Performance appraisal processes are one of the central pillars of the performance management which is directly related to the organizational performance and have a direct impact on it. Employee performance ultimately effects the organizational performance and objectives.

Relationship between Appraisal and Organizational Performance

According to a few HR professionals, the appraisals have no value for the organisation as there is no direct relationship in performance appraisals and the organizational performance. Also, there is no strong evidence to prove that appraisals positively impact the performance of the employees. But the HR professionals who see the organizational performance as a result or sum of the employee’s performance, argue that

apart from the direct benefits to the organisation, appraisals contribute to employee satisfaction, which in turn leads to improved performance.

For an organisation to be effective, the goals, the standards and the action plans need to be planned well in advance. Thus, performance appraisal facilitates the achievement of organizational goals. It also facilitates the optimal use of the organizational resources.

Performance appraisal is the strength of performance management, which in turn effects the organizational performance. It helps to identify and overcome the problems faced by the employees in their work.

Performance appraisals a double edged sword

Performance appraisal is like a double edged sword for an organisation. Although it has many benefits for the organisation, various studies have also revealed that performance appraisals have the equal probability of having a bad impact on the organizational as well as the employee performance.

Where the performance appraisal improves the work performance and employee satisfaction, it can also demotivate employees and leaving a bad impression on the good employees. Most of the employees do not approve of continuous performance monitoring and performance appraisals, and also consider it as a burdensome activity. According to Professor Kuvaas “Performance appraisals and other tools which involve feedback and target management should be adapted to the employee’s individual needs and characteristics. Otherwise, there is a risk of harming the good employees without being able to help the less good.”

Performance appraisal processes can create a sense of insecurity in the working environment and can become an obstacle in achieving the required changes in the attitudes and the performance of the employees. The element of bias in the appraisals can also worsen the situation.

Therefore, performance appraisals can effect the organizational performance both positively and negatively, and should be dealt with care and expert knowledge and experience.