Performance Management vs Performance Appraisal: The Difference

For any organization irrespective of its size, it’s very important to keep a track of the performance of its employees along with its own. Performance management and performance appraisal are two very important factors in defining the success chart of any company.

But what are they? What do they stand for? How do they differ from each other? We will try to answer all these questions by the end of this blog to provide more clarity about the two terms.

Let’s start with the basic definitions first. 

Performance Management

Performance management is defined as a process that is continuous and focuses on various aspects such as planning, monitoring, and evaluating employee objectives.

It also analyses the overall contribution of an employee to the organization and it is meant to boost employees’ efficiency and effectiveness. Both employees and managers are actively involved in performance management.

They set the objectives, assess the performance or progress, provide training and regular feedback to the employees so that they can improve.

Apart from these, performance management enables the organization to implement development programs such as awards or recognition, made for the employees.

Performance management offers the employees and employers a chance to set combined goals and achieve them together. These goals eventually relate to the ultimate mission of the organization’s growth by analyzing the employees’ performance and taking it into account for consideration.

A good performance management system helps to serve the objective of both the parties i.e. by helping the company and the employees grow and develop sustainably. 

Performance Appraisal

The assessment of the employees in which the manager evaluates their performance and the overall contribution made by them to the organization is known as performance appraisal.

It’s a schematic and systematic process that follows a logical approach to review the employees and it’s generally conducted once in a year by the organization.

Performance appraisal enables an organization to evaluate the skills and true potential of the employees to increase their productivity. Performance appraisal also helps to identify the employees that are doing justice to their job and the ones who are not up to the mark along with the valid reasons for the same. 

An evaluation using performance appraisal helps the organization compare the employees’ actual performance with pre-set standards. The outcomes of performance appraisal can be documented based on which feedback can be provided to the employees. It helps them understand their performance and where they need to improve. 

After a particular period of time, employees also get curious about their position in the organization. Hence, performance appraisal is an ideal way to serve this purpose.

Difference Between Performance Appraisal and Performance Management

Some of the major differences between performance management and performance appraisal are:

• Performance Appraisal refers to an organized way using which one can evaluate the performance and true potential of the employees for the future growth and development of the company. While on the other hand, performance management is the complete process of managing the HR department of any organization.
• Unlike performance management, performance appraisal is a system and not a process. 
• Performance Appraisal is pretty rigid and inflexible, but performance management has a lot of flexibility. 
• Performance Appraisal is an operational tool that helps improve the work efficiency of the employees while performance management is used as a strategic tool.
• Performance Appraisal is generally conducted by the human resource department of the company, whereas managers take care of performance management.
• In performance appraisal, corrections are made retrospectively in contrast to performance management which follows a forward-looking approach.
• Performance Appraisal finds its base on an individualistic approach which is completely opposite to Performance Management.
• Performance Management is a continuous and ongoing process while performance appraisal is not. 
• The process of the Performance Appraisal is more structured and formal but it still allows customization of the key performance areas which vary from employee to employee. Performance management is less structured as compared to performance appraisal. 

Endnote

Besides the differences, there are some similarities between performance management and performance appraisal. These similarities exist in terms of execution.

It includes setting the targets and clear expectations, guidelines about measuring success, reviewing whether targets were achieved or not, identifying barriers towards effective performance and new ways to help employees meet these targets.

An ideal choice would be a performance management software meeting all your needs.

Start-ups and small companies might be able to pay their employees manually as the number of employees are too small, but it surely isn’t a good idea for bigger organizations that have hundreds and thousands of employees working for them. And this is why a performance management tool is required.