Performance Appraisal – Scope, Features & Objectives


Meaning of Performance Appraisal

Performance Appraisal is a method of determining and measuring the performance of employees working in an organization. It is a means company to identify how much their employees are contributing to it. Performance appraisal is also termed as employee appraisal, annual review, or performance review. It is an effective tool which helps in recognizing the strengths and weakness of employees thereby understanding their abilities for further development and growth. Recognizing of potentials of all employees helps in placing the right man in the right position which helps in improving productivity.

Performance appraisal helps managers in accessing actual worth of their employees which helps in deciding their pay and bonuses. Managers are able to provide feedback to their employees regarding their performance and provide them with training accordingly. It helps in taking various important decisions like promotion, demotivation, and termination for employees. It helps in regularly comparing the operations of employees with targeted plans and taking necessary actions if any deviations are detected. Fair allocation of funds is necessary as it is limited to every company.

Scope of Performance Appraisal

Scope of Performance Appraisal
Scope of Performance Appraisal

Provides Performance Feedback

Performance appraisal helps managers in providing feedback about performance to its employees. Feedback enables employees to avoid their mistakes and improve their productivity. Employees are interested in knowing the result of their performance. They feel satisfied and happy by knowing it. It motivates them to perform better in the future for getting better pay. Through performance appraisal managers are able to evaluate the employee’s performance and deliver their feedback to them accordingly. 

Decides Employee’s Compensation

Providing the right remuneration to employees is important for every organisation. It should be paid fairly to all of them according to their efforts, performance and skills. Performance appraisal makes it easy to measure the performance of employees and award them accordingly. Employees performing well are awarded better incentives and increment in their pay. 

Validation of Selection Process

Performance appraisal enables the validation of the selection process. Selecting a proper selection channel is a must for recruiting better human resources. Recruitment and selection require lots of organization time, effort, and money.
Validation of a selection procedure helps in finding out its positive and negative aspects and thereby helps the company in selecting a suitable tool for selection. Different tools like application blanks, psychological tests, interviews, etc. used in the selection process help in measuring the candidate’s performance and selecting the right candidate.

Identify Employee’s Training Needs

Training and development programmes help in improving the productivity of manpower. It should be provided by the organization to its employees from time to time to improve their skills and confidence level.
Performance appraisal helps supervisors in detecting the decencies in the performance of employees due to a lack of skills and knowledge. These problems can easily overcome by providing proper training and education to them. Through performance, appraisal companies are able to design better training programs for their employees. 

Motivates Employees

Performance appraisal helps in motivating employees toward their targeted roles and objectives. Employers are able to evaluate the efficiency of their workers through this. It can be ensured whether they are working efficiently or not towards the achievement of organisation objectives. When employees know that their result will be checked it will motivate them to perform well.

Helps in Promotion and Demotion

Giving of promotion and demotion to employees is an important decision to be taken by managers. Performance appraisal helps them in taking these decisions fairly and properly without biased. Through performance appraisal, they are able to measure the performance of all and are able to judge easily who is performing well and who is not. Employees performing their task efficiently are promoted to higher post whereas if they are found inefficient they are demoted to lower post.

Facilitates Communication

Performance appraisal facilitates the efficient flow of information within the organization between employers and employees. Employers are able to understand their subordinate’s nature by measuring their output. They are able to find out their employees strengths and weakness and suggest them ways to overcome their deficiencies.
This develops better employer-employee relations which create better trust and confidence among them. Employers regularly communicate with their subordinates and provide them with feedback about their work. This way performance appraisal develops a better network for communication between the two which helps in clearing all doubts and queries.

Features of Performance Appraisal

Evaluates Performance

It is a process which evaluates the performance of peoples working within the organization. Performance appraisal detects all strengths and weaknesses of employees and suggests ways of enhancing their performance.

Systematic Process

Performance appraisal is a systematic process of tracking the performance of employees. It follows a series of well-defined steps for finding out the areas where employees are lacking and where they possess good skills.

Bias Free

It is performed without any biasness by evaluator within the organization. He should use fair and equitable methods for performance evaluation without getting influenced by anyone.

Continuous Approach

This is an ongoing approach that is followed till organization continues its operations. Organizations need to evaluate the performance of their employees on a continuous basis for maintaining the desired productivity.


Performance appraisal is done periodically by organization that is in 3 months or 6 months. Evaluation is done continuously from time to time by evaluators. That show the changes in employee performance at different period of time.

Based on Definite Plan

This method works in accordance to the well-defined plan for tracking the performance. There is a defined process comprising of many steps which are followed in a systematic way for performing performance appraisal. 

Not Job Evaluation

Performance appraisal and job evaluation are two distinct terms. Performance appraisal is the one which evaluates the performance level of employees whereas job evaluation is concerned with analyzing the value and worth of jobs within the organization.

Objectives of Performance Appraisal

Promotion Decisions

Performance appraisal is a tool which helps managers to take promotion or demotion decisions. This method assesses the performance level of employees. Efficient workers can be promoted to a higher level whereas inefficient one can be demoted.

Provides Feedback

This process provides feedback to workers regarding their performance. Performance appraisal identifies the strengths and weaknesses of employees and suggests ways for enhancing their efficiency.

Development of Employees

Performance appraisal helps in designing the training and development programmes as per the requirements of employees. It by diagnosing the performance level enables supervisors in identifying what kind of training should be provided for developing the skills of peoples.

Motivates Employees

Motivation of employees towards their role is must for attaining desired goals. This method by checking the efficiency of workers and awarding them accordingly motivates them for better performance.

Compensation decisions

It plays an effective role in deciding various compensation decisions for employees. Decisions like a hike in employees’ pay or incentives are taken by managers by judging their performance level.

improve employer-employee relations

Performance appraisal facilitates communication between employers and employees within the organization. Employers regularly check performances of employees and provide them feedback on their work. They suggest ways to their subordinates for overcoming their deficiencies. Employees also communicate with their employers for clearing their doubts and issues while focusing on their roles.


Performance appraisal helps managers in providing feedback, Evaluates Performance, of its employees. It helps in the promotion and demotion of the employees. It also helps in training and development programmers as per the requirements of different employees.

Through performance appraisal managers spend funds fairly on welfare and enhancement of their employee’s skills by reviewing their performance routinely. Performance appraisal may be conducted quarterly, semi-annual, or annually by organizations. Self-assessment, 360 Degree feedback, Management by Objectives, Assessment center method, and Peer assessment are different methods of performance appraisal.