People often confuse the terms ‘performance management’ and ‘performance appraisal’. The confusion is mainly caused by the fact that both concepts relate to employee performance. Whether they need to describe the term during onboarding or training sessions, they face challenges. Let’s explore both terms and understand the difference between performance management and performance appraisals.
What is Performance Management?
Performance management is a comprehensive set of processes that involve an organization’s (including employers and employees) activities aligned with product success. The process ensures employees’ contribution to company productivity and business growth. Yet, it plays a pivotal role in employee development, with career aspects such as employee bonuses, promotions, and quarterly or yearly appraisals closely tied to it. The company arranges different performance management system and related tools to track employees’ everyday performance in detail.
What is Performance Appraisal?
Performance appraisal is a systematic process that documents and evaluates the employee’s performance against the ultimate expectation of their role at certain intervals, such as monthly, quarterly, half-yearly, or yearly. Fundamentally, the performance appraisal process is a valuable tool that allows employers to assess employees’ skills, capabilities, and achievements, enabling them to make crucial decisions like bonuses, increments, etc.
Often, it is also called performance evaluation processes or performance reviews. Starting from start-ups to big MNCs follows the processing during the employee increment sessions.
Performance Management vs Performance Appraisal
Let’s dive deep into the difference between performance management and performance appraisals so you can clarify both terms properly.
| Aspect |
Performance Management |
Performance Appraisal |
| Definition |
Performance management is a process that sets objectives, assesses progress, understands feedback, and provides guidance to achieve the organizational goal. |
Performance appraisal is periodic monetary enhancement after reviewing employees’ job performance. It is typically conducted annually or biannually to assess achievements, strengths, areas for improvement, and future goals. |
|
Focus |
Performance Management mainly focuses on long-term development. It aims to enhance employees’ knowledge and performance while maintaining organizational goals and objectives. |
During performance appraisals, employers plan for a few assessments and analyze whether the candidate is suitable for the reward. |
|
Nature |
Performance management is an ongoing and continuous process, continuing throughout the year. |
Performance appraisals occur periodically, usually yearly or half-yearly and often monthly, depending on the employee’s work.
|
|
Purpose |
Performance management systems can improve overall organizational performance through individual development and alignment with strategic goals. |
Performance appraisals Evaluate individual performance for administrative and decision-making purposes (e.g. compensation, promotions). |
|
Feedback |
In the case of performance management, regular, ongoing feedback is provided to employees to address issues promptly and support their self-development and product improvement. |
In performance appraisals, employee feedback is delivered only during the appraisal time, half-yearly, monthly or mostly yearly. |
|
Goal Setting |
Performance management ensures a collaborative process that involves managers and employees setting smart goals aligned with organizational objectives. |
In the performance appraisal, productivity goals are barely reviewed throughout the year. The main goal is to improve employee performance by praising them with specific increments. |
|
Performance Discussions |
During employee performance management, managers and employees held regular meetings. These meetings discussed task progress, generated feedback, adjusted goals, etc. |
During Performance appraisals, before reviewing employee performance and processing increases, employers arrange a formal meeting to discuss past performance, strengths, and weaknesses and set future goals. |
|
Employee Engagement |
A performance management system encourages employees to actively participate in setting company goals, receiving feedback, and driving personal development. |
Performance appraisals involve employee’s self-assessment and reflection on their achievement and understanding of the areas needing improvement. |
|
Outcome |
A performance management system mainly improves the employees’ individual and organizational performance and enhances employee engagement to align with the organization’s strategic goal. |
An employee performance appraisal is a comprehensive tool for recording an employee’s performance, tracking their presence, and significantly influencing decisions on compensation, promotions, and identification of training or development needs. |
Importance of performance management in the workplace
Analyzing employee performance and taking the lead can be an excellent way to maintain enhanced productivity. The company often integrates performance tracking tools and other HRMS software to acquire the final output.
Here is a detailed overview of the importance of selecting the right performance management system at the workplace and streamlining the path of employee appraisals and company productivity simultaneously.
- Understanding Goals
- Feedback and Improvement
- Enhanced Transparency
- Motivation and Engagement
- Succession Planning
- Decision Making
1. Understanding Goals
The performance management process is crucial to enhancing productivity by assisting employers in identifying the company goal more prominently. It often needs clarification when considering how to segregate the tasks and responsibilities to achieve the final target, instilling optimism about the system’s potential benefits.
Performance management introduces a collaborative environment, managing individuals or teams in alignment with the organization’s objectives. It focuses on input efforts towards successful outcomes and strengthens the feeling of being part of a team.
