:)Feedback Mechanism: Performance evaluation is the central mechanism that not only provides feedback to individuals but also aids in the assessment of the progress of organization as a whole. Without appraisals managers of any firm can only guess as to whether or not employees are working towards realization of the organization goals.


Consistency between strategy and job behavior: Performance appraisal not only is a means of knowing if the employee behavior is consistent with the overall strategies focus but also a way of bringing to the fore any negative consequence of the strategy – behavior fit. Thus the performance appraisal system is an important mechanism to elicit feedback on the consistency of the strategy – behavior link.

Consistency between Values and Job Behavior link: Performance evaluation is a mechanism to reinforce values and culture of the organization. Another importance is to align appraisal with organizational culture.


Thus the purpose of performance evaluation is to make sure that employee’s goals, employees behavior and feedback of information about performance are all linked to the corporate strategy.


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Essentials of a Good Performance Appraisal System:

1. Standardized Performance Appraisal System

2. Uniformity of appraisals

3. Defined performance standards

4. Trained Raters

5. Use of relevant rating tools or methods

6. Should be based on job analysis

7. Use of objectively verifiable data

8. Avoid rating problems like halo effect, central tendency, leniency, severity etc.

9. Consistent Documentations maintained

10. No room for discrimination based on cast, creed, race, religion, region etc.


Problems of Rating:

1. Leniency & Severity

2. Central Tendency

3. Halo Error

4. Rater Effect

5. Primacy & Recency Effect

6. Perceptual Sets

7. Performance Dimensions Order

8. Spillover Effects

9. Status Effect