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Importance of Performance Appraisal: Various Types & Elements of Performance Appraisal

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25th Mar, 2023
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Importance of Performance Appraisal: Various Types & Elements of Performance Appraisal

A performance appraisal’s principal objective is to offer employees positive feedback on their job performance and identify development areas. It also assists businesses and organisations in determining employee salaries, promotions, transfers, and training requirements. The continuous performance feedback-adopting companies had a 24% higher rate of success than their competition in the year 2020, implying how valuable the process can be to catalyse businesses towards growth.

Read on to learn more about the performance appraisal importance, the types of performance appraisals and the various elements constituting performance appraisals.

What is Performance Appraisal?

A performance appraisal, also known as a performance review or evaluation, is a formal process used by employers to assess their employees’ job performance. The aim of a performance evaluation is to offer workers feedback on their job performance, identify areas for improvement, and establish objectives for future growth.

The performance appraisal process typically involves a face-to-face meeting between the employee and their supervisor or manager, in which the employee’s performance is discussed, and feedback is provided. The performance appraisal may also include a self-assessment by the employee, as well as input from other colleagues or stakeholders who work closely with the employee.

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During a performance appraisal, the employee’s job performance is evaluated against pre-established standards and criteria, including job responsibilities, goals and objectives, and core competencies.

Why are performance appraisals important?

Performance appraisals are important for several reasons, including:

Setting standards for the organisation

A performance appraisal aims to establish mutually agreeable goals, objectives, and measures of success for each employee. This ensures that employees know what is expected of them and allows them better to connect their efforts with the organisation’s goals.

Identifying training needs

Performance appraisals can help to identify areas where employees may need additional training in order to improve their job performance or prepare for future career opportunities.

Supporting career development for employees

Performance appraisals can identify employees with high potential for career advancement and develop individualised career development plans that support their growth and progression within the organisation.

Making employment decisions

Evaluations of employees’ performance constitute the foundation for various administrative decisions, including pay raises, promotions, and even termination. Performance appraisals serve to guarantee that employment choices are made in a fair and impartial manner by recording an employee’s work performance.

Boosting morale and productivity in the workplace

Employee engagement can be boosted with the aid of performance appraisals by making it easier for employees to understand how they are doing in their jobs and by rewarding them for carrying out their duties diligently. As a result, employees feel more appreciated and invested in the company as a whole.

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Types of Performance Appraisals

Annual Performance Appraisal

The most prevalent kind of performance evaluation in businesses and organisations is the annual appraisal. An annual appraisal is basically a formal review of an employee’s work over the course of a year.

The annual appraisal lets employers evaluate the employees’ efforts in light of predetermined standards. The employers provide suggestions for improvement and pinpoint skill gaps that may be addressed by further training.

360-Degree Feedback

The term “360-degree feedback” refers to an appraisal method in which employees receive comments on their performance from their management, coworkers, and clients. This type of appraisal provides a more comprehensive view of an employee’s performance.

360-degree feedback can help identify blind spots or areas for improvement that may not be evident in a traditional appraisal. With 360-degree feedback, employees can receive feedback from a wide variety of sources regularly, which helps promote a culture of continuous feedback and improvement.

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Self-evaluation is a type of performance appraisal in which employees assess and critique their efforts, highlighting improvement areas. Employees are prompted to consider their strengths and growth opportunities in this evaluation. Managers benefit from employees engaging in self-evaluation as it allows them to better understand their employees’ viewpoints.

Project-Based Appraisal

A project-based appraisal is a type of performance appraisal used when an employee works on a specific project or task. The employee’s performance is assessed according to their contribution to the successful completion of the project. This appraisal form is particularly effective for organisations that largely depend on project-based work since it gives a more specific evaluation of an employee’s performance.

Continuous Performance Review

A continuous performance review is a type of appraisal that involves ongoing feedback and evaluation throughout the year. Through this method, employees receive feedback and coaching on their performance in real-time.

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Behavioural Appraisal

An employee’s interpersonal and communication skills, as well as their overall conduct, are the primary foci of a behavioural appraisal. This type of appraisal can be especially useful for organisations prioritising collaboration and teamwork, as it provides a more holistic view of an employee’s performance.

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Various elements of performance appraisals

There are several elements that are commonly evaluated in performance appraisals. Here are some of the most important elements that are often considered during a performance appraisal:

Adaptability: This refers to the employee’s ability to work efficiently under pressure and respond to changes in the workplace. It also includes their willingness to learn and accept new ideas.

Attendance: This measures the employee’s reliability in showing up for work on time and consistently fulfilling their responsibilities.

Dependability: This element assesses the employee’s capacity to independently and passionately accomplish tasks with little to no supervision.

Quality of Work: The employee’s capacity to hold themselves to a high standard, make efforts to improve their performance, and go the additional mile to provide high-quality results is evaluated in this element of an appraisal.

Planning and Organising: An employee’s capacity to plan, organise, and carry out assignments, as well as set and achieve targets that align with the organisation’s goals, is evaluated here.

Management Skills: This component of an appraisal assesses the employee’s capacity to successfully manage projects, define objectives and priorities, and accomplish outcomes.

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How upGrad helps?

upGrad is one of the leading online learning platforms for professionals looking to expand their skill sets and advance in their respective fields. The platform also offers a variety of resources to support candidates in different aspects of their professional lives, including performance appraisals.

The purpose of these resources is to provide learners with the information and expertise they need to succeed in their current positions and advance in their chosen fields. upGrad offers a learning environment customised to each student’s specific preferences and objectives.

Candidates may tailor their education to meet the needs of their current/future positions and goals in the workforce. In doing so, they may improve their performance appraisal ratings by honing in on the areas where they need the most improvement, i.e., their abilities and knowledge.

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upGrad also helps with performance appraisals by offering access to a community of industry experts and peers. The community provides valuable insights, feedback, and support that helps individuals to develop their skills and achieve their goals. For example, upGrad’s online forums and discussion groups allow learners to connect with other professionals in their industry and share ideas and experiences.


A performance appraisal is the most useful instrument in any business. Decisions on one’s career, salary, and other personal matters, such as promotions and pay raises, rely heavily on a performance appraisal.

The success of every company depends on having access to reliable and impartial employee records. These help pinpoint problem spots in the original setups. The information gleaned from performance appraisals is invaluable to firms in making important choices about their employees.

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If you’re trying to get a hike in your current job role or switching to a company to receive higher compensation for the work you put in, consider enrolling in the MBA programme offered by upGrad in collaboration with IMT and Deakin University. This MBA programme will equip you with the skills and knowledge you need to succeed in today’s competitive business world.

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With a focus on practical learning and real-world application, this MBA programme will challenge you to grow personally and professionally. You’ll have the opportunity to learn from industry experts and work on projects that will help you develop critical thinking and problem-solving skills.

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Frequently Asked Questions (FAQs)

1What is performance appraisal?

A performance appraisal is a formal process used by employers to assess their employees' job performance. It involves the assessment of an individual's performance against predefined goals, objectives, and key performance indicators (KPIs) specific to their role and responsibilities.

2How can employees prepare for a performance appraisal?

To prepare for a performance evaluation, employees should examine their job description and performance objectives, reflect on their achievements and get feedback from colleagues and stakeholders.

3What should employees do if they disagree with their performance appraisal?

An employee who is dissatisfied with their performance review should first attempt to have a conversation with their immediate supervisor or manager. If available, the employee may also file a formal grievance against the appraisal.

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