Performance Management and Performance Appraisal are the tools that aren’t yet pursued by many business organizations because of which these two terms are frequently used interchangeably but of course, this is incorrect. Performance Management and Performance Appraisal are significantly distinct from each other. Let’s understand them in detail and see how Performance Management is different from Performance Appraisal:- 

What is Performance Management?

Performance management is concerned with the evaluation of employee performance and provides constructive criticism to encourage and support employees. The process of Performance Management is continuous and it looks at the present and the future of an employee’s organizational position and performance. Business Performance Management is very important as it is undertaken to benefit employees and provide them better ways to fulfill their tasks effectively as well as efficiently which will ultimately result in increased productivity of the organization. Performance management incorporates all the activities which enable an organization’s workforce to perform to the best of its abilities.

What is a Performance Appraisal?

Performance Appraisal System is a part of the Performance Management process. It refers to the system that is meant for evaluating employees’ past work and achievements to rate their performance in quantitative terms, because of which it is also known as Performance Evaluation. Performance Appraisals aim at giving employees a score based on how well they performed in the past year. It plays a major role in determining employees’ compensation, whether they are eligible for a promotion or whether they should be employed in the company any more. 

Difference between Performance Management and Performance Appraisal System

Listed below are the parameters based on which Performance Management and Performance Appraisal are differentiated:

Nature

Performance Management is a process. It makes a difference in the way how employees perform their daily tasks. It is concerned with the relationship between an organization and its employees. It is supple and dynamic and involves a lot of dialog between employees and higher-level managers.

Performance Appraisal is a system. It depends upon the past performances of employees. It is rigid and quite a liner in the terms of communication as it flows from top to bottom towards employee performance. It doesn’t interfere with the employee’s daily work being a distinct staff activity. 

Primary objective

The primary objective of Performance Management is to genuinely help employees in their personal development and increase their productivity. It aims to foster growth within an organization.

Performance Appraisal is primarily done for evaluating the actual performance of employees. With this function, an organization goes through its employee’s performance for the year and gives the final feedback accordingly. It aims at identifying employee potential and facilitates in determining compensation.

Approach and Frequency

Performance Management has a holistic approach that focuses on both quantitative and qualitative aspects. It is an ongoing process as it gives real-time instant performance reviews.  

Performance Appraisal has an individualistic approach that focuses on quantitative aspects and assesses employee performance once or twice a year. 

Scope

Performance Management is a strategic tool. It keeps an eye on employees’ performance while focusing on the present and future of the organization as they are the strengthening pillars of all the functions and work done over there. Corrections made by the Performance Management Process are prospective. 

Performance Appraisal is an operational tool. It evaluates employees’ performance based on how they have performed in the immediate past. Corrections made by the Performance Appraisal System are retrospective.

Participation

Performance management involves employees and their respective managers. Sometimes other stakeholders, who can positively impact an employee’s performance, also play an important role.

Performance appraisal is conducted by the HR department of the organization in collaboration with direct managers of employees. Certain parameters play an important role in it like employee designation, job description, experience, etc. 

Conclusion

Having a good understanding of Performance Management and Performance Appraisal is of utmost importance these days as the pace with business firms are expanding, it is getting difficult for businesses to manage their employees. Hence a better understanding of how Performance Management and Performance Appraisal are different from each other solves a lot of problems to ensure your organization’s success by mastering these two tools!