Appraising the performance of individuals, groups and organizations is a common practice of all societies. While in some instances the appraisal processes are structured and formally sanctioned, in other instances they are an informal and integral part of daily activities. Thus teachers evaluate the performance of students, bankers evaluate the problem of creditors, and all of us, consciously or unconsciously, evaluate our own actions from time to time.

Performance appraisal is a method of evaluating the behavior of employees in the workplace, normally including both the quantitative and qualitative aspects of job performance. Performance here refers to the degree of accomplishment of the tasks that make up an individuals job. It indicates how well an individual is fulfilling the job demands. Often the term is confused with effort. No: performance is always measured in terms of results.

A student, for example, may exert a great deal of effort while preparing for the examination but may manage to get a poor grade. In this case the effort expended is high but performance is low. In order to find out whether an employee is worthy of continued employment or not, and if so, whether he should receive a bonus, a pay raise or a promotion, his performance needs to be evaluated from time to time.

When properly conducted, performance appraisals not only let the employee know how well he is performing, but should also influence the employees future level of effort, activities, results and task direction. Performance appraisal is the systematic description of an employee's job-relevant strengths and weaknesses. The basic purpose is to find out how well the employee is performing the job and establish a plan of improvement. Appraisal process is always systematic in the sense that it tries to evaluate performances in the same manner using the same approach. Appraisals are arranged periodically according to a definite plan. Performance appraisal is not job evaluation. Performance appraisal refers to how well someone is doing the assigned job. Job evaluation determines how much a job is worth to the organization and therefore what range of pay should be assigned to the job.