We often find employees and sometimes even the management being confused between performance reviews and performance appraisals. In many cases, these terms are used interchangeably which is not helpful at all. However, we need to understand that there are very specific differences between the two.
The confusion is quite understandable as they both are tools to measure the performance of an employee and come under the common umbrella of the Performance management system.
When you take a look at what these activities focus on, it is easy to find similarities. Both performance reviews and performance appraisals tend to be a look back in time, generally focusing backward shedding light on the previous year’s successes and hurdles. In fact, this backward focus is where much of the criticism of the annual appraisal or performance review is aimed at.
What is Performance Review?
When we search for a formal definition of it in books or on the internet you would probably find a definition like “A performance review is a formal assessment conducted by the managers for their employees where they go through the employees’ work and performance throughout the year and identifies the employee’s strengths and weaknesses, offers their feedback and sets goals for the future performance reviews”.
Reviews used to be conducted on an annual basis, however, we see that these days they are a bit more frequent where the employees are being reviewed on a quarterly, monthly, or even weekly basis.
Some organizations are ditching the formal approach in favor of casual manager drop– ins and one on ones with their employees for sharing feedback and reviewing their work, eliminating the wait time for a formal review to happen.
When used appropriately, a performance review helps an employee understand where they are doing well and where they are lacking, how they can improve, and how their current goals align with the larger company objectives.
Managers who use performance reviews effectively can recognize the well-performing employees, are able to communicate the expectations better, encourage growth and development, and foster employee engagement.
What is Performance Appraisal?
While the performance review is more about understanding strengths and weaknesses and setting goals for the next term, the performance appraisals are more focused on the actual performance of the employee in the past year.
Performance appraisal also includes the evaluation of the employees’ competencies such as commitment to the company’s core values, willingness to take initiatives, responsibility for tasks, skill set and training, etc.
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Performance Reviews vs Performance Appraisals
While both Performance Review and Performance Appraisals look into the performance of the employee, we will go over a few key differences of the two:
Benefits of Performance Review when compared with Performance Appraisal
It goes without saying that both Performance Reviews and Performance Appraisal have their own benefits and many of these benefits are common.
Here, since we are trying to understand the difference between the two, we will be focusing more on the different benefits each one has to offer.
Every organization has its own unique competencies, core values and goals.
The performance reviews ensure that the goals are communicated clearly and the continuous feedback mechanism is in place.
Whereas performance appraisals reward those who manage to achieve their goals while sticking to the organizational competencies and core values.
Compared to appraisals, performance reviews are much more flexible as they take many things into consideration and are focused on overall employee development.
Every organization must focus on employee engagement and performance with a holistic approach. While performance appraisals are mandatory in a company, creating development strategies for improving the employee performance and productivity after the appraisal process is also equally necessary. This ensures better overall business productivity.