action.

Project Report # 4. Methods of Performance Appraisal:

Since there is a universally acceptable method for performance appraisal, various organisations employ different techniques for different category of their employees.

Some of the common methods used for appraisal are given hereunder:

1. Essays and overall ratings:


In this system, rater is asked to give an overall evaluation in narration form for the past year and to provide overall rating.

2. Trait-rating Scales:

In this system, a rater is required to indicate on numerical scale the degree to which an employee is appraised on the traits he possesses.

3. Ranking Method:

In this system, rater is required to distribute the employees along a scale on the basis of performance or simply list them in order of effectiveness. This helps in selecting top 1% or 5% or 10% and bottom 10% or so on.

4. Critical Incident Method:


In this method, rater is required to document the positive and negative behavioural events that have occurred in a particular period.

Project Report # 5. Need for Performance Appraisal:

1. It can be used as a basis for reward allocations i.e., salary increases, promotions and other rewards.

2. It can be used for identifying areas where development efforts like training and devel­opment are needed. Performance appraisal helps in identifying those deficiencies where development is needed.

3. Selection process can be developed on the basis of a valid reliable and bias free per­formance appraisal system.

Psychologically, performance appraisal is a powerful tool with tremendous impact on, the mind of employees and, through them on the organisation.

The purposes of performance appraisal are:


(a) To facilitate to find out suitability for;

i. Promotion

ii. Transfer

iii. Demotion or termination etc.

(b) To select persons for training and development;

(c) To facilitate in determining salary, increments etc.

Project Report # 6. Factors Distorting Performance Appraisals:


In the performance appraisal system, it is assumed that evaluator is free from personal biases and prejudices and that all managers impartially interpret and standardise the criteria for the appraisal. Efforts should be made to utilise direct performance criteria for appraising individuals wherever possible.

Following are the main factors which can affect the objective evaluation, and thereby validity and dependability of the performance appraisal system:

1. Leniency Error:

Sometimes rater has his own value system which acts as a standard against which appraisals are made. When the subordinate is rated higher than actual, it is referred to as positive leniency error, and when rated low, it is referred to as negative leniency error.

2. Halo Error:

Halo error or effect is a tendency to evaluate on all factors due to the general impression.


3. Bias:

Sometimes evaluators are biased for several reasons such as regional, religious backgrounds, social or interpersonal conflicts.

4. Similarity Error:

Those subordinates who demonstrate the characteristic similar to that of evaluator tend to benefit, while others are penalised.

5. Central Tendency:

Some evaluators avoid using the extremes of rating scales and to award ratings around the midpoint.


6. Strictness Error:

This error occurs when the rater artificially assigns all or a certain group low performance ratings.

Project Report # 7. Benefits of Performance Appraisal:

In the words of Dalton E. McFariand, “The purpose of any formal method of systematic employees appraisal is to provide greater objectivity in the executive’s judgement about subordinates. It is also an objective to regularise the procedures used by requiring periodic appraisals, so that up-to-date information is available for use in making decision about people.”

Performance appraisal has become a very significant activity in most of the enterprises, because it provides data about past, present and expected performance of the employees which is helpful in taking decisions on selection, training and development, increases in pay, promotion, transfers and the like.

The following are the benefits of performance appraisal:

1. It helps the supervisors to evaluate the performance and to know the potentials of their subordinates systematically.

2. Ratings can be used as a basis of sound personnel policy in relation to transfer and promotion.

3. It helps in designing the training programme in a better way.

4. Performance ratings help in guiding the employees.

5. The employees also come to know where they stand and consequently they try to improve their performance.

6. It will reduce grievances and develop a sense of confidence amongst the workers because they are convinced of the impartial basis of evaluation.

7. The records of performance appraisal are available in a permanent form to protect the management against subsequent charges of discrimination which might be levelled by the trade unions.

Project Report # 8. Limitations of Performance Appraisal:

The drawbacks or limitations of various methods of performance appraisal are as follows:

1. If the factors included in the assessment are irrelevant, the result of merit rating will not be accurate.

2. Different qualities to be rated may not be given proper weightage in certain cases.

3. Some of the factors are highly subjective like initiative and personality of the employees.

4. Supervisors often do not have critical ability in assessing the staff. Sometimes, they are guided by their personal emotions and likes.