Functions of Employee Performance Reviews/Appraisals

Performance reviews (also referred to as performance appraisals and performance evaluations) serve many useful purposes for any type of organization no matter how large or small. These functions include:

Basis for Performance Reviews

The purpose of a performance appraisal is to provide regular feedback to all employees at all levels in an organization. One of the ways this is achieved is with the use of competencies. Competencies allow an organization to define what job actions and values are important enough to be measured. This also allows employees to understand what actions are important in their job and if they are meeting or exceeding expectations they were hired for

A performance review helps in determining who the key employees in an organization are. It also brings out challenges for the management to keep the rest of the employees motivated and ensure that they keep working at optimum levels. In addition, it allows the management to adopt certain techniques in order to correct the behavior of the poorly performing employees.

Setting up of Work Goals

Performance appraisals present an opportunity for the management to discuss work responsibilities and agree on common goals with the employees. The employee and his manager also discuss the employee’s objectives at the start of each year or review period. Managers aid their employees in identifying their objectives by making them understand the relationship between their work and the departmental/organizational goals. The manager along with the employee must also work on defining the measurement to be used for the evaluation of each of these objectives. This means that both the employees and their managers must agree to the objectives and the evaluation methods involved with them. Employees should not set unrealistic goals, as this will lead to failure and problems with the management in the future. Any education or training necessary for the employee should be identified and arranged for during this process.

Determining Increase Based on Merit

Many organizations attach the performance appraisal process with actions like merit, promotional or salary increases. An accurate performance review can help determine a percentage increase or decrease in an employees wage, this type of action is more commonly know as "pay for performance"

Identification of Developmental and Training Needs

Training needs are identified and development schedules established while discussing performance issues during a performance appraisal. When the entire organization has gone through the performance review process management can use the results for identifying organizational training requirements. Care must be taken to setup a need based training program rather than implementing a companywide training program that results in a waste of essential resources like time, money and man-power. Moreover a skills inventory should be maintained as it determines the skill resources at hand and those that might be needed in the future.

Documentation of Employee Actions

Although there is no legal requirement to carry out performance appraisals these usually form the basic documents that support employment actions like work assignments, discipline, promotions and terminations. Performance reviews provide a standardized basis for supporting employment actions since each employee is reviewed with the same method. Moreover, performance appraisals form the initial document source for substandard performance in organizations that follow progressive discipline policies.

Documentation of Approvals for Progression

Many organizations use performance appraisals as the managerial recommendation for proceeding to the next job level. This could be as simple as a column on the form indicating whether the employee is fit to move up the ladder in a job family. This kind of practice is very common for union and non-exempt positions.

Identification of Special Skills, Abilities and Interests

The formal framework of performance appraisals results in identifying interests, abilities and emerging skills. Moreover, some employees may indicate a strong desire for a particular type of work, which can be a useful input for any future tasks or promotions.

Provide Individual Recognition

Performance appraisals indicate to employee’s that their managers are observant, knowledgeable and keeps records of events performed by the employee’s. Employees like to be recognized, which helps to boost their morale for future assignments while maintaining the same service level. Moreover, the manager’s eagerness to listen and consider an employee’s opinion reflects on the manager’s respect and recognition for their employees even when both parties do not agree on certain issues during the appraisal process.


A performance review can fulfill many purposes within an organization and help to bring the management and the employees together. The positive results achieved during this process can help in promotions and wage increases while the negative ones can help in identifying training needs. A performance review also helps to document skills inventory for current and future use. After the review process both the employees and their managers can easily work towards common departmental and organizational goals.

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