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Performance Appraisal: Concept & Purpose

The performance appraisal is an important function in business nowadays. The need for
performance appraisals arises because in this highly competitive world, the organizations
are required to ensure the peak performance of employees, and give them suitable
increments for the next salary. Appraisals help for improvement of individuals, which
eventually increases the company’s performance. Generally the performance appraisals are
carried out every year.

According to Edwin Flippo (Author), “performance appraisal is the systematic, periodic and
an impartial rating of an employee’s excellence in the matters pertaining to his present job
and his potential for a better job.”

According to Peter Drucker, employees are our most valuable assets, and they can
determine the success and survival of an organisation. Appraisal is one way in which the
efforts of those employees can be aligned with the aims of an organisation and those
employees can be motivated and supported.

The concept of Performance appraisal started for the first time during the First World War,
when Walter Dill Scot, the U.S. army adopted the individual rating system tor evaluating
military personnel. Legends show that the Wei dynasty introduced performance appraisal in
which an Imperial Rater used to appraise the performance of members of the official family.
During the 1920-30, the policy of giving grade wage increments on the basis of merit was
accepted for the hourly paid workers in industrial units, which was called merit-rating
program. The trend continued till 1940’s. After that came the rating - scale, where emphasis
was given on the factors and various parameters. Now, the term “merit rating” is used
frequently in developing criteria for salary adjustments, promotions, transfers etc.

The table given below shows the changes in the appraisal criteria with time.
Performance Appraisal is a very important part of performance management. In the same
workplace, people consciously or unconsciously, make opinion about others. The opinion
may be about their quality, behaviour, way of working, etc. Such an opinion becomes basis
for interpersonal interaction. In the same way the superiors may form some opinions about
their juniors which can affect the employee rating.

Hereby with the above discussion, it has been clear that the purpose of performance
appraisal is extended beyond just salary increments. It is used for career planning,
succession planning, promotion, transfer and training. Also the method, judgement
parameters, appraisal system, performance measurement, everything varies from one
organization to other and sometimes even different departments of same organization.
Hence Performance Appraisal requires a dynamic approach.

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