The work performed by the different employees differ in many aspects due to the difference in their backgrounds, experiences, knowledge, skills, abilities and aptitudes. Such differences determine the need of training and development activities. So, it is necessary for management to identify such differences so that employees having better job performance ability, skills and knowledge can be rewarded in one hand, and the wrong placements of the employees may be checked through transfer or punishments on other hand. In this regard, performance appraisal provides a measure in order to know the level of performance so that the employee may improve his/her performance.
Performance appraisal is a process of identifying, measuring and managing employee's performance in order to enhance organizational efficiency and effectiveness. It is a merit rating that denotes the appraisal of the performance of the employees in an organization. Performance appraisal systematically evaluates the personality and performance of each employee so that the productivity can be measured in terms of efficiency and effectiveness. The primary purpose of performance appraisal is to facilitate the orderly determination of an employee's worth in comparison to his/her fellow employees and expected level of performance. It provides information relating to various aspects of an individual upon which promotion, transfer and salary decisions can be made. It also provides an opportunity to review employee's work related behavior.
More precisely, performance appraisal can be defined as a systematic evaluation of an employee's current, or past performance as well as future potentials by supervisors or those familiar with his/her performance. It defines an employee's job related behaviors and outcomes which help reward, motivate, and empower employees at work. It also helps to identify future potentialities of an individual.