Updated May 17, 2023
Overview of Benefits of Performance Appraisal
An organization’s productivity, profitability, and sustainable growth depend on the efficient and effective utilization of human resources. People or human resources are one of the most important assets for effective operations, and their skillful application is directly related to the organization’s overall performance. Various factors, including organization culture, unbiased appraisal system, the prospect of career growth, job responsibility, and so on, stimulate an employee’s performance or productivity level. In this topic, we will learn about the Benefits of Performance Appraisal.
The Appraisal system must be unbiased because it provides adequate feedback about an employee’s performance level. Still, it also gives data to managers for future job assignments and compensation. It supports a basis for transforming or changing the behavior pattern toward more effective habits, which delivers results.
Definition of Performance Appraisal
The words performance appraisal or merit rating systems denote the evaluation process of performances of the employees of any small or big organization. It can be defined as a “process of systematic evaluation of personality and performance of each employee, measuring by supervisors or managers or some other persons trained in the techniques of merit rating, against some predefined parameters such as knowledge of job responsibility, quality of delivery, leadership ability, cooperation, initiative, creativity, attendance, judgment skill and so forth”.
Objectives of Performance Appraisal
Organizations adopt various performance rating systems with certain objectives in mind. Those objectives are –
- To provide inputs for making decisions regarding transfers and promotions.
- Providing data for identifying the requirements of training and development programs for individuals.
- To help to make decisions for offering confirmation to the employees who have completed the probationary period.
- To make decisions regarding the hike of employees’ salary, incentives, or variable pay.
- Enable clarification of expectations and facilitate communication between superiors and subordinates.
- To help employees to realize their performance level.
- Collect data and keep the record for different organizational purposes.
Methods of Evaluation Technique
In designing the evaluation technique, each company considers various factors such as the size of employees, work schedule, company goal, etc. Whatever method is used, it is important to select the right method for assessing the individual’s quality and quantity of work. Merit rating can be classified into two categories of Performance Appraisal Methods – traditional and modern methods.
1. Traditional method
- Ranking method
- Forced Distribution
- Forced Choice method and Checklist method
- Paired Comparison
- Critical Incident Method
- Graphic Scale
- Essay method
- Field Review
- Confidential Report
2. Modern method
- Management by Objectives (MBO)
- Behaviorally anchored rating scales
- Assessment centers
- 360-degree appraisal system
- Cost Accounting method
Benefits of the Appraisal System
Though there are some debates regarding the merit rating system as it considers adding little value to the organization’s performance, the annual reviews are taken by management and staff as a painful process. Sometimes it acts as detrimental to performance management.
The still appraising system is assumed as a performance measuring standard that has been fixed to give feedback to the employees to improve their performance level by eradicating deficiencies. It is acclaimed as an investment for the company, and this acclamation is quite justifiable after considering the following benefits –
1. Assist in Enhance Employee Performance
The evaluation process needs supervisors to note insufficiencies in employees’ performances and communicate to the respective employees accordingly. The manager or supervisor can give suggestions to overcome their deficits.
The logical appraisal system helps the line managers and HR people to design policies and programs for the progress of employees and businesses. It supports planning daily work agreeably to assign the right people to an accurate job. The evaluation process should actively ensure unbiased and equal views to stimulate every employee’s career development.
2. Promotions and Transfers
The merit evaluation system helps to recognize talented employees to groom them as competent. The organization admits employees’ hard work and accomplishments by giving promotions, deputation, and transfers. The evaluation system certifies that promotion and transfer offers are based on performance, not seniority and nepotism.
3. Hike in Salary and Compensation
The rating system gives a clear view of an employee’s performance level, which is compensated by an enhancement in salary and offering other fringe benefits. A good point rating can be achieved only through the appraisal system, which offers handsome compensation packages like a bonus, extra reimbursement, various allowances, and requisites. Almost in all organizations, different categories of employees are paid good compensation packages for their high level of performance, which reveals in the evaluation system.
4. Planning for Providing Training and Development
Through the appraisal procedure, the superiors can comprehend their subordinates’ strengths and weaknesses, which also helps the HR department design a training and development program. The content and method of training vary according to the requirement of employees. Even the appraisal system decreases the attrition rate because appreciation and bonuses enhance the stability of an employee.
5. Improve the Relationship Between the Management Group and Employees
After the appraisal, the employees get the opportunity to discuss their concerns with superiors which is not only helpful for resolving any grievance or dispute and improves the liaison between the management group and employees.
6. Be Integrated with Strategic Vision
One important purpose of an appraisal is to communicate employee goals that are part of the organization’s strategic vision.
7. The Tool of Inspiration
Performance appraisal is an inspirational tool for employees because weighing up the performance level and the recognition system after achieving the goal can boost the employees’ efficiency and productivity level.
8. Detect Valued Performers
The evaluation system aids in recognizing potential employees in the organization. When making personnel decisions, such as promoting individuals to influential positions or laying off employees, employers base their decisions on performance history, skill level, and experience. The appraisal system is also helpful for inventorying quality people in the organization. As per the valuation, the HR department recruits new employees or upgrades the existing workforce.
Suppose the performance appraisal system executes properly. In that case, it can become a powerful tool to establish an organizational culture where each employee acts for the broad strategic vision of the organization.
This is a guide to the Benefits of Performance Appraisal. Here we discuss the objectives and Benefits of Performance Appraisal and methods of Evaluation Techniques. You may also look at the following article to learn more –