Understanding Performance Appraisal

Human resources are a relevant productive factor within any organization, whether public or private (Boudreau and Ramstad 2007). That is why the improvement of employee's performance is a crucial issue in management science. Performance appraisal (PA), the formal management system that provides for the evaluation of the quality of an individual's performance in an organization, is a fundamental step along this path. In concrete terms, PA is the process by which an observer, often a supervisor, assesses an employee's work performance (DeNisi et al. 1984), comparing current performance with explicit or implicit standards, and then providing feedback. PA is a key tool used in public or private companies to measure employee performance and ensure proper and efficient personnel management. The first experiences of performance appraisal are very old and can be traced back to the Chinese Han dynasty (206 BCE-AD 220), where PA was used to determine public officials' careers. However, its institutionalization in modern times is linked to the industrial revolution. The first large-scale use of PA took place in Scottish cotton mills to measure organizational efficiency. Nowadays, PA is widespread in companies and public administrations and is often part of broader performance management systems (PMS). PMS is the set of activities, approaches, and tools that enable organizations to achieve their goals efficiently and on time by aligning resources and measuring performance (Harris et al. 2003). The complete understanding of an appraisal performance system goes through the illustration of its purposes, methods, process, and actors.