Employee performance has developed as a significant issue in present competitive organizational environment. Organizations need to be constantly evaluating their Human Resource strategies for meeting the challenges and grating opportunities to remain competitive and sustained growth. Primarily, the human resource management function is designed to take advantage of the performance of the employee. Employee performance appraisal is a vital instrument for career progression of an employee and manager. Mullins (1992) states the primary goal of performance appraisal is improving the performance of employees, consequently, directing towards performance improvement of the whole organization. Performance appraisals are important for the employee succession and career planning. Performance assessment is aimed for the workforce inspiration, position improvement along with the development of positive association between the supervisor and employees (Panagar, 2009).
Performance appraisal is an official interaction involving a superior and employee, in the form of a discussion to examine the job performance of a subordinate for recognizing the strength and weakness and the opportunities for improvement in the performance for improvement of skills. Armstrong, (2001) was of the opinion that employee performance is related to their behavior. Mooney (2009) explained that it set the means for the individuals and the teams in the organization get the work done. Further, Dessler (2005) defined performance appraisal as comparison of the performance standards with the employee’s past and present performance. Performance review help most of the organization in taking important decisions associated to employee training and development, compensation, transfers, advancement, reductions or termination of the employees. Generally, the performance review process focuses on setting of well-defined and explicit performance expectancy for all the employees and delivering regular feedback on the performance related to the employee’s specific goals. Performance appraisal has become an important means for raising employee’s job satisfaction as well as in their retention in the existing competitive environment. Performance appraisal system helps management in evaluation of employee talent for achieving better performance.
The practice of performance appraisal was initiated in the 1940s and first-time merit rating was used in World War II as a method of justification of employee wages (Lillian & Sitati, 2011). Performance maximizing of the organization is the primary concern of any organization (Bob Cardy, 1997). The performance appraisal of an employee is affected by managerial standards, skill and knowledge and commitment. There are a number of service organizations including public and private use performance appraisal system for increasing their employee’s performance. Performance appraisal has increased importance as it leads towards achieving organizational performance, thus, managing the work of an employee effectively.