Performance Management and Performance Appraisal: Defining the Difference
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Performance Management and Performance Appraisal: Defining the Difference

Performance Management and Performance Appraisal: Defining the Difference

Most employees are familiar with the concept of an employee review and come to expect it on an annual or semi-annual basis. When you hear the term “performance appraisal”, you think reviews that help you manage employee performance and drive overall engagement, productivity, and business success.

But is performance appraisal synonymous with performance management? Or even performance success? Here’s how they relate – and what your business needs to know.

The difference between performance management and performance appraisal

What is performance management?

Performance management encompasses how an employee’s performance is managed, measured, and developed throughout the employee’s tenure with the organization. While an employee review or appraisal is often a part of the overall employee management process, one of the biggest differences lies in the word “developed”. Employee performance management is a comprehensive, proactive, and continuous approach to employee management. Because of this, successful performance management at the start of an employee’s time with the company, during onboarding and training and then throughout the entire employee lifecycle. It involves regular and consistent feedback between employees, employers, and colleagues. It helps to set expectations for employees early on and functions as a way to continue to guide and drive progress to enable individual success that can help to drive better organizational success.

Employee performance management usually includes:

  • Higher-level strategic business thinking
  • Dialog based
  • Future (rather than past) oriented for better business and employee growth
  • Less likely to involve ratings or ranks
  • A more collective process that involves both HR and management teams
  • Can use both quantitative and qualitative measures
  • Not likely to be linked to compensation
  • A more flexible, holistic process that is linked to business needs

What is performance appraisal?

Performance appraisal (or assessment or review) is one part of the performance management process. These appraisals are tangible evaluations that help employees understand if they’re meeting the standard of success for their position. It gives them feedback on the quality of their work, focusing on affirming successes as well as working through things that may need to be improved. This gives employers a more formal, organized way to engage with employees on their performance. These reviews are often linked with raises, bonuses, and other performance-related compensation.

Employee performance appraisals usually have the following things in common:

  • Evaluates operational performance criteria
  • Often an assessment conducted by manager or supervisor
  • Annual or semi-annual
  • Can involve a ratings or ranking system
  • Uses a quantitative approach
  • Based on an individual employee’s performance
  • Can involve a lot of paperwork or documentation
  • Can often affect compensation
  • Typically a process is overseen by HR

For the most successful appraisal (and more successful performance management), a performance appraisal should include the following:

  • Some businesses have their HR managers deliver performance reviews, while others have managers conduct them. Either way, nothing should be truly surprising to an employee, as in addition to a formal review, there should be regular, ongoing conversations about goals between employees and their supervisors.
  • Performance appraisals should be documented. This is one of the most important things that set them around. Documentation can not only provide a more organized process, it gives employers informative records, and also gives employees and managers a tangible product to reference for goals and look back at come next review. This documentation helps can be formal – such as a completed evaluation template – as well as informal, like notes from the meeting and conversation.

Why is the difference between performance management and performance appraisal important?

TalentManagement360 noted, “Another way to think of the difference between the two is that performance appraisal is about the past, meaning how the employee performed in the immediate past period being reviewed during the appraisal process. Performance management, meanwhile, is focused on the present and the future. In the present, you’re doing things in real-time to help make sure the employee’s performance reaches the desired level. With an eye on the future, you’re also planning what can be done to further develop that employee’s capabilities for periods to come.”

Employee performance is critical to your business success. Figuring out how to guide employees and enable their success is better for your business in the long run. Using the right performance reviews and appraisal methods is an essential part of your overall employee performance management.

One of the best ways to understand and enhance your overall employee performance management is through an automated HR tool that has performance management and appraisal built in to help your HR leaders. Working automation into your employee performance process can help you stay proactive and have a more comprehensive performance management ideology and a more regular, consistent employee performance schedule. Ultimately, your biggest employee performance success will be driven by a good understanding of the difference between performance management and performance appraisal and how businesses can successfully combine their operational reviews into their more strategic management process.

Marianne Chrisos
Marianne Chrisos
Born in Salem, Massachusetts, growing up outside of Chicago, Illinois, and currently living near Dallas, Texas, Marianne is a content writer at a company near Dallas and contributing writer around the internet. She earned her master's degree in Writing and Publishing from DePaul University in Chicago and has worked in publishing, advertising, digital marketing, and content strategy.
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