Appraising on-the-job performance costs money and time, so “Performance Appraisal: Why Bother?” is a dollar-and-cents question for most organizations.

This article provides some hardheaded answers. Before we get into details, we’ll give you a preview of what’s to follow.
Here’s our line of reasoning:

• Your organization wants optimal results.
• Of the many contributors to optimal results, none is more important than motivated employees.
• An effective performance appraisal system can motivate employees by:
  • Letting them know what’s expected of them, how they’re doing, and how they can do better
  • Helping management make valid transfer and promotion decisions
  • Helping management make equitable compensation decisions
  • Showing the employee “what’s in it for me if I achieve my job goals.”

• It should also provide documentation for affirmative action decisions, thus lessening the likelihood of costly litigation.
• Your appraisal system is unlikely to do these things if your managers don’t know how to conduct effective appraisal interviews.
• Your managers can be taught to do appraisal interviews that motivate employees and improve results.

Three Basic Questions

Let’s start by looking at the relationship — the very close relationship between appraising an employee’s on-the-job performance and optimizing the organization’s results.

Most successful organizations spend much time and money appraising on-the-job performance. Consider a few of the things any sizable organization does to keep its performance appraisal system functioning: It produces forms and devises procedures for evaluating performance, for recommending compensation, for setting goals, and for planning succession.