Rakesh has just joined an IT organization. Aware that performances at this organization are reviewed on a quarterly basis, Rakesh pushes himself to make a positive impression from his first quarter itself. However, the performance review leaves him surprised and confused. The report is rather vague, with barely any objective data, and it has rated Rakesh as “sub-par”. There are no suggestions regarding what Rakesh did wrong or where he could improve. 

By the next quarter, a new CEO has overhauled the performance review process. Modern methods of performance appraisal, based on rigorous data and analysis, are adopted to assess the performance of employees. This time around, Rakesh receives glowing feedback for his hard work and dedication, with his many strengths and a few weaknesses scrutinized constructively. This helps Rakesh build on his strengths and work on the areas where he’s falling short, thereby improving his overall performance. 

Through Rakesh’s example, it’s clear how performance appraisal can impact employees and their contribution to an organization.

  1. What Is A Performance Appraisal?

  2. Features Of A Performance Appraisal

  3. Types Of Performance Appraisals

  4. Need Of A Performance Appraisal

  5. Perfecting Performance Appraisals

What Is A Performance Appraisal?


Before delving into the importance of a performance appraisal, it’s crucial to understand what a performance appraisal actually is. A performance appraisal is traditionally defined as a periodic assessment of an employee’s performance that’s qualitative and/or quantitative in nature. Although performance appraisals can technically happen at any time, the convention in most organizations is to conduct them on a quarterly, half-yearly or annual basis.

Without a performance appraisal, it’s not possible for any organization to plan, develop, monitor, rate, reward or train their employees effectively, efficiently and without biases. 

Features Of A Performance Appraisal


In order to appreciate the need of a performance appraisal, it’s important to consider the basic features of a performance appraisal, which are enumerated as follows:


  1. The most important feature of a performance appraisal is a compilation of an employee’s biggest strengths and weaknesses and their effect on the organization’s performance during a particular period.

  2. An often overlooked feature of a performance appraisal is how it helps to formulate goals and targets for an organization, something that’s  done in collaboration with employers and employees. This helps to develop symbiotic relationships within an organization.

  3. A performance appraisal has set parameters that apply uniformly to all employees working in a particular department. Without consistency or clarity in metrics, no performance appraisal can be fair or comprehensive.

  4. Another important feature of a performance appraisal is the impartiality of the process, which ensures that employees aren’t discriminated against during their evaluation by their seniors or the management. To guarantee impartiality, a performance appraisal often involves members from outside the organization who have no personal knowledge of the employees being assessed. 

Types Of Performance Appraisals


The significance of a performance appraisal frequently varies with its type. Conventionally, there are two main types of performance appraisals—traditional and modern. Both these types and the ways they impact the importance of a performance appraisal are explained below:


  1. Traditional 

A traditional performance appraisal tends to be more qualitative than quantitative, more subjective than objective. Its metrics are more flexible, although for some employees, this flexibility can lead to vagueness in understanding evaluation. Traditional methods of performance appraisal are important because they analyze the attributes and personalities of the employees in a holistic manner. The most common traditional methods of a performance appraisal are:


  • Confidential Appraisal Method

  • Essay Method

  • Checklist Method

  • Rating Scales Method

  • Critical Incident Method

  • Paired Comparison Method

  • Field Review Method

  • Forced Distribution Method


  1. Modern

A modern performance appraisal differs from a traditional one in being more precise and transparent, as it relies on a larger pool of data and a wider range of feedback options. Modern methods contribute to the importance of a performance appraisal by clearly identifying the strengths and shortcomings of employees, and in some cases, even proposing solutions to optimize performance. The most common modern methods of a performance appraisal are:


  • 360 Degree Feedback

  • Assessment Centre Method

  • Cost Accounting Method

  • Behaviorally Anchored Rating Scale (BARS)

  • 720 Degree Method

  • Management By Objectives (MBO)

  • Psychological Appraisal

Need Of A Performance Appraisal


A performance appraisal represents the completion of one cycle of work at an organization. It must be incorporated into the workflow to improve the performance levels of employees and coordination between management and employees. 

