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What is Performance Appraisal | Performance Review

Kate William

8 min read

Performance appraisals. Sound familiar? No doubt about it. Performance appraisals are most often kicked-off by the HR team for evaluating an employee’s performance with a bunch of do’s and don’ts’ set out by the organization. Performance appraisal process is critical for any organization as it helps them to track the employee performance, which is directly connected to organizational growth and also it indicates whether the organization is moving in the correct direction or not.

Performance appraisals assess the performance review of the employee, including productivity, strengths, shortcomings and motivation, and the result of this determines the employees’ wage raise and promotion. Above all, it is essential to appraise employee performance to get a fairly good idea on the effectiveness of the process of selection, training and development set about by the organization and to ascertain the contributions of an employee towards the organization. 


Employees put their best foot forward, showing how wonderful the previous year has been for them and how much they deserve the best possible appraisal. And definitely, that’s hitting the sweet spot. When it comes to the reporting managers, they are mostly under stress as they walk the tightrope, to do their best not to upset the applecart. But that’s not all, the need for getting a full commitment from their team members and to separate rewards based on an individual’s performance is the hectic task. Thus, they risk disappointing some of the team members for not being able to meet their needs. Needless to say, that the organization has a limited budget within which everyone’s expectations are to be accommodated. Let’s see exactly how this works and the processes involved.

Objectives of Performance Appraisal 

The objectives of performance appraisal will give an idea of how an effective performance appraisal process should be carried out. Keep the following objectives in mind while doing the performance appraisal:

  • Recognizing employees for different functions- wages, promotions, transfers, lay-off, terminations etc. 
  • Identifying the strengths and weaknesses of employees to place the right person in the right job.
  • Deciding training needs to boost improvement in employee performance.
  • Motivating employees by providing feedback, pointing their performance levels.
  • Review and retain the promotional and training programs. 
  • Creating a source for research and reference for the future.

Purpose and Benefits of Performance Appraisal

This part is easy; the purpose of a performance appraisal is always two-fold. It helps the organization determine the employees’ value and productivity and help the employees develop their role and skills. Employee assessments make a difference in an organization’s performance and give insight into the employee contribution. Basically, both the organization and the employee benefit from performance appraisals. Benefits for the organization is that they can identify areas to improve the working conditions, to increase the productivity and work quality of the employee. In addition to that organization can recognize employees’ talents and skills to encourage them in contributing more and also address employee behavioral issues and support them in career and skill development. And isn’t that what you want? The organization can also make strategic decision-making progression during layoffs, filling vacancies or succession planning. So, have we got that straight? Now it’s the turn for employee benefits.

The simple truth is, performance appraisals are intended to deliver a positive outcome for employees. It helps the employee recognize and acknowledge the achievements and contributions made by them for the organization. Employees’ opportunity for promotion or bonus increases along with the support or need for additional training or education for career growth. Performance appraisals help improve the skills of the employees after determining specific areas. Most importantly, performance appraisals allow an open discussion to an employee’s long-term goals. Trust me. It’ll all be worth it.

Advantages of Performance Appraisal 

By and large performance appraisals are an asset for the organization, here are the advantages that can justify this:

  • Employee Development: The systematic performance appraisal process helps managers frame training or career development programs. This will analyze the employees’ strengths and weaknesses so that jobs can be disseminated efficiently. 
  • Proper Selection: Performance appraisals help in the right person’s placement and understand the validity and importance of the selection procedure. In this regard, changes in selection methods can be made in the future.
  • Promotion: With performance appraisals managers can chalk out the promotion procedures for efficient employees and inefficient employees can be sacked or demoted, if found.
  • High Morale: Quite simply, every employee is excited to know the organization’s opinion about one’s work and ability. A proper performance review gives the employee to know about themselves and gets driven for development, thereby increasing their mental strength and self-satisfaction.
  • Motivation: Performance appraisals acts as a motivation tool. You may wonder how? Through the performance appraisals, an employee’s performance can be evaluated and thereby a person’s efficiency is determined if the targets are achieved. This will very much motivate and help them feel involved and invested in their career development.
  • Utility for management: The core advantage of the performance appraisal goes to management. They will know the capabilities of the employee and on that basis, they can set the right program for employees’ promotion, transfer, forced leave or discharge. It aids in shaping a sound and suitable wage structure and can be used to assess the training programs also.

Performance Appraisal Examples

Suppose you want to conduct an effective performance review. In that case, you should keep in mind, it’s always important to carry a positive and solution-focused message to make the employee feel less discouraged. You should offer constructive feedback, while also praising the employee’s efforts and focus on the employees’ achievements and strengths. Even if you are doing a basic performance review, you should not forget to include:

  • Elements of the employees’ strengths and areas where the employee can develop.
  • Contribution of the employee through performance towards the organization’s core values and culture. 
  • Track record of the employees’ development and growth throughout the year.
  • Summarizing the employees’ performance to calculate the priorities for the future.

Before you check out two basic performance appraisal examples, here’s a performance appraisal survey created using SurveySparrow…

To create similar performance appraisal surveys or performance reviews, you can create a free account on SurveySparrow.

