Functions and Utilizes of Performance Appraisal

Functions and Utilizes of Performance Appraisal

A performance appraisal is an evaluation done on an employee’s job performance over a specific period of time. The works performed by the different employees differ in many aspects due to the difference in their backgrounds, experiences, knowledge, skills, abilities, and aptitudes.

Performance appraisal is a function of human resource management. It is to be made effective for the achievement of organization’s objectives. It systematically evaluates an employee’s current and past performance as well as future potentials. It helps to identify employee’s job-related behavior and outcomes. Organizations usually undertake appraisal for administrative and developmental purposes. Main uses are as follows:

A. Administrative Uses of Performance Appraisal

Under administrative use, performance appraisal provides a basis for a decision about the employee’s work conditions, promotions, terminations, and rewards. Administrative uses of performance appraisal comprise the following aspects:

  • Promotion

Promotion is an upward movement of employees, the transfer is displacement from job to job for better fit and termination is dismissal from the job. Performance appraisal serves as a basis for the promotion of employees by communicating required skills, efficiency and potentials of the employees. It serves as a basis for termination of employees to weed out the low performer’s through dismissal, lay off, downsizing etc. It is the common interest of employees to get promoted to the position where they can utilize their abilities effectively. It is mismanagement to promote the employees into such position where they cannot perform effectively. Hence, performance appraisal provides relevant information on promotion decision.

  • Transfers

Transfer decision is concerned with the transformation of employees from one work unit to another. It is conducted when the employees are not performing well in the organization. It provides reliable and relevant information for transfer decisions.

  • Remuneration Administration

Performance appraisal serves as a basis for administrating the remuneration of employees. It provides feedback to employees about their performance rating and helps to remove performance deficiency. Future potential can be initiated to help the employee and it can be identified. It means, by assessing the current and past performance of an individual a decision regarding reward and punishment will be made.

  • Training and Development

Performance appraisal provides a basic ground for determining needs of individuals. It provides a guide for identifying training and development needs. Management development needs of managers can also be identified to realize their future potential. It indicates the performance deficiencies in an employee, if any so that the training needs can be identified within individuals. It also helps in indicating talented employees so as to impart additional knowledge and skills to them.

  • Supervision

Performance appraisal serves as a basis for termination of employees to weed out the low performer’s through dismissal, lay off, downsizing etc. It provides a guideline for determining where and what kind of supervision is required. It also helps in personal research.


B. Development Uses of Performance Appraisal

Performance appraisal is said to be used in development whenever it is used to gear up towards improving employee’s performance and skills. It can also be defined from the viewpoint of self-improvement. Under it, performance appraisal helps for the development of overall skills and efficiencies of the individuals. It also facilitates employee’s career planning by recognizing their strength and weakness. This brings out the deficiencies and shortcomings of the employees and provides a regular feedback to employees so that the employees can improve their skills deficiencies.


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