Performance appraisal is a significant element of the information and control system in an Organisation.
Benefits
1. Performance appraisal provides valuable information for personnel decisions such as pay increases, promotions, demotions, transfers and terminations. The information provided forms the basis for suitable personnel policies.
2. It provides feedback information about the level of achievement and behaviour of subordinate, rectifying performance deficiencies and to set new standards of work, if necessary. It also identifies individuals with high potential who can be groomed for higher positions.
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3. It serves as a means of telling a subordinate how he is doing and suggesting necessary changes in his knowledge, behaviour and attitudes.
It thus provides information, which helps to counsel the subordinate. It also serves to stimulate and guide employee’s development.
4. It is useful in analysing training and development needs. These needs can be assessed because performance appraisal reveals people who require further training to remove their weaknesses.
By identifying the weaknesses of an employee, it serves as a guide for formulating a suitable training and development programme to improve his quality of performance in his present work.
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5. Performance appraisal serves as a means for evaluating the effectiveness of devices used for the selection and classification of employees.
It therefore helps to judge the effectiveness of recruitment, selection, placement and orientation systems of the organisation.
6. Performance appraisal facilitates human resource planning and career planning; permanent performance appraisal records of employees help management in human resource planning without relying upon personal knowledge of supervisors.
7. Performance appraisal promotes a positive work environment, which contributes to productivity.
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When achievements are recognised and rewarded on the basis of objective performance measures, there is improvement in work environment. Performance appraisal therefore, provides the rational foundation for incentives, bonus etc.
The estimates of the relative contributions of employees help to determine the rewards and privileges rationally.
8. The existence of a regular appraisal system tends to make the supervisors and executives more observant of their subordinates because, they know that they will be expected periodically to fill out rating forms and would be called upon to justify their estimates. This knowledge results in improved supervision.
9. Performance appraisal records protect management from charges of favouritism and discrimination. Employee grievances can also be reduced as it helps to develop confidence among employees.