Employee Performance Appraisal: A Tool for Success

As March comes, it marks the end of the financial year for many countries like the UK, India, and Japan. For businesses, this is the time to review and close their business accounts. For employees, it is about completing their performance appraisals and gearing up for increments and promotions.

Sathish is a software developer working in an Indian IT multinational corporation (MNC) in Hyderabad. This is his second appraisal cycle after graduating from college, and he is eager to receive feedback on his performance and set goals for the future. However, he is busy with project deliverables and works late into the night. Like all other employees, he is also receiving frequent reminders from the HR team managing the Performance Management System (PMS) process. As part of the process, employees are to fill in their achievements for the goals set and have a close discussion with their managers. While Sathish and his manager were aware of this, they were so occupied with project deliverables that they missed completing the process. They only did it at the last minute to be compliant. Sathish’s manager resigned a few days after the performance management system (PMS) cycle ended.

The PMS calibration activity was conducted by the management, where the ratings given were reviewed and moderated. Since Sathish’s manager had already left the company, the new manager did not have clear input from the previous manager on the PMS form. Therefore, during moderation, Sathish’s rating was downgraded. Sathish was upset about this and raised a grievance, but since his manager had already left, he was left to defend himself. Due to this lower rating, he received a lower increment than expected and also missed out on a promotion that was due. Sathish learned his lesson the hard way.

“Like a ship without a rudder, a man without a goal.”

– Thomas Carlyle

Although some perceive employee performance appraisals as imposed by HR and burdensome, they hold intrinsic value in heightening organizational efficiency and growth. Performance appraisal serves as a robust tool for aligning individual performance with organizational objectives, fostering a synergy that propels success.

Understanding Employee Performance Appraisal

Despite the notion that some may view it as a necessary evil, performance appraisal serves as a valuable tool for understanding individuals and correlating their actions to outcomes. Employee appraisals are essential, not just as a means of acknowledging progress and motivating employees, but also for identifying areas of improvement and devising strategies for future objectives. Recognizing the potential for learning and growth, and understanding the underlying reasons behind performance, are key to unlocking enhanced productivity and organizational success.

The performance appraisal is a structured process involving managerial or consultative assessment of employee work behaviors and accomplishments. This process is typically benchmarked against predetermined company standards and Key Performance Indicators (KPIs), as well as an individual’s goals set in previous appraisals. The manager, having evaluated achievements and gaps, collaborates with the employee to formulate a concrete action plan aimed at improving performance and meeting objectives.

Importance of Employee Appraisal

Employee appraisals hold significance for businesses, managers, and employees alike. These appraisals promote alignment, foster a healthy dialogue between managers and employees, and ensure fundamental standards are met. Furthermore, they act as catalysts for productivity enhancements. Consider the following reasons to underscore the importance of employee appraisals:

  • Facilitates open, honest discussions, leading to prompt issue identification and resolution.
  • Ensures the attainment of goals and sustained productivity, addressing the basic requirements of the business.
  • Aligns employee aspirations and performance with overarching business objectives, promoting collaborative success.
  • Offers opportunities for professional development and career progression, enhancing employee satisfaction and retention.
  • Intertwines business goals with learning, training, and career advancement, organizing multifaceted aspects for unified outcomes.
  • Ultimately, enhances overall business performance.

Creating an Effective Performance Appraisal Structure

Formulating an ideal appraisal structure is pivotal in ensuring a productive evaluation process. While adaptable to unique business contexts, consider the following step-by-step approach to guide your performance appraisal process:

  • Initiate with a General Discussion: Begin with a candid discussion to establish an open and honest rapport, promoting effective communication and understanding.
  • Embrace Regular Performance Reviews: Move beyond the conventional annual review, adopting more frequent feedback sessions throughout the year. This approach enhances engagement, communication, and retention.
  • Prioritize Constructive Feedback: Forego the traditional ‘sandwich’ method and deliver direct and honest feedback. Embrace constructive criticism as an opportunity for growth.
  • Address Developmental Areas: Address concerns promptly and discuss strategies for improvement. Identify solutions, whether they involve workload adjustments, skill enhancement, or mentorship.
  • Set Measurable Objectives: Based on assessments, establish short-term goals aligned with long-term objectives and business goals. These milestones aid tracking and intervention.
  • Allocate Resources: Commit to supporting employees in achieving goals. Ensure access to training, courses, and mentorship, fostering skill development and performance improvement.

Guidelines for Effective Performance Appraisal

Consider these performance appraisal best practices to enhance the precision and effectiveness of the evaluation process:

  • Clearly define the employee’s current responsibilities.
  • Evaluate their current performance and ability to fulfill duties.
  • Assess developmental growth since the last review.
  • Determine goal achievement and exceptional performance instances.
  • Engage in an open discussion on fitting into the organization.
  • Collaboratively identify improvements with the employee.
  • Encourage employees to express their development interests.


Performance appraisal, anchored in SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals, serves as a compass for both individual growth and organizational success. Recognizing the value of structured appraisals and adhering to comprehensive guidelines, businesses can harness the potential of their workforce, elevate productivity, and foster a culture of continuous improvement.

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