2. Feedback and Improvement
A performance management process helps employers initiate the feedback mechanism for enhanced employee performance and overall improvement of company productivity. By understanding employee performance during a predefined timeline, the system assists employers in identifying what strategies are working well and what isn’t. It also involves them in initiating proper employee feedback accordingly.
Positive feedback makes the employees feel comfortable and valued, allowing them to express their opinions, which leads to better decision-making and further productivity.
3. Enhanced Transparency
The performance management process enhances transparency and introduces clarity within the workplace. A straightforward strategy, in-detailed training practices, on-time genuine feedback, and authentic rewards encourage employees to perform a bit extra to achieve the business targets. Also, a transparent work culture creates a balanced relationship with a management team, leading to employee retention and productivity.
4. Motivation and Engagement
The performance management process not only motivates employees and employers to achieve their targets but also emphasizes the crucial role of the HR and management team in maintaining top talent. From strategic task planning and distribution to successful task execution, employees feel valued and encouraged, actively contributing to business success. This process allows the HR and management team to play a pivotal role in talent retention, enabling them to focus on enhancing business productivity.
5. Succession Planning
Succession planning is a strategy that ensures an appropriate employee performance evaluation, analyzing their skill and growth for ultimate growth and productivity. Performance management is essential in succession planning; establishing clear metrics to identify high-potential employees within a workplace process creates a pipeline of capable candidates ready to step into critical roles.
It also provides high-end development opportunities that are meticulously aligned with an individual’s career and organizational needs, reassuring the audience about the effectiveness of the process.
6. Decision Making
The performance management process and associated performance matrices assist employers in gaining insight into the process’s efficiency, the productivity of teams and individuals, and the alignment of activities with strategic goals. The process ensures transparency in informed decisions about promotions, training and development initiatives, etc.
The added insights are also crucial in aligning activities with strategic goals, fostering a sense of focus and alignment among employers, HR professionals, and business leaders.
Furthermore, performance management plays a crucial role in proactive risk management. It highlights potential vulnerabilities or underperforming areas that require attention, providing reassurance and confidence in the operations.
Objectives of Performance Management
The performance management process has five steps. Every step is essential, regardless of how often you plan the employee performance management process.
➔ Planning
First, employers set a business goal and initiate communication with the employees to disclose their job description and work target. This first step also includes the new hire’s training and development program.
➔ Monitoring
Once the plan is in motion and tasks are assigned, the managers and team leaders provide support and guidance. They monitor the progress, ensuring any misunderstandings or mismanagement are swiftly addressed within the estimated timeline.
We also leverage performance management software and time-tracking tools to track employee performance and work hours, further ensuring on-time target achievement.
➔ Developing
In this phase, employers collect all the data obtained from the previous phase and analyse them in detail. If any remissness or mistakes appear, they suggest refresher courses or assign assignments, helping them improve their knowledge and performance for better productivity.
➔ Rating
Understanding an employee’s performance, whether good or bad, depends on this phase called ‘Rating’. In this phase, employers rate the employees’ performance using 360 feedback, PMS integration, etc. In the final analysis, well-performed employees are paid well during appraisals.
➔ Rewarding
With the assistance of the performance analysis tools, employees are rewarded or get a verbal or written warning to improve their performance. A full-scale employee reward program helps employees and employers recognize and reward excellent organizational performance.
Importance of performance appraisals in the workplace
Satisfying performance appraisals makes the employees feel valued and excited about their jobs. They feel enthusiastic and ready to input efforts for the ultimate business output.
Here are the top 6 points that describe the importance of performance appraisals.
- Improved Career Growth
- Enhanced Performance
- Employee Engagement
- Training and Development
- Fulfilled Expectation
- Refocused in Work
1. Improved Career Growth
An unbiased performance appraisal of objectives, such as employee hard work, skill, and capabilities, makes employees feel valued and satisfied. It boosts employee motivation and engagement and encourages them to take ownership of their professional growth. This appreciating career loop aids employee development and serves as a satisfactory initiation of setting clear career goals aligned with the organizational core objective.
2. Enhanced Performance
Once an employee gets promoted and appreciated by his employers, he puts in more effort. A sound appraisal amount makes them feel valued and energizes them to work more in the following quarters. It helps the employees enhance their job performance to a certain extent and prepare them to take senior roles within the organization. Consecutive employee appraisals create a culture of growth and development within the work culture.
