Importance Of Performance Appraisal & It’s Advantages

advantages performance appraisal

Efficiently managing employee performance is a critical aspect of organizational success. To achieve this, companies employ various strategies, one of which is performance appraisal. This process entails evaluating an employee’s job performance, providing constructive feedback, and offering guidance for improvement. In the modern workplace, performance appraisal plays a significant role in fostering growth and maximizing individual and organizational potential. This article highlights the importance of performance appraisal and explores its numerous advantages.

What is Performance Appraisal?

Performance appraisal, or performance review or evaluation, is a formal assessment of an employee’s job performance. It involves measuring the employee’s achievements, strengths, areas for improvement, and overall contribution to the organization. Performance appraisal is typically conducted annually or semi-annually and serves as a platform for open communication between employees and their supervisors. Here is a brief overview of some common performance appraisal methods:

Rating Scales

This method involves using predefined criteria or scales to rate employee performance. Supervisors assess employees based on factors such as job knowledge, quality of work, communication skills, and teamwork, assigning numerical or descriptive ratings.

360-Degree Feedback

In this method, feedback is gathered from multiple sources, including supervisors, peers, subordinates, and even customers. The feedback provides a holistic view of an employee’s performance, capturing insights from various perspectives.

Management by Objectives (MBO)

MBO involves setting specific objectives and goals in collaboration between employees and their supervisors. Performance is then evaluated based on the achievement of these objectives. This method emphasizes the alignment of individual goals with organizational goals.

Behaviorally Anchored Rating Scales (BARS)

BARS combine the aspects of rating scales and critical incident techniques. It uses specific behavioral indicators to assess performance. Supervisors rate employees based on the extent to which their behaviors align with predefined criteria.

Critical Incident Technique

This method involves documenting specific incidents or events where an employee displayed exceptional or poor performance. Supervisors keep a record of these incidents and use them as a basis for evaluation during performance appraisals.


Self-assessment allows employees to evaluate their own performance by reflecting on their achievements, strengths, and areas for improvement. The self-assessment is then reviewed and discussed with the supervisor, providing an opportunity for self-reflection and growth.

Importance of Performance Appraisal

Performance appraisal holds significant importance within organizations for both employees and the overall success of the company. It serves as a valuable tool that enhances employee performance by providing constructive feedback and guidance. Through performance appraisal, organizations can identify training and development needs, align individual and organizational goals, and promote employee growth and development. It facilitates communication and feedback, supports reward and recognition systems, and ensures fairness and objectivity in evaluating employee performance. By implementing effective performance appraisal methods, companies can optimize their workforce’s potential, improve productivity, and foster a positive work environment.

Advantages of Performance Appraisal

Performance appraisal offers numerous advantages that contribute to individual growth, improved performance, and organizational excellence. Let’s explore the key advantages of performance appraisal:

1. Creates Employee Growth Opportunities

Performance appraisal provides a structured framework for employees to engage in meaningful discussions about their career aspirations, strengths, and areas for improvement. These conversations with supervisors lay the foundation for personal growth plans and development opportunities, fostering a culture of continuous learning and advancement within the organization.

2. Improves Employee Performance

Regular performance appraisals enable supervisors to assess employee performance objectively and provide valuable feedback. By acknowledging strengths and addressing areas for improvement, performance appraisal becomes a catalyst for enhancing individual performance. Employees gain clarity on expectations, receive guidance on enhancing their skills, and are motivated to excel in their roles.

3. Helps Determine Training Requirements

Performance appraisal serves as a powerful tool for identifying skill gaps and training needs within the workforce. Through a comprehensive evaluation, organizations can determine areas where additional training or development initiatives are necessary. This proactive approach ensures that employees receive the necessary resources and support to enhance their competencies and contribute effectively to the organization’s objectives.

4. Helps in Goal Setting

Performance appraisal serves as a strategic process for aligning individual goals with organizational objectives. By defining clear and measurable performance targets, employees gain a sense of purpose and direction. Setting meaningful goals within the appraisal process enhances employee motivation, focus, and commitment, resulting in improved overall performance and productivity.

5. Increases Employee Engagement

A well-executed performance appraisal process fosters employee engagement by creating a platform for open dialogue and feedback. When employees feel heard, valued, and recognized for their contributions, they become more engaged and committed to their work. Engagement leads to higher job satisfaction, increased productivity, and reduced turnover rates.

6. Clarifies Expectations

Performance appraisal ensures that employees have a clear understanding of their job responsibilities, performance standards, and expectations. By providing specific feedback and guidance, supervisors can effectively communicate their expectations to employees. This clarity minimizes misunderstandings, improves job satisfaction, and helps employees perform to the best of their abilities.

7. Helps Communicate The Company Vision Clearly

Performance appraisal serves as an opportunity to align individual goals with the company’s vision and strategic objectives. Through regular appraisals, organizations can reinforce their values, mission, and long-term goals. By sharing the company’s vision and discussing its significance, employees develop a stronger connection to the organization’s purpose, leading to improved performance and commitment.


Performance appraisal plays a vital role in organizations by fostering growth, enhancing employee engagement, and driving organizational success. By setting clear performance expectations, identifying strengths and weaknesses, motivating employees, enhancing communication, recognizing performance, and facilitating career development, organizations can leverage the advantages of performance appraisal to achieve their strategic objectives.