Performance management and performance appraisals are often confused. These two concepts have many elements in common, but an understanding of the comparisons and dissimilarities is vital for improving performance. The main distinction between the two is that the performance appraisal is a tool, while performance management is a process. While the performance appraisal is a useful tool, it is essential to remember that it is most effective when used within an overall performance management process.
Human beings have judged the work of others for as long as we have performed work for one another. However, the performance appraisal is a relatively new concept, evolving around the time of World War II. Historically, the performance appraisal was used to justify compensation levels for workers. Over the next several decades, the performance appraisal evolved from a tool commonly used only to reward or punish workers for current performance. It was not until the 1950s that managers and management theorists began to recognise the usefulness of the performance appraisal as a tool used within the overall performance management process.
The performance appraisal is a performance measurement tool that measures individual employee performance in a variety of activities. The performance appraisal may measure such aspects of performance as units produced and quality of an individual's overall work. Performance appraisals are also commonly used to document performance issues, including excessive absenteeism or the inability of an individual employee to adhere to policies and procedures. This type of documentation may be used to justify disciplinary action and eventual discharge of problem employees. Additionally, individual employee pay rates and bonuses are commonly tied to performance appraisal scores.
Performance management may be used on an individual, department or organisation-wide basis. The main goal of performance management is to improve performance. According to the U.S. Office of Personnel Management, performance management consists of several elements, including performance measurement. Performance management begins with the planning of work, followed by monitoring performance and developing employees to ensure they maintain the abilities needed to perform at desired levels. Finally, a performance appraisal or similar rating system is used to rate employee performance and justify rewards for those who meet or exceed expectations.
Performance measurement is essential to the overall performance management process. It would be virtually impossible to improve performance without the use of effective measures for identifying performance gaps. Measurement tools like the performance appraisal are vital benchmarking tools that help managers and workers identify potential barriers to success. The performance management process provides a framework for identifying and removing performance barriers, as well as planning for the development of employees in order to maintain the skills necessary for the organisation to compete long-term.