3. Employee Engagement
Employees receive appraisals for their hard work at a specific interval and feel valued and satisfied during their working tenure. These monetary or non-monetary appraisals play a crucial role in keeping employees engaged and motivated. A thoughtful vacation trip or luxury launch can boost them to keep up their hard work. Employee engagement has improved in the workplace.
4. Training and Development
Technology improves every day. Employees must always follow the latest trends to maintain a global market balance; they would love to be trained in new expertise. As a type of appraisal, if the company arranges a specific training structure with associated training management tools and customizable training facilities, it will be an outstanding opportunity for the employees as they can get acquainted with the tech trends and upcoming modern expertise. They will feel satisfied and retained within the company for an extended period.
5. Fulfilled Expectation
When employees work hard for organizational success, their expectations from the companies increase. They anticipate successful outcomes. A complete appraisal process within a specific duration helps the employee feel valued and satisfied. It meets the employee’s expectations. As a result, they work harder and stay with the company longer.
6. Refocused in Work
Employees become stressed and depressed while completing their daily target achievement and working on exemplary product output. Monotonous job schedules make them feel bored. A seasonal appraisal helps employees understand the impact of their work and refocus their work output, as they feel valued and appreciated. By commencing appraisals, managers can get a chance to reiterate the company vision.
Objectives of Performance Appraisals
- Identifying Mistakes
- Promotions Opportunities
- Goal Setup
- Boost Confidence
- Record Overall Progress
➔ Identifying Mistakes
Anyone can make mistakes, whether employees or employers. If employers and employees work together to achieve common goals, they can easily prevent common errors from reoccurring. Employees also feel valued throughout their entire work tenure.
Through the process of employee appraisals, employers can identify mistakes, provide detailed sessions related to issues the employees face during their work tenure, and reward them for their hard work.
➔ Promotions Opportunities
During the performance appraisal process, employers analyse employee performance throughout the entire period and prepare documentation of which employees receive the promotion based on their performance and whose performance needs further improvement. Hence, employees who work harder receive opportunities to be promoted and get more advanced roles in the office.
➔ Goal Setup
Performance management is a long-term process; setting proper goals and tracking them accurately to ensure the organization’s success is often challenging. However, working uniformly by maintaining a balanced employer-employee relationship can smoothen the entire process.
Here, employers can encourage employees to choose goals based on their past performance or the needs of the business or commence the appraisal technique, such as monetary benefits, promotions, etc., to streamline it better.
➔ Boost Confidence
Evaluating performance and introducing employee performance appraisals often help boost employee confidence. Continuous hard work for a better product outcome becomes monotonous for employees if they are not compensated adequately. Employee appraisals ensure employees are recognized for their excellent work, boosting their confidence and setting the stage for future years of hard work and success.
➔ Record Overall Progress
Performance tracking and evaluating employee task progress can be daunting. However, the employee appraisal method is an effective way to assess performance and generate insightful reports.
More importantly, the process helps employers recognize employees’ constant struggles and provide them with the necessary support.
Conclusion
Every organization has its unique technique of managing employee performance and appraising them with a considerable salary increase. Performance management primarily sets a business goal, drafts strategies for objectives, processes them to achieve the goals and drafts continuous feedback mechanisms. On the other hand, performance appraisal is a part of the performance management system where organizations only focus on employee performance for a specific time and reward them with appraisals. The difference between performance management and performance appraisal provides you a clear image for understanding which type of approach
FAQs on Performance Management vs Performance Appraisal
1. Are performance management and performance appraisal the same thing?
No, it is not the same thing. Performance management practically oversees and evaluates the employees’ performance, generates reports, and ensures that the employees accomplish the goals, vision, and mission. Then, it follows employee increments.
Employers might not visit in depth during performance appraisals, such as performance management. They evaluate employee performance and generate reports and further appraisals based on the current performance scenarios.
2. How often should performance appraisals be conducted?
There is no specific legal time for organizing appraisals. Most organizations arrange them yearly or twice yearly to reward employees for their hard work.
In some specific departments like sales and marketing, employees get the appraisals within 2 to 3 months.
3. What are the five stages of performance management?
The five stages of performance management are Goal Setting, Planning, Monitoring, Developing, and Reviewing.
4. Is performance appraisal part of performance management?
Yes, performance appraisal is part of performance management. Performance management is a complete process that involves identifying product goals, strategising to achieve them with employees, tracking employee performance, achieving targets, rewarding them, and more. Performance appraisal is one phase included in the entire performance management process, where employers reward them with a monetary surplus or offer them travel packages or holidays.