For Positive Performance

You excel at [action], and I would love to continue doing that from you, as it has really helped the team [result].

Mary exceeds all expectations in her role as a designer creating thoughtful marketing decks. She always carries a positive attitude and adapts easily to the workplace’s rapid changes. Mary works by herself comfortably under pressure and even with other team members. I would love to have Mary continue taking the lead on the team, especially since I know she enjoys the creative process.

For areas of Improvement 

I encourage you to start [action] because it will help you [intended result].

Tom demonstrates satisfactory communication skills and completes all assigned tasks and required responsibilities. He works well independently or collaboratively and is very selfless to other team members. Tom shows leadership skills and seeks out extra professional development opportunities. I encourage you to start blocking off time to get your administrative tasks done, which will help you finish it on time rather than let it fall through the cracks.

Modern Methods of Performance Appraisal

Let’s get this show on the road. With the right performance appraisal process, there’s a way for an organization to enhance employee performance and productivity. A good employee performance review method can turn the complete experience effective and rewarding. Modern methods of performance appraisals are more focused on job accomplishment and evaluating work results. After all, each category has its own strengths and weaknesses and there’s no single appraisal method that is universally used. The secret is that never the same performance appraisal method will be suitable for two organizations. Below given are some of the modern appraisal methods most of the organizations gravitate towards.

Management by Objectives: This method focuses on improving the organization’s performance where the employee and manager agree to a set of challenging yet achievable performance goals for the employee to achieve over a given period of time. In case the employee is not able to achieve the pre-set goals, what can be done about it? This situation demands the organization to come up with a new strategy or policy to be undertaken for achieving the unattainable goals. Honestly speaking, this process lays more stress on tangible goals and intangible aspects like communication, commitment, interpersonal skills, etc. are kept under the wraps. The experts of MBO trust that it helps in creating employee motivation and commitment along with building healthy communication between the organization and employees. And that’s something awesome, isn’t it?

Psychological Appraisals: This is one of the most exciting and intuitive methods of appraisal, which is handy to determine an employee’s hidden potential. The method evaluates the employees’ future performance, but not their past one. In fact, it focuses on employees’ interpersonal and leadership skills, cognitive abilities, emotional, intellectual, and personal characteristics affecting their performance. Psychological appraisals can be deployed easily when compared to other methods of appraisal. The main point is, it extracts measurable, objective data of an employee’s performance and potential. Great news for introverts and shy employees is that this is the right platform for them to shine and prove themselves.

360-Degree Feedback: In order to get a bigger picture of an employee’s performance, go for this method only. Here, in 360-degree performance appraisal, it’s not just the direct feedback from the manager and employee included, but also from peers and even customers are collected. The 360-degree appraisal turns out to be the most widely used appraisal method since it helps the performance appraisal process to have a diverse outlook. This is the point where biasing in the performance review gets eliminated, offering a clear understanding of an individual’s competence. Here’s the deal, with SurveySparrow you can do a complete 360-degree performance. This 360-degree appraisal will help you integrate performance feedback with the work culture and promote engagement. Isn’t it a great asset for the organization?

Conduct performance appraisals using custom employee 360 reports with SurveySparrow.
Conduct performance appraisals using custom employee 360 reports with SurveySparrow.

Assessment Center Method: Imagine for a moment that you as an employee get a clear picture of how others observe you and that has an impact on your performance. How’s that? This is exactly what the assessment center method does, assessing an employee’s existing performance and predicting their future job performance. Employees need to participate in social-simulation exercises to evaluate their mental alertness, persuasive ability, confidence, etc. Impressive, right? I know that’s what you’re thinking. 

Behaviorally Anchored Rating Scale (BARS): If you want to bring the benefits of both qualitative and quantitative data to the employee performance review process, here’s the solution, the BARS method. It does comparison between the employees’ performance and specific behavioral examples that are anchored to numerical ratings. Needless to say, with this method you can enjoy clear standards, better feedback, accurate performance review along with a consistent evaluation. The method emphasizes more on definite, tangible, and visible behaviors, and hence, you can make the most out of your performance appraisals.  

Cost Accounting Method: Let’s face it. You may find this method a little harsh, perhaps unsurprisingly for some others, this is the most convenient appraisal method. At this point, you realize that it is important to analyze an employee’s performance through the monetary benefits they yield to the organization. It is done by comparing the cost of retaining an employee with the benefits an organization has ascertained from that employee. The purpose of prioritizing performance appraisal is clearer than ever. Employee potential leads to organizational growth.

There you have it, the six modern methods of performance appraisals that can help manage the employee and the organization grow in parallel. So, the best way is to choose the right performance appraisal method for your organization and get it done effectively.  

Wrapping it up..

If you have a clear set of objectives for the performance appraisal, then you are good to go. It will help you gain a competitive edge over others. And finally, you will be able to make more rational decisions concerning the organization’s overall development and the employees. You know, the satisfaction gained from a rise in employee engagement and dedication will make your effort on the performance appraisal process entirely worth it. Once you have cracked it, I ensure you have more effective reviews moving forward. 

Kate William

Content Marketer at SurveySparrow

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