Difference Between Performance Management and Performance Appraisal

Difference between performance management and performance appraisal: In human resource and organizational management, performance management and performance appraisal are used interchangeably. The replacement of words often leads to confusion about the distinct meanings and purposes. However the two processes are related to each other and share a common goal of enhancing the performance of the employees but still, they differ in terms of their scope, approach, and overall objectives. 

In our blog about understanding the difference between performance management and performance appraisal for organizations, let us dive into the differences between the two important evaluations in terms of process, frequency, focus, approach, and scope. Furthermore, for ease of understanding, we will provide a summary table between the assessments. 

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Performance Management: A Complete Ongoing Process

Performance management is an ongoing process that includes several activities aligned to achieve the goals of the organization as well as individuals. These goals majorly include the development and overall performance improvement of the employee. 

It emphasizes clear expectations, providing regular feedback, identifying the areas of growth and improvement, and supporting the employees of an organization in their professional growth. 

For instance, in a software development company, a performance management system includes the setting of goals for the developers to enhance their coding efficiency. Regular reviews of their performance help in assessing their progress and offer support for achieving their targets. 

Here in this example, the collaborative efforts between managers and developers is an example of performance management. It began with establishing a well-defined goal and objectives that are aligned with the organization and strategic goals of the organization. 

Key Characteristics

From the above short example, we can extract some important features of performance management which are as follows:

• Clear setting of goals: Establishing specific and achievable goals.
• Regular feedback and reviews: Providing ongoing assessment and constructive criticism.
• Measurement of key performance indicators (KPIs): Helps in tracking the metrics to evaluate the performance of the employee. 
• Alignment with organizational objectives: Ensures the individual goals and supports the big target.
• Accountability for performance outcomes: Hold the individuals accountable for meeting the expectations.

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Performance Appraisal: A Periodic Evaluation Process

In contrast to the ongoing features of performance management, performance appraisal is a periodic evaluation process that is a type of formal assessment that occurs annually or semi-annually. It assesses the performance of the employee over a specific period, specifically with a predetermined goal, and competencies according to the organisational standards of the company. 

During the process of performance appraisal, the managers review the achievement of an employee, areas of improvement, and their overall contribution to the organisation. 

This evaluation often involves the rating or scoring of the employee based on the established criteria of the business and providing a quantitative measure of their performance. 

For example, Sarah’s manager of Sarah discussed her performance over the past year. Her sales numbers have consistently exceeded the targets of the company. The teamwork and problem-solving skills were invaluable for the team. She was appreciated for achieving the Key Performance Indicators (KPIs). 

Key Characteristics

Like performance management, performance appraisal also has specific features but with different targets:

• Alignment of Goals: Evaluation is made based on how well the performance of the employee aligns with the objectives of the organisation. Moreover, assurance is made that every employee should work towards the common goal.
• Providing constructive feedback: Performance appraisal provides managers with a structured platform for giving constructive feedback. This aims for further improvement in employee performance.
• Development opportunities: providing targeted training and plans for development wherever necessary according to the identified areas of excellence for the employee.
• Recognition and Reward: Motivating the employees by acknowledging and rewarding their performance. 
• Documentation of the Performance: Records of performance achievements and further areas of improvement. This serves as a reference for future development and helps boost the career prospects of an employee. 

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Difference Between Performance Management and Performance Appraisal

After learning about performance management and performance appraisal, now let us understand the difference between performance management and performance appraisal:

Point of Difference	Performance Management	Performance Appraisal
Definition	A continuous process that includes setting clear goals, and feedback helps in the development of the employee.	Performance appraisal is a formal evaluation process that helps in assessing the performance of employees against the predetermined criteria.
Frequency	Performance management is an ongoing process.	Performance Appraisal is conducted at specific intervals such as annually or semi-annually.
Focus	The main focus of performance management is continuous improvement and development	The main focus of performance appraisal is on the evaluation of past performance of the employees.
Approach	Performance management involves feedback and coaching.	Performance Appraisal approaches for the strength and improvement of the employees.
Scope	The scope of Performance management includes setting goals, giving feedback and guidance	Performance Appraisal evaluates performance against the predetermined criteria.

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