Advantages and Disadvantages of Performance Appraisals

Employees, as well as managers, often question why organizations do employee performance appraisals. Anyone who has received or been given a performance appraisal could argue why they perceive it to be ineffective and a complete waste of time.

So what exactly is a performance appraisal?

A performance appraisal is an evaluation done on an employee’s job performance over a specific period of time. It is the equivalent of a report card on an employee and how their manager assessed their performance over the prior year.

Anyone who has worked in more than one department or at more than one organization can attest to the fact that not all performance appraisal processes are the same.

The varying systems and processes are all over the map.  Unfortunately, some are done so poorly that they are not only designed to fail, but also to create a negative experience for both the manager as well as the employee.

So why do organizations do performance appraisals?

advantages and disadvantages of performance appraisalThere are many varying opinions on the subject of performance appraisals and why they are done.  Some organizations do performance appraisals because they feel obligated to do them – because everyone else does.

Some organizations do performance appraisals to make sure they have a piece of paper in the employee’s file – in case they ever need to do corrective action.

But successful organizations understand the importance of incorporating performance appraisals into their performance management process and strategy.

Advantages of performance appraisals:

  • They provide a document of employee performance over a specific period of time.
  • They provide a structure where a manager can meet and discuss performance with an employee.
  • They allow a manager the opportunity to provide the employee with feedback about their performance and discuss how well the employee goals were accomplished.
  • They provide a structured process for an employee to clarify expectations and discuss issues with their manager.
  • They provide a structure for thinking through and planning the upcoming year and developing employee goals.
  • They can motivate employees if supported by a good merit increase and compensation system.

Disadvantages of performance appraisals:

  • If not done right, they can create a negative experience.
  • Performance appraisals are very time consuming and can be overwhelming to managers with many employees.
  • They are based on human assessment and are subject to rater errors and biases.
  • Can be a waste of time if not done appropriately.
  • They can create a very stressful environment for everyone involved.

Finally, performance appraisals are only as good as the performance management system it operates within.  Organizations that only do performance appraisals for the sake of doing them are wasting their time.

But organizations that incorporate performance appraisals into a comprehensive performance management system and use them to implement business goals have an advantage for accomplishing their goals and ultimately their strategic plan.

If you are interested in learning more about performance appraisals, you might find this book: Performance Appraisal Source Book: A Collection of Practical Samples helpful.

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photo by: thinkpanama

article originally posted April, 2010, updated July, 2014.