To throw light on the importance of a performance appraisal, let’s look at why organizations feel the need of a performance appraisal in the first place:

  1. Reception Of Employee Feedback

A performance appraisal is not meant solely to assess employees. It’s also designed to receive employee comments, suggestions  and grievances and to factor them into the organization’s policies in the future. The importance of appraisals can’t be understated since they form the most critical channel of communication. Employees can voice their thoughts and push for tangible change in whatever they identify as problems in the workflow or work environment.


  1. Constructive Criticisms Of Performance 

The importance of a performance appraisal is best illustrated through how it allows for constructive criticisms of performance. With the help of data or evidence gathered during a performance appraisal, it’s possible to critique employees in a methodical manner that doesn’t allow personal prejudices to intervene in the process of assessment. Constructive criticism isn’t  about finding flaws with employees. They can also be suggestive and involve recommendations that employees can internalize to improve their productivity and performance.


  1. Expression Of Work Trends And Patterns 

A thorough performance appraisal provides both micro- and macro-level analysis of an organization. While the micro analysis is useful for individual feedback and assessment, the macro analysis comes in handy while making sense of how an organization has progressed over time. If analyzed deeply, it’s possible to detect trends and/or patterns in an organization’s work culture that indicate its trajectory. Such a trajectory may be positive or negative or even remain static, but the essential aspect about performance appraisal in this context is that it allows a comprehensive assessment of the entire organization.


  1. Interactions With Experts

In order to carry out the various types of performance appraisals, in particular those concerned with modern methods of appraisal, organizations are bound to consult with experts from outside. This consultation provides impartiality of opinion, originality of ideas, as well as depth of insight, all of which are crucial for assessing employees. Interactions with experts also help build a network of professional relationships that can be useful for organizations for activities other than a performance appraisal.


  1. Collaboration Between Management And Employees

The significance of a performance appraisal revolves around the fact that it isn’t a one-way street. Employees also get to contribute meaningfully to the process instead of simply being the ones whose performances are being evaluated. Whenever an organization uses a performance appraisal to frame its upcoming objectives or to modify past agendas, it’s expected to do so through active collaboration between employers and employees. Not only does this create a better sense of team spirit, but it also allows for greater accountability and transparency within an organization.


  1. Rewards Or Warnings For Employees

Employees can’t and shouldn’t be rewarded or penalized based on random decisions or, worse still, through favoritism. A performance appraisal, by providing a report on an employee’s performance, prepares the grounds on which incentives or penalties can be issued to guide employee performance in the future. Positive incentives include praise, salary hikes or bonuses or a promotion, whereas penalties can range from issuing warnings to potentially dismissing employees for sustained poor performance.


  1. Identifying Structural Flaws

Sometimes even with adequate resources and talented personnel, organizations struggle to maximize their output or meet their objectives. This is where the need of a performance appraisal comes in, as it helps organizations locate structural issues that may be holding them back. Be it shuffling certain hierarchies or shifting employees between departments, a performance appraisal makes it possible to fine-tune organizational structure to get the best out of each member.

Perfecting Performance Appraisals

Appraisals combine technicality and creativity and can’t be mastered overnight. But with Harappa’s First Time Manager Program, your employees get an opportunity to understand the qualities that characterize an excellent appraisal, thereby boosting their productivity and performance. Through this, employees can build and inspire cohesive teams, increase self-awareness to leverage strength and create an environment of learning and trust.

A diverse program curriculum, which includes frameworks like Influencing Approaches, Eisenhower Matrix, and Trust Equation, will empower your employees with must-have Thrive Skills such as taking responsibility, influencing stakeholders and dealing with conflict. Guided by a world-class faculty, this program will enable your employees to develop a clear conception of how the entire process of management should work in an efficient organization.  Enroll your organization for the First Time Manager Program today and help your employees perfect the process of performance appraisals.

Explore Harappa Diaries to learn more about topics such as the Steps Of Performance Appraisal, the Meaning Of A Performance AppraisalPerformance Appraisal Objectives and Performance Appraisal Methods that will help organizations tap into their employee's potential.

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