Performance appraisals work as a motivating mechanism. It refers to a process, which studies and evaluats the job performance of personnel. Formally (Mondy, 1987). Appraisal is an effective instrument in the human resources management, which if performed correctly and logically, the organizations will reach their personnel who will achieve their interest (Rezghi Ros tami, 2000). The act of motivating the employees is in the heart of the organizations. Success in every organization depends upon the personnel motivation conducted by their directors. (Abedinirad & Hazer, 1995).

Competent appraisal of individual performance in an organization or company serves to improve the overall effectiveness of the entity. According to D. McGregor, author of The Human Side of Enterprise, the three main functional areas of performance appraisal systems are: administrative, informative, and motivational. Appraisals serve an administrative role by facilitating an orderly means of determining salary increases and other rewards, and by delegating authority and responsibility to the most capable individuals.

The informative function is fulfilled when the appraisal system supplies data to managers and appraisees about individual strengths and weaknesses. Finally, the motivational role entails creating a learning experience that motivates workers to improve their performance. When effectively used, performance appraisals help employees and managers establish goals for the period before the next appraisal.

Appraisees, appraisers (managers), and companies all reap benefits from effective performance appraisals. Appraisees benefit in a number of ways; for example, they discover what is expected of them and are able to set goals. They also gain a better understanding of their faults and strengths and can adjust behavior accordingly. In addition, appraisals create a constructive forum for providing feedback to workers about individual behavior, and for allowing workers to provide input to their managers.

Finally, appraisees are (ideally) given assistance in creating plans to improve behavior, and are able to get a better grasp on the goals and priorities of the company.

Appraisers gain from evaluations as well. They are able to effectively identify and measure trends in the performance of their employees, and to more accurately compare subordinates. They also get a better understanding of their workers’ needs and expectations. Managers are able to use the information to assist their subordinates in planning long-term and short-term goals and career objectives, and to tailor their job responsibilities to make fuller use of their skills. Importantly, the appraisal process helps managers to make informed decisions about promotions and assignments based on applicable facts.

Chief benefits that can accrue to the entire organization from the appraisal process include: improved communication, which results in more cooperation and better decision making; greater staff motivation; and a more informed and productive workforce, which leads to a greater organizational focus on comprehensive goals. Specifically, the performance appraisal process allows the organization to achieve a more productive division of labor, develop training and education programs, eliminate bias and irrelevant data from evaluations and decisions, and design effective compensation and reward systems.

The main purpose of appraisals is to help managers effectively staff companies and use human resources, and, ultimately, to improve productivity. When conducted properly, appraisals serve that purpose by:

• showing employees how to improve their performance,
• setting goals for employees, and
• helping managers to assess subordinates’ effectiveness and take actions related to hiring, promotions, demotions, training, compensation, job design, transfers, and terminations.

A good employee appraisal can do wonders for the employee’s morale, performance and motivation, while a bad one can ruin his enthusiasm for the job. A positive appraisal is not necessarily one that indiscriminately heaps praise, but rather an honest evaluation that targets areas for growth and offers benchmarks for future progress.
• Sincere Praise: A performance evaluation is an opportunity to tell an employee that he is doing a good job and that you appreciate his contribution. Mentioning these specifics shows your workers that you notice their individual skills and talents and encourages them to continue developing these strengths.
• Insincere Praise: Many employees who are not doing well are aware of their substandard performance on some level, and they welcome the opportunity to hear specifics about how they can improve. An employee who is not aware that he is failing to perform up to par will not benefit from a falsely enthusiastic performance appraisal, either, because it offers him no useful feedback.
• Constructive Criticism: Constructive criticism can be beneficial to an employee’s morale, provided you deliver it artfully. By offering constructive criticism as part of an appraisal, you offer your employee a chance to grow and learn.”
• Benchmarks: Your employee appraisals will be most likely to motivate your staff if you offer specific benchmarks and criteria for improvement. If you say, “You need to speed up,” you are less likely to motivate your employee than if you tell him that over a given amount of time his productivity should improve to the point that he produces a given number of widgets per hour. By setting a goal and allocating a period of time, you give him the tools to gauge his progress.

Common Methods of Performance Appraisal Today are

• 90o Appraisal: The employee evaluates himself and shows his strengths and achievements or his boss evaluates him. (Self or Boss)
• 180o Appraisal: The employee and the boss evaluate his performance on a monthly basis. (Self and Boss)
• 270o Appraisal: The method wherein the employee is evaluated by 3 persons, himself, boss and co-workers.
• 360o Appraisal: Also known as ‘multi-rater’ feedback, where feedback about employee’s performance comes from a Supervisor/superior, co-worker, client/customer, subordinates and the self-assessment of the employee himself.
• 7200 Appraisal: As the name itself suggests, in this method, the 360o appraisal method is practiced twice. First the 360o appraisal is done, where the performance of the employee is analysed and having a good feedback mechanism, the boss sits down with the employee again a second time and gives him feedback and tips on achieving the set targets.
• Motivational Maps: it is a simple on- line diagnostic tool that enables individuals, teams and organizations to understand and prioritize what motivates them, reveals how motivated they are, and provides practical and effective tools that increase motivation at all levels. It also reveals the employees key motivators in clear and easy to understand reports. Other personality tests can provide employee awareness, but Motivational Maps go much further providing Reward Strategies to show you how to reward your staff effectively, Appraisal Systems to improve staff appraisal, and an effective new team building tool.

“Nothing great was ever achieved without enthusiasm.” – Ralph Waldo Emerson