Understanding The Importance of Performance Appraisal

Understanding the Importance
of Performance Appraisal
Know the importance of performance appraisal and its elements, and learn
how to conduct performance appraisals using a digital tool.
What is a Performance Appraisal?

A performance appraisal is a periodic method of evaluating and documenting employees’ job
performance in relation to the objectives and goals set for them within a specified time frame.
Generally, it’s considered part of an organization’s overall performance management system,
aimed at determining opportunities for improvement, reducing attrition rate, and boosting an
organization’s culture and productivity.
Also referred to as employee evaluation, performance review, or employee appraisal,

a performance appraisal is typically devised and conducted by the HR, supervisor, team leader,
or team manager.
What is the Importance of Performance

Appraisal?
Importance of Performance Appraisal
The importance of performance appraisal in an organization directly coincides with its

advantages. Take a look at these factors and understand the benefits of performance appraisal.
Improved business areas and processes

Conducting performance appraisals lets you in on how an employee views the organization.
During your one-on-one sessions and regular performance appraisals, part of the process is to ask
for specific comments that the employee has regarding team dynamics, policies, and
management. Then, leverage these findings and by turning them into actionable insights for
your continuous improvement efforts like eliminating manual tasks with process automations.
Defined aspects for training and development

Ideally, performance appraisals must be a two-way street. Learning what employees need help
with allows organizations to implement strategies for training workers more effectively. This is
where people analytics become handy, as data and trends generated from such are key to
identifying what kind of policies, initiatives, and systems are needed to be carried out. Hence,
this benefits an employer’s resource allocation on training and focus on areas that are of utmost
priority.
Enhanced profitability
Another notable importance of performance appraisal is that it ultimately puts emphasis on a
business’s bottom line. Performance appraisals help employees and managers devise strategies to
refocus their tasks, make them realize how their work makes a difference for the company, and
align the company’s mission, vision, and values with their tasks and standard processes. This
way, an “all hands on deck” approach can be achieved across the organization, allowing for
maximum efficiency and streamlined processes toward profit-making operations.
What are Performance Appraisals Used

For?
Commonly, organizations, team leaders, supervisors, and managers do performance appraisals to
cover the following aspects:
 Setting goals
 Providing feedback
 Allowing employee self-development
 Allocating rewards and giving recognition
 Gathering information to make staffing and business decisions
 Motivating employees to improve productivity
 Developing training programs and development initiatives
What are the Seven Elements of

Performance Appraisal?
Every successful performance appraisal system has these 7 essential elements or components:
1. Identified Goals and Objectives – These, along with a rating system and Key Performance
Indicators (KPIs), are key to help in defining and achieving an employee’s Objective Key
Results (OKRs) and enable the employee and the organization to measure performance
effectively.
2. Continuous Feedback – Detailed, consistent, and proactive feedback is crucial to employee
growth. Hence, a performance appraisal process must ensure that ample feedback is given to
employees for them to know their overall contribution and impact on the organization.
3. Flexibility – In an effort to continuously improve an organization’s path to innovation and
competitive advantage, a performance appraisal system must be flexible enough to be open to
changes. One way to do this is by setting different Key Result Areas (KRAs) to fit each job
description.
4. Data-driven Insights – Apart from reducing attrition rate, people analytics also help an
organization’s management pinpoint the overall relationship between an employee and a
manager or team leader. This way, proactive decision-making can be achieved.
5. Benefits and Rewards – A clear system for identifying the appropriate compensation, rewards,
and recognition must be incorporated into employee engagement initiatives. This paves the way
for increasing worker motivation, productivity, and a sense of belonging.
6. Self-evaluation – This element of a successful performance appraisal enables employee
accountability as they take charge of their own progress, monitor their performance, and
challenge the rating or feedback given to them.
7. Performance Improvement Plan (PIP) – Commonly given to employees who struggle meeting
business objectives, PIPs are also key to identifying the next steps to help empower employees
with the right tools and knowhow in order to improve their performance. This, along with the
other elements, forms a proactive appraisal process.

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Understanding the Importance

What is a Performance Appraisal?

Also referred to as employee evaluation, performance review, or employee appraisal,

What is the Importance of Performance

The importance of performance appraisal in an organization directly coincides with its

Improved business areas and processes

Defined aspects for training and development

What are Performance Appraisals Used

What are the Seven Elements of

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