The Performance Appraisal System Commerce Essay

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Employees are critical part of organizational system. If they perform better, they bring efficiency and effectiveness in the organizational process. Its important to keep them motivated as if they are motivated, their morale is high, and they are committed to their work and try to improve the operational process by being creative. There are number of factors that can play important role in employee motivation. Performance appraisal is a system through which efforts of employees are recognized and rewarded. It's an effective way to keep employees motivated and develop a spirit of improve their performance and focus on their strengths. An effective performance appraisal system motivates employees to set goals for themselves to increase their performance level.

It helps employees as well as supervisors to identify strengths and weaknesses of employee performance (FILIZ K. MCNAMARA, 2011). The system brings an opportunity for supervisors and employees to discuss the goals employee set for him, goals of supervisor that he has set for department and discussing the ways that can be helpful for achieving these goals while supervisors and employees working together.

A good enough performance appraisal system creates a link between performance of employee's expectations and how employee's efforts are contributing in overall success of organization. It brings two sided benefits, for organization as well as for employees. It works as mechanism, when you recognize the efforts of employees, they will be motivated to bring even better performance next time, and there will be a feeling of importance in employees, this feeling keeps their morale high, committed to work and excellence, this is an ideal situation when you have employees in such state of moral and motivation, as it will give amazing results.

In this situation use of resources will be maximized and waste of resources will be minimized. Productivity will increase and ultimately profits. So in the basic factor of increased profits comes from employee side, this clarifies the importance of good employee performance in profitability ratio. So when they play such a key role they should be rewarded definitely.

It must be kept in mind while rewarding employees that reward system should be just and fair and the rewards it uses are important for employees. If you are using type of rewards to which is not important for employee, it will not have affect. Employee will become disappointed and it may also decrease the performance of employee. Monetary awards are not effective all the time, no doubt, money holds so much importance but sometime employees need something else then the money. So, different types of performance appraisal system should be checked for their effectiveness for different employees.

Performance appraisals should not be used as substitutes for consistent, open communication. According to Carter McNamara of Authenticity Consulting LLC, "Nothing should be surprising to the employee during the appraisal meeting. Any performance issues should have been addressed as soon as those issues occurred." 

Appraising the performance is not end at all. It's important to check the employee performance after rewarding them. Sometimes they may become lazy and do not show consistency in their performance. In this situation effectiveness of reward should be checked. A reward that brings consistent performance is perfect to be used.

Experts recommend that performance appraisal meeting should be started to by making it clear that goal of appraisal system is to exchange ideas and work together to come up with an action plan that can be effective for achieving employees and organizational goals.

Strategic advantages of performance appraisals:


Performance appraisal system helps to align performance of employees with organization's mission and vision. Evaluation process should relate to how the job of employee benefits the organization and how effectively job is being performed by employee. This process requires careful analysis and review of job description so that duties and responsibilities of a given job to its related department and ultimately with organizational objectives.

Optimized performance:

Appraisal system should motivate employees to perform better. For instance, when manger evaluates the performance of employee and finds well performers, through evaluation process, it helps him to give that employee more challenging task next time. For such employees, manager can set standards of expectations and to discuss with employee as well about the ways that can be effective in order to achieve goals and objectives.

Succession Planning:

Evaluation of employee performance helps organization in succession planning. Through this process, management will know about key performing, talented and qualified employees and it will be easy for them to decide about what key position should be given to whom, when people holding these posts leave or retired.

With strategic and well-planned evaluations, company leaders can discuss the potential they see in an employee and plot a course to get the skills and experience necessary to work into the identified role.

Potential forms of bias within the appraisal system:

Performance appraisal system faces some common biases named below:

Horns and Halos Effect:

It refers to phenomenon that a manager assumes about particular employee that he is naturally good or bad at his job. This is based on personal clashes or other factors that do not relate with job performance exactly. Manager keeps on looking employee with this perspective that has been built in this setting. This point effects performance appraisal system.

Self Bias:

This happens when employee suffers from self-fulfilling prophecy. This refers to phenomenon that when performance appraisal indicates that an employee is performing well, he/she will continue to perform well. And if performance appraisal system indicated poor performance of any employee, he/she will start will continue to perform poorly. Employees set their performance according to performance reviews.

Appraisal Bias:

Appraisal, itself can be a bias, as in many companies, only one type appraisal is used for all positions in organization. This appraisal may not be effective for particular post of employees.


Performance appraisal system can be very helpful if it is implemented effectively and carefully. It's an effective way to keep employees motivated and develop a spirit of improve their performance and focus on their strengths. An effective performance appraisal system motivates employees to set goals for themselves to increase their performance level.

Appraisal system work effectively if it is well implemented, free from potential biases and serves as an effective tool to align employee efforts with company vision and mission and help to achieve organizational objectives and goals.