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In the corporate sector, performance appraisals fulfill several important roles--assuming that the appraisals are balanced and are not used for punitive reasons. The process must be administered by the company's Human Resources group, which is, for the most part, seen as a kind of neutral party in the appraisal process.
First, from an administrative perspective, the performance appraisal helps ensure that people who are performing similar jobs are rated with similar criteria, thereby creating uniformity in the appraisal process. From an employee's view, the appraisal process must be uniform and applied equally in order for it to have any validity. Second, depending on the size of the company, the standardized performance appraisal is the most efficient method of judging the relative merits of a number of employees. When and if the company's payroll and employees have to be reduced, the appraisals are usually the first item Human Resources looks at to determine who among the workforce might be asked to leave first.
Second, appraisals are, in their best form, used to not only point out an employee's strengths and successes but also to identify areas that need to be improved in order for the employee to reach his or her potential in the company. This is the point at which balance and fairness are critical--if the employee perceives that weaknesses are being "found" simply in order to find an area of criticism, the integrity of the appraisal process becomes suspect.
Most employee see the appraisal process as a necessary evil and are inherently suspicious of an appraisals integrity. The goal of an HR group is to make sure appraisals are as unbiased and constructive as possible, with attention given to positive aspects of an employee's performance as well as areas that require some attention.
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