The main reason for the utilization of performance appraisals is performance improvement at individual level and ultimately at organizational level.
Other fundamental reasons include
- As a basis for employment decisions
- Criteria in research;
- To aid with communication;
- To establish personal objectives for training programs, for transmission of objective feedback for personal development;
- A means of documentation to aid in keeping track of decisions and legal requirements; and
- Used in wage and salary administration.
Additionally, they can aid in the formulation of job criteria and selection of individuals “who are best suited to perform the required organizational tasks”.
Other potential benefits include:
- Facilitation of communication
- Enhancement of employee focus through promoting trust
- Goal setting and desired performance reinforcement
- Performance improvement and Determination of training needs
Aid for Communication
Communication in organizations is considered an essential function of worker motivation. It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty. Fundamentally, feedback and management employee communication can serve as a guide in job performance.
Enhancing employee focus and trust
Behaviors, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors. Such factors consume psychological energy of an employee and can lower job performance and cause workers to lose sight of organizational goals. Properly constructed and utilized performance appraisals have the ability to lower distracting factors and encourage trust within the organization.
Goal setting and desired performance reinforcement
Organizations find it efficient to match individual worker’s goals and performance with organizational goals. Performance appraisals provide room for discussion in the collaboration of these individual and organizational goals.
Organizational performance improvement
Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results. Well-constructed performance appraisals can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations. “At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices and performance improvement at both the individual and organizational levels.”
Determination of training needs
Employee training and development are crucial components in helping an organization achieve strategic initiatives. It has been argued that for performance appraisals to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered. Performance appraisals can especially be instrumental for identifying training needs of new employees.
Finally, performance appraisals can help in the establishment and supervision of employees’ career goals.