Why You Need to Conduct Employee Performance Appraisals

Last updated on July 23rd, 2013 at 07:25 pm

Many organisations, particularly smaller ones, overlook the importance of conducting regular, formal employee performance appraisals. Performance appraisals and other performance management practices, like onboarding or employee development, are viewed as unnecessary administrative burdens that provide little benefit. But employee performance appraisals are a foundational performance management tool that, when done well, provide tremendous value to the employee and the organisation, by helping you to:

Cultivate a Work Culture & Values

When they include a review of core and job specific competencies, your employee performance appraisals can be a vital way to cultivate work culture and values. Competencies define “how” work should be done. It’s best to include a clear definition or description of each competency, as well as descriptions of the various levels of demonstration, so employees more clearly understand how to apply and exhibit each competency in their work.

Set Clear Expectations for Performance and Give Employees a Larger Context for Their Work

One of the primary functions of performance appraisals is to establish goals for each employee for the coming year, and to review their achievement of goals for the past year. Setting goals for each of your employees helps to direct and prioritise their work, and let them know exactly what you expect of them. If you further link each employee goal to a higher level organisational goal, you give your employees a context for their work and help them understand how they are directly contributing to the organisation’s success. This helps them feel valued and important.

Identify and Address Development Needs

Performance appraisals are also an optimal time to identify employee development needs and put plans in place to address them. By supporting your employees’ ongoing development, you also commit to the ongoing growth and success of your organisation. Development plans should be put in place to address any identified performance problems or shortfalls, but also help broaden or deepen your employees’ knowledge and skills.

Foster an Ongoing Dialogue on Performance

Performance appraisals really should just be the beginning or the culmination of an ongoing dialogue about performance, culture and expectations. To effectively manage employee performance, you need to do it all year round. Annual or regular performance appraisals simply provide a formal occasion to review and document employee performance and act as a reminder to set and review goals, discuss competencies and performance, and support employee development.

Build an Engaged and Loyal Workforce

Employee performance appraisals help to address the employee needs that underpin engagement and loyalty. They help employees:

  • Know what is expected of them
  • Have a context for their work
  • Understand their value to the organisation
  • Have their accomplishment recognised
  • Be given opportunities for development
  • Be rewarded for their accomplishments
  • Build a relationship with their manager

All of these activities have been shown to positively impact employee engagement and retention.


No matter how large or small your organisation, your employees are your most valuable asset. Conducting regular employee performance appraisals helps you support employee high performance and develop an engaged and loyal workforce.

Sean Conrad is a Certified Human Capital Strategist and Senior Product Analyst at Halogen Software, one of the leading providers of performance management software. For more of his insights on talent management, read his posts on the Halogen Software blog.

If you would like to download my One Page Appraisal Form for small business, please click here.

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