There are many things that can go wrong with performance appraisals. The major problems are that the systems can lack reliability and validity.
Reliability refers to the extent to which the system measures performance consistently. In other words, if a person does work of the same quality two years in a row, will he or she get the same grade on the appraisal? If not, the appraisal is not reliable. The same thing goes if two employees who do work of similar quality get very different grades.
Validity refers to whether the appraisal measures what it is supposed to measure. In other words, does it truly measure how good employees are at their jobs or does it measure something else that is not truly relevant. If it measures things that are not truly relevant, it lacks validity.
It is difficult to devise performance appraisals that will be both reliable and valid. This is the major problem with performance appraisals; they are often of poor quality and therefore do not help firms identify who is truly doing their job well.
There are different things that can affect performance appraisal.
One of the most important factors are Inappropriate systems and Bad human resource management.