Scope of Performance Appraisal

Meaning of Performance Appraisal

Performance Appraisal is a method of determining and measuring the performance of employees working in an organisation. It is a means through which companies identify how much their employees are contributing to it. Performance appraisal is also termed as employee appraisal, annual review, performance review or performance appraisal. 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 the 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. Performance appraisal 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.

Through performance appraisal managers spend fund 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 organisations. Self-assessment, 360 Degree feedback, Management by Objectives, Assessment centre method and Peer assessment are different methods of performance appraisal. Scope of Performance appraisal can be well understood from the following points:

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 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 must for recruiting better human resource. Recruitment and selection requires lots of organisation time, efforts and money. Validation of selection procedure helps in finding out its positive and negative aspects and thereby helps company in selecting a suitable tool for selection. Different tools like application blanks, psychological tests, interview etc. used in selection process helps 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 organisation to its employees from time to time to improve their skills and confidence level. Performance appraisal helps supervisors in detecting the decencies in performance of employees due to 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 programmes 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 organisation 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 relation which creates 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.