Is a formal management system to evaluate the quality of an individual’s performance in an organization.The appraisal is usually prepared by the employee’s immediate supervisor. The procedure typically requires the supervisor to fill out a standardized assessment form that evaluates the individual on several different dimensions and then discusses the results of the evaluation with the employee.

Steps of the performance appraisal process:

Step 1 : Planning & Goal setting:
Usually at the beginning of the year both the manager and the employee schedule a performance planning meeting. During this session both the manager and employee need to set mutually agreeable goals for the employee to achieve for this year. This consensus is a very important factor that ensures the employee will diligently achieve these goals.

Step 2 : Delivering the results
Over the course of the year, the employee works to achieve the goals, objectives, and key responsibilities of the job that were previously agreed with the manager or direct supervisor who's role is to create the suitable conditions that motivate the employee and coach or council to resolve any performance problems. It is also very useful to hold another meeting or more mid-year to review the performance of the employee so far in comparison to the agreed goals that were discussed during the first goal setting and appraisal planning meeting at the beginning of the year.

Step3 : Assessing performance:
As the time for the formal yearly performance appraisal nears, the manager reflects on how well the subordinate has performed over the course of the year, assembles the various forms and paperwork that the organization provides to make this assessment, and fills them out. The manager may also recommend a change in the individual’s compensation based on the quality of the individual’s work.

Step 4 : Performance review:
The manager and employee meet at the end of the year to go over the appraisal form and measure the actual performance and compare it to the agreed specific goals and objectives that were mutually set at the beginning of the year. At the end of the meeting usually both the employee and manager set a new date for setting the appraisal goals and objectives for the new year.

What is the purpose of Performance appraisal?

Improves overall performance:
A good performance appraisal points out areas where individuals need to improve their performance, so coupled with support, coaching and counseling from management, performance appraisals help guide those conscientious employees who are willing to improve to know what their weak areas are.

Giving feedback to employees:
One of the main reasons performance appraisals are done is to provide feedback to employees so they can know exactly how well they did or what do they need to do better. In addition to this it's also a way to communicate the expected targets and goals required from each employee.

Motivating Employees:
Performance reviews can serve as a motivator to employees, the appraisal process helps them learn what is considered " outstanding" according to the company and management's criteria and what is " poor performance" . It also keeps employees motivated as it provides them with a means to demonstrate that they can be "outstanding"

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Goal setting:
The performance appraisal process is one of the most effective ways to ensure that every employee has clear, achievable and specific goals which is cascaded down and fits in with the main corporate goals and objectives which is a sure way to generate superior performance.

Improving Overall Organizational Performance:
This is one of the most important reasons for an organization to have a performance appraisal system. A performance appraisal procedure allows the organization to communicate performance expectations to every member of the team and assess exactly how well each person is doing. When everyone is clear on the expectations and knows exactly how he is performing against them, this will result in an overall improvement in organizational success.

Identify poor performers:
Not everyone is expected to meet their targets and set goals, The performance appraisal is a way for Managers and direct supervisors to pinpoint and identify low performing employees to rectify the problem and assist them to improve.

Makes promotion decisions easier :
Performance appraisals are one of the main methods used by senior managers that helps them decide who gets promoted based on their performance and making sure that the most important positions are filled by the most capable employees.

Makes firing decision easier :
When financial and economic factors force corporations to downsize or layoff some of their workforce, performance appraisals help make sure the most talented employees are retained and only low performers are laid off.

Pay based on performance:
Many organizations believe in paying employees based on their performance, One of the classic uses of performance appraisals is to measure performance in order to base the pay accordingly

Helps Managers to help employees:
Performance appraisals are an excellent way to discover areas where each employee experiences difficulty achieving their targets showing weak areas where the manager or direct supervisor needs to intervene, coach and mentor employees to improved performance.

Helps in manpower planning:
Effective companies need to constantly know where their best people are. Performance appraisal gives companies the tool they need to make sound manpower planning decisions by knowing where both the top as well as the low performers are.

Determining training & Development needs:
The performance appraisal gives a very good insight in determining the specific training and development required to enhance any deficiencies in any specific skills or competencies.