Key Objectives and Types of Performance Appraisal
Jul 7, 2025
8 min read
Table Of Content
- What is a Performance Appraisal?
- Key Objectives of Performance Appraisals
- 8 Common Types of Performance Appraisals
- Wrapping Up
What is a Performance Appraisal?
Performance appraisal is the process of formally evaluating an employee’s performance over a time period. Performance appraisal typically will involve comparing performance against established goals, collecting feedback from various parties, and discussing strengths, weaknesses, and development opportunities with the employee.
At its core, though, performance appraisal is all about communication. It is an opportunity for employees and managers to have a conversation; to discuss performance, employee expectations, growth, and understanding. A performance appraisal process – annual, quarterly or even monthly – can help to establish clarity and alignment across your team if managed well.
Key Objectives of Performance Appraisals
Let’s now dive into why performance appraisals matter so much. Here are the main objectives of performance appraisal that make them important in any organisation:
1. Improving Productivity
First and foremost objectives of performance appraisal, productivity levels are improved! Organisations do not do performance evaluations to complete bureaucratic paperwork; they do performance evaluations to create change. When employees know what is expected of them and receive feedback frequently, their productivity increases.
In addition, evaluations help to set tangible goals, remove uncertainty, and get employees pushing themselves toward optimal levels of performance. Evaluations also create the opportunity for transparency on a team about information or processes that are inhibiting productivity – lack of training (tangible) or unclear expectations (intangible).
Tips to Improve Productivity:
- Use evaluations to set specific & measurable goals.
- Establish more feedback cycles; not only once a year!
- Evaluate development plans for effectiveness.
- Train managers on how to lead interesting/motivating conversations.
2. Setting and Aligning Employee Goals
Employees are looking to advance, and companies are trying to meet the objectives they set. Goal-setting is the crossroads of these needs.
The main objectives of performance appraisal are to find a common ground with employees to ensure you’re establishing goals that are geared towards growing the company, but also align with their personal goals. With this level of shared planning, employees will be even more engaged and aware of the accountability they will have to you and the company.
How to Set Employee Goals:
– Use structures like SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals.
– Ensure employees take part in goal-setting because ownership creates commitment.
– Track progress regularly, and be prepared to adjust the goal when needed.
3. Identifying Training and Development Needs
Major objectives of performance appraisal are they shine a light on skill gaps. Maybe an employee is great at strategy but needs work on communication. Or perhaps they’re excelling in a technical role but eyeing a leadership position.
The objective examples for appraisal can be seen as providing learning paths, and offering a tailored training programme can help employees grow in their field and increase productivity.
How to Begin with Training & Development Needs? A quick tip:
- Incorporate skill assessments into the appraisal process.
- Build individual development plans post-appraisal.
- Invest in training programs based on collective needs.
4. Enhancing Employee Engagement and Satisfaction
When employees feel heard, supported, and appreciated, they become more engaged. A quality performance appraisal communicates to employees, “We notice you work, and we are invested in your development.”
In fact, when employees are kept engaged, they are more loyal, productive, and enthused about contributing to team objectives. Thus, the objective of performance appraisal is to boost engagement. But that comes with the question: how to achieve the right result? Well, here’s the easy tip or strategy you can follow to bring engagement :
- Encouraging two-way conversations.
- Recognising achievements, even the small ones.
- Communicating the purpose and impact of appraisals clearly.
5. Recognising and Rewarding Top Performers
Another objective of performance appraisal is often the basis for salary increases, bonuses, or promotions. Recognising and rewarding top performers motivates them to continue their good work and shows others that great performance is noticed and appreciated.
The scope of performance appraisal doesn’t always have to be monetary. Sometimes, a new role, more responsibility, or even a shout-out in a meeting can make a huge difference.
Make recognition work by:
- Tying performance data to rewards.
- Making promotion criteria transparent.
- Balancing praise with constructive feedback.
6. Supporting Succession Planning
Every company needs a pipeline of future leaders. Thus, the objectives of performance appraisal are to help identify high-potential employees early and prepare them for bigger roles down the line.
By tracking performance trends, behavioural strengths, and leadership qualities, companies can better map out succession plans and reduce the risk of losing key talent without a replacement.
Support succession planning by:
- Creating career pathways linked to appraisal data.
- Offering mentorship or stretch roles to promising candidates.
- Keeping track of long-term employee development goals.
7. Resolving Role Ambiguity
There are times when employees don’t meet your expectations simply because they do not know what you expect of them. This is where the objectives of performance appraisal is to provide them with clarity of their roles and responsibilities to know what it is they are expected to deliver.
When roles are constantly clarified and documented, there is less chance for interpretation and thus, more room for outcomes.
To eliminate role confusion, try to:
- Use appraisals as a method to broadly tell them what they will be doing from here on out.
- Update job descriptions for changing roles in the company on an as-needed basis.
- Promote conversations if employees believe they don’t have alignment.
