Benefits of performance appraisal: employees and organizations

Does your company already know the benefits of performance appraisal? In the business world, creating a workflow that allows the...
14 July 2022
Benefits of performance appraisal: employees and organizations

Does your company already know the benefits of performance appraisal? In the business world, creating a workflow that allows the organization and its employees to make improvement decisions to maximize the performance of all its processes is vital. In this sense, performance evaluation is one of the most widely used tools by companies in many sectors. 

But what is this performance appraisal? Let us explain it to you below. 

What is the performance appraisal?

Performance appraisal (also known as performance evaluation or performance review) is a method widely used by organizations to measure the employee added value and the capacity to achieve their objectives. It is primarily used to evaluate and determine in which objectives employees have exceeded expectations and in which others they have had more difficulties.

To accurately track employee performance, it is advisable to review it quarterly and always approach it constructively so that the organization sees its benefits and the employees consider it a helpful tool to measure themselves. 

The company’s primary goal in this process (even a small business) is to obtain the essential information to make correct and accurate decisions.

Benefits of performance appraisal for the organization

  1. It leads to increased productivity: the performance evaluation measures the employee’s added value in terms of increased company revenue and job performance, compared to industry standards and overall employee return on investment.
  2. Improves the manager-employee relationship: after the evaluation, employees have the opportunity to discuss their concerns with their superiors, which, through constructive feedback, is very helpful in resolving any complaints and improves relations among the entire team.
  3. It helps to detect new talent: people often show their work potential in the field. The performance appraisal helps see attitudes and skills often hidden inside an introspective personality or with fewer communication skills.
  4. It allows the success measurement of the company’s selection processes. If the evaluation is unfavorable, it may be necessary to rethink some aspects of these processes.
Benefits of performance appraisal: employees and organizations

Benefits of performance appraisal for employees

But the benefits of performance appraisal don’t relate only to the organization itself. When appropriately used, review performance appraisal is a potent tool for employees to self-evaluate and improve their performance without external pressure. Some employees may see this evaluation method as a way of being pressured if they don’t achieve the pre-established objectives. The organization’s job is to make them realize this is not the case. 

These are the significant benefits of employee performance appraisals: 

  1. When an employee’s evaluation is positive, their attitude spreads to the rest of the team. This raises the spirits in the daily work and improves group performance
  2. It pushes employees out of their comfort zone, leading them to achieve goals they may not have imagined
  3. Suppose they approach the performance evaluation as a bi-directional communication channel, and the organization constantly listens to the employee’s feedback. In that case, this will help the employee to feel heard and, consequently, more involved
  4. It helps employees to determine their role in the company and to see their professional future clearer. In other words, it sets them on the path to improving their skills.
  5. Bonuses, money always helps. If an employee performance review is positive, it could improve the employee’s salary.

What aspects of an employee should your company evaluate?

There are many aspects to consider, for example, strengths and weaknesses, but it depends on each organization. We believe that some should not be missing in any performance appraisal process:

  • What’s next?: there must always be a next step for the employee. They must have a horizon to reach. It is necessary to focus on evaluating without forgetting that the past is past and that the only thing we can change is future performance.
  • Are they happy?: Without entering into the philosophical debate on whether we can achieve real happiness, it is essential to know if the person’s mood is good, if they have an excellent personal-professional balance, and if they feel valued and appreciated in the company to have it in account in future annual reviews.
  • Are the objectives realistic?: When goals are planned, everything looks pleasant and achievable, but is it so? When an objective is not met, it is necessary to evaluate the results obtained with those expected and to be clear if they were realistic. The aim is to improve the process. 
the benefits of employee performance appraisal outweigh its deficits

What methodologies are there to measure performance appraisal, and when to use each of them?

Throughout history, there have been various methodologies that have helped companies evaluate the performance of their employees. Some have survived to the present day: the so-called modern appraisal methodologies. They can be combined, giving managers a much more comprehensive picture of an employee’s performance. 

Let’s take a look at some of these methodologies: 

Customer evaluation:Our natural customers are the people who can teach us the most about improving our company’s service. Why not ask them for their opinion? At Smowltech, for example, we receive feedback, collect success stories and focus on what we can improve.
Low appraisal:A manager or a human resource team member evaluates an employee’s performance at a given time. This is the most classic method. 
Upward appraisal:Opposite to the previous one. Here it is the manager who receives the evaluation from his employees. Teams or highly structured work groups usually carry it out.
Peer review:With this modality, everyone in the company evaluates their equals, the work processes, and the organization itself.
Self-evaluation:Although we are often harder on ourselves than on others, it is always interesting to go through a process of introspection. Therefore, with this method, employees evaluate their performance, attitude, and role within the company.
360-degree evaluation:It is a mix of all the previous ones. It is the most global and complete one, as it gathers the opinion of all the different levels that constitute the organization.

Conclusions: the benefits of employee performance appraisal outweigh its deficits

Even though there is still a view that performance appraisal systems only seek to make more demands on employees, it is becoming more and more common to see them applied in different organizations. 

It is the responsibility of each organization to put this methodology to good use in the long term so that the data collected is reliable and valuable to both managers and employees. Thanks to this information, your organization can maximize resources and improve its results and human relations.

On the other hand, it also works positively on employee engagement, and for them, it is a golden opportunity to demonstrate their strengths in the annual performance reviews. They will also have access to better training (Smowltech can help you with this) and professional and personal benefits.

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