Formal performance appraisal plans are designed to meet three needs, one for the organisation and two for the individual.

i. PA provides systematic judgments to back up salary increases, promotions, transfer, demotions or terminations.

ii. It provides a means of telling a subordinate how he is doing and suggesting needed changes in his behaviour, attitudes, skills or job knowledge. They let him know where he stands with the boss.

iii. PA is also increasingly used as a base for coaching an d counseling of the individual by the superior.

Purpose

Performance Appraisal serves many purposes, but they can be sorted roughly into two categories- the administrative purpose and the informative purpose. Appraisals fill certain needs of the employer and certain needs of the employee; a company needs satisfied employees and employees needs a prosperous company, and therefore in satisfying the needs of one group, the performance appraisal is also satisfying the needs of the other.

Performance Appraisals are useful for management because they are the means of deciding who is to be promoted, who is to be transferred and who is to be terminated.

The informative purpose of a performance appraisal, is to let the employee know whether management thinks he is doing a good job or not, to let the employee know what the company expects from him and what he can expect from the company; to let him know what aspects of his work his superior feels needs improvement. It is also a way of letting him know that his work is appreciated. It is a way to help each employee perform his present job more efficiently and satisfyingly, and also a way to help each employee prepare for possible advancement and promotion.

Objectives:

Generally the organisations have identified the following objectives of appraisals:

• Promotions
• Transfers
• Terminations
• Redeployment
• Increments
• Special or merit increments
• Identifying employee strengths and weaknesses
• Counseling
• Coaching
• Promoting motivation and morale
• Keeping employee informed about how he/she is doing
• Providing a channel for open and free discussion of performance
• Removing discontent and dissatisfaction
• Training and Development
• Identifying individual needs of training and development
• Identifying special training needs
• Personal Research
• Spotting potential

New Objectives of Performance Appraisal

Designed properly performance appraisal system can serve what could be called as ‘development’ and ‘informative’ purpose discussed above. These are:

• PA can help each employee to understand more and more about his role and become clear about his functions.
• It can help each employee to understand his own strengths and weaknesses with respect t his role and functions in the organisation.
• It can help in identifying the developmental needs of each employee with respect to his role and functions.
• It can increase mutuality between each employee and his supervising officer so that every employee feels happy to work with his supervisor and thereby contributes to his maximum to the organisation.
• It can increase communication between the employees and his supervising officer so that employee gets to know the expectations of his boss and boss gets to know the difficulties of his subordinate and attempts to solve them; and thus they together accomplish the tasks.
• It can provide an opportunity for the employee for self-reflection and individual goal setting so that individual planned and monitored development takes place.
• It can help in preparing employee for performing higher level jobs by continuously reinforcing the development of behaviours and qualities required for higher level positions in the organisation.
• It can create positive and healthy climate in the organisation that drives people to give their best and enjoy doing so.

Objectives of Appraisal of a Company

British Airports Authority now (BAA) PIC in its booklet Appraising Performance ‘The BAA Appraisal System Explained’ has listed following objectives of an appraisal:

• To develop and improve the abilities of employees by providing them with formal feedback on job performance
• To assist in the achievement of the aims and objectives of BAA by ensuring that employees are aware of the changing priorities of their jobs.
• To enable managers and employees to take action to improve any elements of job performance recognised as weak by arranging e.g. training, additional experience, on-the-job coaching.
• To provide employees with an opportunity to seek advice on their careers
• To supply information for use in the placement and promotion of employees.