Performance appraisals are more than an HR requirement. They’re also one of the most important tools managers have to help employees grow and develop their skills.

There are, however, both advantages and disadvantages of a performance appraisal. For managers who conduct them, there are many points to consider. There are varying merits and demerits of a performance appraisal depending on the chosen methods and how it’s implemented.


  1. Benefits Of A Performance Appraisal

  2. Disadvantages Of A Performance Appraisal


Benefits Of A Performance Appraisal

The many advantages of a performance appraisal put it at the top of the list of management tools for organizations. For instance, in the balanced scorecard approach to management, every organization has four components that together create its value proposition: people, ideas, processes and technology. Among these four elements, nothing impacts a firm’s ability to get work done as much as its people.

An organization can’t grow without an optimally performing talent pool. But it’s not enough for employees to perform their jobs well. They also need to understand how they’re doing so they can improve their performance even further and continue what’s working in the future. That’s why businesses need a system for evaluating employee performance.

You can’t change or improve something you don’t measure—this is one of the key advantages of a performance appraisal. When it comes to the value of a firm’s people, managers are in the best position to measure. Studies have shown that one of the most important factors for employee satisfaction—often more influential than salary, benefits or job description—was manager feedback.

Here are a few more benefits of a performance appraisal:

  1. Recognizing Effort

One of the advantages of a performance appraisal is that it gives recognition to your employees. This can have an outsized impact on the workforce. A well-conducted appraisal helps determine salary increments and other awards such as ‘Employee Of The Month’. These rewards make employees feel valued, positively impacting their performance.

  1. Growing Talent

Another one of the significant benefits of performance appraisal is that they can help managers spot areas where employees are underperforming. Support in the form of one-on-one coaching, training sessions, intra-office mentors can all be arranged after they identify these weak areas.

  1. Discovering Leaders

Another one of the top advantages of a performance appraisal is that it can help identify potential leaders. There are always a few employees who shine brightest through their competence and hard work. The job of a manager is to identify these employees and assign them responsibilities that’ll sharpen their leadership skills. Through performance appraisals, they can easily identify such employees and promote them as leaders during the appraisal process.

While there is a need for conducting employee evaluation, as with most things, there are both pros and cons of a performance appraisal. We’ll look at the disadvantages of a performance appraisal next.

Disadvantages Of A Performance Appraisal

Many managers have mixed feelings about employee evaluation, even in the face of all the evidence of benefits of a performance appraisal. Here are the top reasons they aren’t always popular with managers or even employees:

  1. The major disadvantage of a performance appraisal is that they’re inherently subjective. For example, how do you prove or disprove the point that an employee has improved their communication skills? What made the manager decide they weren’t an excellent communicator to begin with?

  2. A good employee appraisal takes time to prepare and execute, and often the results don’t give you a return on your investment.

  3. They can be unpleasant affairs—particularly for employees who don’t get the feedback or training they need to turn their weaknesses into strengths.

  4. An organization should choose a method of appraisal and stick to it. If the methods change every few years, you’ll lose continuity and consistency. If the management hasn’t done this, it’s hard to know what to expect or how to prepare.

  5. There are advantages and disadvantages of performance appraisals no matter what the chosen method. If they’re too infrequent, they lose their relevance. If they’re too frequent, they can become a burden on both employee and manager.

  6. Another factor that contributes to lack of consistency is who’s conducting the appraisal. Most performance appraisal systems give management teams a way to measure the ability, skills and productivity of their employees. But if two managers do similar comparisons, they may not come up with the same results.

There are many factors that could make the appraisal result less reliable or motivating than expected. Having looked closely at the advantages and disadvantages of performance appraisals, they can design a process that serves both employees and the organization.

How to get the most out of a performance appraisal is just one of the challenges facing managers taking up leadership positions for the first time. Harappa’s First Time Manager Program is all about providing skills that employees can use on the job. It’s ideal for a professional about to make the leap into a role of more responsibility. They’ll learn all about building a team that trusts them, how to communicate with clarity and leading with empathy—all key for a fruitful performance appraisal. With expert instructors and blended online-first material they can tackle at their own pace, learners will master must-have Thrive Skills. New managers can fill their career toolkit today!

Explore Harappa Diaries to learn more about topics such as Steps Of Performance AppraisalTypes Of Performance Management SystemsPerformance Management Objectives and Traditional Methods Of Performance Appraisal that will help organizations tap into their employee’s potential.

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