13 Benefits of Performance Appraisals for Managers and Employees

Here are our top performance appraisal benefits:

1. Boosts employee performance

2. Increases employee engagement

3. Reduces employee turnover

4. Improves decision-making for managers

5. Enhances communication between managers and employees

6. Informs training requirements 

7. Provides an opportunity for goal-setting 

8. Gives recognition to top performers

9. Provides feedback on management 

10. Contributes to a positive company culture

11. Supports professional growth 

12. Builds an appraisal history for every employee

Let’s explore each of those benefits in detail…

A performance appraisal is the perfect opportunity to give employees feedback on their strengths and weaknesses while allowing them to share their own thoughts. By working together to set appropriate goals and overcome hurdles, managers can help employees improve their performance over time. 

Employees are more likely to be engaged at work if they feel that their efforts are recognised. Supporting employees to improve their performance through coaching, training and development can also be a big driver of engagement. 

Plus, performance appraisals ensure employees are actively involved in managing their own performance, particularly when you use tools like self-appraisals. This can help motivate employees to work towards their goals, simply because they played a part in setting them. 

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When you conduct regular performance appraisals, you show employees that you care about their long-term growth and development. This means employees are more likely to stick with your organisation over the long term, because they’ll see how doing so can help them improve their work and advance in their careers. 

One side-effect of performance appraisals is that they produce a lot of data. And that data can help managers and company leaders to make smarter, better-informed decisions about everything from promotions and compensation to training and workforce planning. 

A performance appraisal should be an open forum for discussion between managers and employees. They provide a space for both sides to communicate openly and honestly about the employee’s strengths, achievements, weaknesses and challenges. This helps to build a culture of trust, where employees feel able to discuss any difficulties they’re facing with their managers.  

Running regular performance appraisals helps managers spot any knowledge gaps or training deficits within their teams. By providing the right training to fill these gaps, managers can improve performance across their entire team over time. 

Every company’s priorities change over time. That means that whatever an employee was working towards a year ago might not be as important now. Conducting regular performance appraisals allows you to reassess each employee’s goals to make sure they’re still in line with the company’s overall strategic direction. 

Everyone likes to be thanked for a job well done. And a performance appraisal is an opportunity to reward top performers, helping to motivate them to keep up the hard work. If you use a performance management software solution like Personio, you can even link performance ratings directly to payroll to make sure employees get rewarded with a bonus when they hit their targets. 

Performance appraisals aren’t just about telling employees what they’re doing right and wrong. They’re also an opportunity for managers to find out how they could better support their teams. To get the most out of your performance appraisals, you should encourage employees to share their honest thoughts on how your management style is working for them. 

Conducting regular performance reviews sends a clear message to employees: that you care about supporting your team and enabling them to do their best work. Over time, this creates a culture of openness that encourages feedback, sharing and support. 

Performance appraisals provide an opportunity to discuss the next steps an employee could take in their career. Managers and employees can work together to create a development plan that will help them get where they want to be. 

When you conduct regular performance appraisals, you’re building a detailed record of every employee’s performance over time. In the future, you can use these records to assess any changes in performance for individual employees. 

More than this, they can also help HR teams and managers to identify the drivers of great performance, as well as things that might hold employees back — helping them to improve performance company-wide. 

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If you want to experience the benefits of performance appraisals in 2024, we can help. 

Using our all-in-one HRIS software, you can set up performance cycles across your whole organisation in minutes. Once they’re set up, managers and employees will be automatically prompted to complete their appraisals and book a one-to-one meeting — without anyone having to manually follow up. 

Our customisable, standardised forms and rating scales mean you can ensure consistent performance appraisals across the organisation and track both quantitative and qualitative progress over time. If goals are linked to bonuses, you can even connect Personio directly with your payroll to make sure every employee gets their hard-earned reward. 

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