Every organization needs consistent performance of employees to drive success in their goals. Therefore, it is imperative to monitor the employee’s performance regularly and give them support in real time. Performance Management can do it for your organization, and as an ongoing process, it can assist you in increasing employee efficiency over the period. In this post, we will discuss the difference between performance appraisal and performance management. In this post, we will discuss the difference between performance appraisal and performance management.
Though many people use these terms interchangeably, it is fair to mention that performance appraisal is different from performance management. Both have distinct roles in the journey toward success for any organization.
Let’s understand both concepts one by one.
What is Performance Management?
What is performance management in HRM?
Performance management in HRM is an umbrella term that involves monitoring and managing the employee’s performance. It helps the HR department to remove obstacles that come in the way of employees in achieving the common corporate goals. It involves a supervisor or a project manager, an HR executive, and an employee throughout the year.
Performance Management- Scope and Importance
Performance management is an ongoing process focusing on various aspects including planning, monitoring, and analyzing employee activities to enhance their performance. Performance management also includes support from the management so that employees can make their best efforts to achieve company goals.
Major Aspects of Performance Management
Performance management is a consistent process that involves the following aspects-
Objectives
It starts with setting SMART (Specific, Measurable, Attainable, Relevant, and Time-bound) goals in line with the organization’s vision.
Feedback
Regular and constructive feedback can assist employees to focus on their strengths and address challenges efficiently.
Measurement
It involves the performance measurement of each employee using various methods like self-assessment and objective metrics.
Planning
This is a crucial aspect based on areas for improvement and aims to create personalized development plans for employees.
Discussions
This factor involves performance discussions to review employees’ progress and set new goals periodically.
Recognition
Rewards and recognition of high performers can reinforce positive behaviours among employees and motivate them.
Let’s mention the key benefits of the performance management system.
Top Benefits of Performance Management System
Performance management takes a holistic approach for every employee. Its three core benefits include-
Goal Alignment
It aligns individual goals with the organization’s medium to long-term goals. In other words, performance management in HRM can set clear and measurable goals for employees in line with the organization’s vision and help them achieve these objectives.
Employee Development
It focuses on the development of employees and identifies areas for improvement. Performance management also assists companies in creating personalized plans for employees that improve the skills, knowledge, and efficiency of employees.
Performance Improvement
Employees get regular feedback, necessary training, and support to enhance their expertise or expand their skill sets. This objective aims at overcoming challenges and achieving high productivity from employees.
Let’s understand about a performance appraisal.
What is a Performance Appraisal?
Performance appraisal in HRM is a systematic process that assists HR departments as well as company management in assessing the employee’s job performance. Performance appraisal is also known as performance review or performance evaluation. Companies make performance appraisals yearly or at regular intervals.
Performance Appraisal- Scope and Importance
As a formal evaluation, performance appraisal can measure strengths, achievements, and areas for improvement of your employees. Moreover, it is a measurement of the overall contribution to the organization.
Key Components of Performance Appraisal
The performance appraisal process involves the following elements-
Feedback
It involves giving constructive feedback to the employee about their performance highlighting their strengths. The performance feedback assists employees in knowing their position and contribution to the company.
Ratings
In this stage, companies assign a numerical rating or descriptive feedback based on their performance. Ratings consider the strengths of employees and areas of improvement for every employee.
Planning
It includes the process of establishing goals for the future together with employees and their managers. It reflects the performance of employees and usually, companies make it on the basis of predetermined KPIs.
Reward
It is a final but highly essential factor. At the end of the performance appraisal process, employees get monetary rewards and recognition every year. However, various companies follow different procedures for this aspect.
What Is a 360-Degree Appraisal?
The standard performance appraisal process involves an employee and their reporting manager or supervisor. However, a 360-degree appraisal includes the process of getting feedback from the employee’s coworkers or team members, the employee, and their manager or supervisor. A 360-degree appraisal process can give a clearer picture of the employee’s year-long performance as compared to the standard process.
Performance Management vs. Performance Appraisal
When it comes to employee development, performance management, and performance appraisal play a vital role. However, they serve different purposes. Performance management is the bigger picture. It is an ongoing process that focuses on continuously improving employees. It involves goal setting, skill development, and ensuring individual efforts align with the organization’s objectives. This is a proactive approach.
On the other hand, performance appraisal is a specific event within performance management. It’s like a progress report that happens annually or at predefined intervals. Here, the focus shifts to evaluating an employee’s performance against set criteria during that specific period. This process often uses formal tools like rating scales and relies on past performance data.
How to Build a Proper Performance Management System
Here are five useful steps to make an effective performance management system in your company-
Set Clear Goals
You can align the employee’s individual goals with overall company objectives. Use the SMART method (Specific, Measurable, Achievable, Relevant, Time-bound) to make them clear.
Ongoing Feedback
Regular check-ins and conversations between managers and employees are vital in improving performance. It enables managers to praise for good work and identify areas for improvement.
Performance Reviews
You can schedule formal reviews to assess the employee’s progress toward goals. Use these reviews for feedback, development planning, and potential rewards or recognition.
Nurture Ownership
It is beneficial to encourage employee participation in goal-setting and feedback discussions. This fosters a sense of ownership and improves engagement.
Continuous Development
You can provide opportunities for training and skill development to help employees excel in their roles and reach their full potential. It is necessary to achieve goals.
Performance management in HRM can help organizations establish the right system for monitoring the employee’s performance regularly.
Conclusion
Performance management and appraisal play a vital role in any organization. Performance management in HRM softwares enables companies to improve the employee’s performance and performance appraisal can help them retain efficient employees. Continuous development and ownership are other noteworthy benefits of these processes. Here we mentioned the difference between both the terms along with the description of their components.