8. Tracking Employee Progress Over Time
Think of appraisals as a performance journal. They help track how an employee has developed over time, which is especially useful when making promotion decisions or evaluating someone’s fit for a new role.
With these objectives of performance appraisal, you can get a historical perspective of companies to base decisions on patterns rather than isolated incidents.
How to achieve this?
- Documenting appraisal results in a structured format.
- Using digital tools to visualise growth trends.
- Comparing past and current performance for a holistic view.
8 Common Types of Performance Appraisals
Now that we’ve covered the primary objectives of performance appraisal, it is time to look at how organisations performance appraisal. However, methods can differ greatly depending on the cultural context of the organisation, the nature of the job, and organisational goals. There is no universally accepted approach to performance evaluation, and that’s a good thing—organisations can select what works best for them.
Here are eight common types of performance appraisals and when each of them makes the most sense.
1. Self-Appraisal
Self-appraisal puts the responsibility of evaluation into the hands of the employee. Here, employees consider their performance reflectively, noting their achievements, acknowledging any barriers that existed, and recognising areas for growth. This process supports self-awareness and accountability, allowing the employee to better prepare for a discussion with their manager.
This is most useful for people in leadership, working from home, or part of self-managed teams—any situation where there is a lot of employee autonomy.
2. Peer Review
In a peer review environment, employees assess each other’s performance in a way that focuses more on separate performance aligned with collaborative teamwork, communication, and goals. Since employees who work closely together usually have more insight into each other’s daily work than upper management, they can provide more meaningful feedback.
Peer reviews work best when work is collaborative and requires teams to function together.
3. Management by Objectives (MBO)
Management by Objectives is a results-focused method where the employee and manager agree on specific, measurable goals at the beginning of the review cycle. The appraisal then evaluates how well those objectives were met. This method removes ambiguity and places emphasis on outcomes rather than behaviours.
MBO is great for roles with clearly measurable outputs—think sales, marketing, or operations. It gives employees a clear roadmap and a fair metric to be judged on.
4. Negotiated Appraisal
A less common but very useful method, negotiated appraisal involves a third-party mediator who facilitates the review conversation. This can be particularly effective when there’s conflict or a strained relationship between the employee and manager. The mediator ensures both sides are heard and the discussion remains productive.
It is best for the environments where tension or mistrust may exist, this method helps rebuild communication and mutual respect. It’s also a good option during major organisational changes or restructuring.
5. Assessment Centre Method
This approach involves having employees participate in simulated job scenarios, role-plays or case studies which replicate real-life situations. Multiple assessors observe and assess what the individual does in the simulations, and how they behave, and respond in terms of leadership and problem-solving activities.
This is a great way to assess leadership potential or exercise judgment in decisions on making promotions to management positions. It can also work in the hiring process for senior roles.
6. Customer or Client Reviews
In service-based roles, the most relevant feedback often comes from outside the company. Customer or client reviews offer direct insights into how an employee handles communication, problem-solving, and overall service quality. This method relies on collecting structured feedback from clients that the employee interacts with regularly.
Perfect for customer service agents, account managers, or any employee who has significant client-facing responsibilities.
7. Behaviourally Anchored Rating Scale (BARS)
The BARS method judges employees based on certain examples of behaviours associated with job performance. Rather than relying on overall impressions, managers use a defined scale to connect numerical ratings to direct examples of behaviour. The BARS method reduces bias and provides a more objective assessment.
The BARS method is most applicable to repetitive or monotonous jobs where consistency and accuracy are crucial – for example, manufacturing, technical support, or an administrative position.
8. Human Resource (Cost) Accounting
This is a more analytical approach, evaluating employees based on the financial value they bring to the company compared to what they cost to employ. It involves measuring productivity, efficiency, and profitability in monetary terms. While it’s not a traditional performance review, it provides valuable business insights.
This method is well-suited for finance-driven organisations or roles with clear ROI expectations, such as finance, consulting, or sales analytics.
Wrapping Up
Performance appraisals are so much more than filling out forms or having an uncomfortable meeting once a year. In fact, when done properly, performance appraisals are perhaps one of the most powerful tools in any organisation looking to drive growth, retain talent and create an open and honest culture to work within.
By exploring the major aim of performance appraisals and making the right choice from available performance appraisal methods, you can turn performance appraisals into a key resource when it comes to competing on more than simply price.
So whether you’re managing a small team or a department, get value from performance appraisals—and enjoy the rewards for yourself, your people, and your business. If you want to learn more about performance appraisal and how to be a great leader, explore online courses available at Jaro Education, India’s leading online higher education and upskilling company.
Frequently Asked Questions
Most organisations use a five-point rating scale to meet the objectives of performance appraisal:
- Outstanding / Exceeds Expectations
- Above Expectations / Very Good
- Meets Expectations / Good
- Needs Improvement / Developing
- Unsatisfactory / Does Not Meet Expectations
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