Online HR Toolkit
Get full access to 1000+ up-to-date HR guides, 24/7 Legal Helpline*, document templates, policies and guidance for you or your HR team
The Importance of Performance Appraisals
Performance appraisals are integral to the success of any organisation, as they provide employees with feedback and guidance on their performance and align to the needs of the team/organisation in which that person works. They also allow employers to recognise top performers and understand where areas for improvement lie to create a more productive team.
An effective performance management process and appraisals can have a significant impact on a company’s productivity and profitability, as well as its culture, values, and morale – all of which enhance your brand and support the retention of talent within your business.
However, a recent survey from the Society for Human Resource Management found that 72% of businesses conduct appraisals only once a year, and only 2% of employees gave their employers an A grade for their performance management!
These figures suggest that your employees want to be valued and that you, as employers, recognise their good work. An appraisal is an opportunity to give your employees honest and open feedback, and it is the best time to praise and recognise their good work. Your best talent wants to know how happy you are with their achievements, so this will spur them on to continue to work smarter and with even better results. They also value your input on what key areas they should be strengthening and any training and development they may need to become even more productive.
What is an appraisal at work?
An appraisal at work is a key human resource management tool, which supports in aligning the targets/objectives of your employee to your organisation’s aspirations. To ensure all employees are working towards the same overall goal and for the benefit of the success of the organisation, you should have them in place.
An appraisal allows you as a line manager to give feedback on an individual’s performance in a structured and consistent way. It’s an opportunity to celebrate success, plan for succession and also identify and set required improvements to keep up employee motivation and engagement.
An appraisal will consist of goals, targets and potential improvements to be made. This should be a consistent tool in the management of performance and should be regularly reviewed to ensure they continue to be aligned with the team/organisation’s goals.
Some organisations align their appraisal process to momentary benefits such as rewards and pay increments; however, this is not essential, and if it’s managed properly, you can still maintain motivation and job satisfaction without.
How to conduct a performance appraisal
For any performance management to be effective and productive, employers and managers need to feel effectively equipped to provide regular feedback and ongoing performance management. This is a skill in itself and doesn’t always come naturally to all managers.
Therefore, training and development in this area to build the capability of the management team will help to create the trust and respect needed to build open and transparent relationships, and developing skills such as active listening, performance assessment and goal setting will help you to ensure your business can benefit from a well-delivered and maintained appraisal system and performance management programme.
Performance appraisals practicalities:
When conducting a performance appraisal, both you and the employee need to know what you are measuring their success against, such as KPI’s, objectives, customer feedback, etc.
To undertake meaningful performance reviews, you may need to obtain feedback from others as well as from your observations such as from other team members, managers or customers on the individual’s job performance.
If there are any areas of improvement, you need to know what you expect the employee to achieve, by when and what support will be offered to them.
Employee performance needs to be monitored and fed back frequently in order to be meaningful and successful, and it will also allow ease if you need to take a more formal approach if improvement to performance is required. It may be worth implementing a performance management system, to ensure all teams are managing performance appraisals in a consistent way.
Remember to celebrate successes and don’t shy away from difficult conversations; they may be uncomfortable to have but can cause you a lot more stress if you do not address the issues early on.
Employee training and development
An appraisal is the ideal setting to discuss any training or development needs with your employees. You can identify any gaps in knowledge and explore positive solutions. Additional training and support could be provided to enable your employees to achieve results that they can feel proud of. High-performing employees can be supported with further training to help them to progress to the next level.
Goal Setting
The most productive employees are those who are driven to achieve goals. Setting SMART targets (specific, measurable, attainable, relevant, time-based) helps to motivate employees. Use this time to talk to your employee about their goals and targets, and agree on them with your employee, so that they feel empowered and motivated to deliver.
“Helpful MAD-HR leadership and management training”
“Sophie’s training was very helpful looking at things from different angles. It was useful seeing people from another perspective. ”
Building rapport & employee engagement
It is important for overall productivity, as well as the organisation’s culture, that managers have good relationships with their team. An appraisal, using two-way dialogue with employees, helps to facilitate good relationships between manager and employee. One of the key enablers for achieving great employee engagement is to ensure that your employees have a voice; an appraisal can help provide a platform for discussions and empower employees to share their opinions.
Resolving concerns & grievances
Issues, grievances and complaints can usually be nipped in the bud before they escalate if they can be raised in appraisals. It would be better still for regular 1-2-1s to be held with employees as part of an overall performance management programme, enabling such issues to be picked up and dealt with at the time, rather than being stored up for the annual appraisal.
Nevertheless, in the absence of such regular meetings, appraisals may be used as a platform to voice such concerns. If this is the case, taking the time to listen to your employees and address any concerns helps to create a happier working environment and will continue to fuel a culture of openness and trust.
Check out our blog about how to manage employee grievances.
Uncover valuable insights to optimise business performance
As a busy manager, you can sometimes adopt a helicopter view of ongoing projects. Appraisals are a good opportunity to step away from the busy everyday hustle and bustle of work and reflect on the direction you want your team to be heading in.
Businesses can benefit from a well delivered and maintained appraisal system and performance management programme.
If you need help with performance management, appraisals or building the capability of your management team to deliver effective processes, then please do call a member of the MAD-HR team, who will be only too happy to help.
Encouraging a harmonious workplace culture
Companies with great workplace cultures are those where employees feel a real sense of belonging. They know your brand and understand what the business is trying to achieve; they are inspired by your values and mission. The discussions that take place during an appraisal meeting will help your employees to understand how individual objectives set for them will play a part in the wider business plan.
Frequently Asked Questions
Useful questions and answers about “The Importance of Performance Appraisals”
Why are performance appraisals important?
Appraisals give employees structured feedback and recognition while helping managers align individual goals with business objectives. They highlight strengths, identify areas for development, and open up conversations about training, progression, and wellbeing. When done well, they build engagement and trust, reduce staff turnover, and improve overall productivity.
How often should appraisals take place?
Many organisations still carry out appraisals only once a year, but research shows this is not enough to keep employees motivated and on track. Annual reviews should be supported by regular one-to-ones or quarterly check-ins. This ensures feedback is timely, prevents small issues from escalating, and helps employees feel valued throughout the year.
Do appraisals need to be linked to pay?
Not necessarily. While some employers tie appraisals to pay rises or bonuses, the real value lies in communication and development. An honest appraisal process can maintain motivation even without financial incentives, as long as achievements are recognised, goals are set, and managers show genuine interest in employee growth.
What should managers include in an appraisal?
A good appraisal goes beyond ticking boxes. Managers should prepare with clear examples of performance, celebrate successes, and address areas needing improvement. Using SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound) gives employees clarity and direction. Just as importantly, managers should listen — appraisals work best as two-way conversations.
This article is intended for general information purposes only and does not constitute legal or professional advice. It should not be relied upon as a substitute for advice tailored to your individual circumstances. Please be aware that the law may have changed since the article was published.
Articles may include links to external websites. We have no control over the content, availability or accuracy of these sites, and their inclusion does not imply endorsement or approval of the information or views expressed.
Book a Free HR Consultation
If you need access to commercial and friendly experts to chat through any HR concerns or challenges your business is facing, you have come to the right place!
