Performance appraisal is the identification, measurement, and management of human performance in organizations. Appraisal should be a future-oriented activity that provides workers with useful feedback and coaches them to higher levels of performance. Appraisal can be used administratively or developmentally.

Performance appraisal begins by identifying the dimensions of performance that determine effective job performance. Job analysis is the mechanism by which performance dimensions should be identified.

The methods used to measure employee performance can be classified in two ways: (1) whether the type of judgment called for is relative or absolute, and (2) whether the measure focuses on traits, behavior, or outcomes. Each measure has its advantages and disadvantages. But it is clear that the overall quality of ratings is much more a function of the rater’s motivation and ability than of the type of instrument chosen.

Managers face five challenges in measuring performance: rater errors and bias, the influence of liking, organizational politics, whether to focus on the individual or the group, and legal issues (including discrimination and employment at will).

The primary goal of any appraisal system is performance management. To manage and improve their employees’ performance, managers must explore the causes of performance problems, develop action plans, empower workers to find solutions, and use performance-focused communication.