How performance appraisal works in an organization

Performance appraisal is the most systematic way to evaluate the performance of every employee in any organization and directs its result for organizational growth. In this article, you will learn about the uses of performance management, the importance of Performance appraisal, the process of performance appraisal, its impact on the company's attrition rate and how to overcome bad rating consequences.


Performance management is an objective assessment of the individual performance against the given standards that is well defined by the organization. Every single employee of the organization is a part of this performance appraisal. It is the foremost tool for evaluating the skills, competencies, and performance of an individual. It is a periodic assessment of every organization. It is one of the most important factors that influence the working habit of an employee at an individual level and influences the cultural environment of the overall organization. Performance appraisal identifies the ability and potential of every employee and redirects them to the best use for the organization. In words of Robert half- There is something that is much more scarce, something rarer than the ability, it is the ability to recognize ability. So in this context performance appraisal is the backbone of the growth in any organization, it recognizes the ability and mobilizes the resources for organization growth.

Why performance appraisal is done

Every company while formulating its hr policies has kept its vision and mission in mind and to achieve this they work consistently. Every action is directed to achieve these goals both at the individual level and for an organization as a whole. And in this journey the contribution of every employee is important. And before proceeding, a set of the desired result is predetermined. And to know if an individual is aligned with this company goal or not performance appraisals are done. Performance is always measured against the given standards. The parameter of these standards can be quality of output, ability, integrity, job knowledge, etc.

Performance appraisal

The Outcome of performance Appraisal

Well, we are now aware that performance appraisal helps to evaluate the employee's performance but it's not limited to that only. It indirectly supports every core function of an organization. It directs and redirects the company to achieve its goals in a more feasible manner. It provides facts and data for manpower planning. On the basis of the results obtained the organization is able to promote its employee, confirm the service of an employee who is on probation, and provide pay revision for the whole organization on the basis of requirements. Further, it helps to provide feedback on employee's performance and accordingly a blueprint of training and development schemes are executed. This proves to be very crucial in curbing the employee's performance drawbacks. On lateral aspects, it shapes the overall outlook of an organization. HR role of being a bridge between employees and organization evolves effectively. The crux of the whole story is that it caters to all the needs of an organization to grow and attain its goal. Hence in this data-driven fast pace era, the importance of effective performance appraisal is of utmost importance.

The Process of appraisal

Well process of carrying out performance appraisal varies from organization to organization. It strictly depends upon the setup, cultural environment of the particular organization. On the basis of the choices, performance appraisal methods can be categorized as a traditional and contemporary method.The Traditional method includes confidential reports, essay method, checklist method, graphic rating scale, critical incident method technique, etc. These methods are time taking and mostly subjective in nature and even open to rater basis. In this comparison, Contemporary methods are more accurate and justified. At least its not open to rater basis and evaluation is done on the basis of facts and data. This evaluation includes three key tools I.e KRA- Key result area, KPA- key performance area and a metric to evaluate both i.e KPI- key performance indicator. Most of the organization follows the contemporary method of performance appraisal. Among which MBO- management by objective is the most popular. In this process objective is predetermined and then it delegates into departmental goals and then to groups within departments and eventually to individuals. The performance standards are communicated to all employees and on the basis of that evaluation is executed.

Performance appraisal and attrition rate in the company

Performance appraisal does affect the attrition rate in a company. We belong to an era of impatient fast pace time.Today's millennial are more competitive and more driven towards an instant outcome. Having this behavioral attitude slight deviation from what expected leads to simple result - "quit and seek a better opportunity" A bad rating during performance appraisal made employee furious and without thinking twice they opt for company change. Gone were the days when people feel happy and content with those 10% yearly hike. Employee wants more and in this rush and hustle retaining an employee in the company is the real tough task. According to survey every organization at some or the other point of time faced the situation when the employee leaves the organization after a bad rating. Employee attrition rate is increasing day by day with increasing competition. Nowadays many companies are using the poaching method to hire employees at the senior level. This scenario gives a turbulent and instability to the organization.

Wrap up

Performance appraisal has always been an important tool for making the organization work effectively but in today's world of cut and throat competition, there is no place of single flaws in its applicability. It is the key element from recruiting an employee to retaining it. Planning the training and development scheme for providing feedback for both employee and employer. Organizational goals direction is totally dependent on performance appraisal outcome. So to make the process of performance appraisal effective- discuss the objective with employees, seek the advice of everyone, listen to the needs of the employee, and ask them what training they require for performing better. Archive every data received and use it appropriately. Focus more on employee engagement and employee satisfaction to retain them. Beside this communicate the performance standard to every employee very clearly and rely on the triangular method for collecting the data for appraisal. By just following these simple yet effective methods one can make performance appraisal a real pleasure for both employer and employees. Both needs are well addressed and hence better growth of organization and individuals. Attrition rate will fall and the whole organization will work more effectively.

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