Performance appraisal serves two very important purposes. One of these is to evaluate employees in terms of the quality of their performance. The other is to help the firm develop better employees and better procedures.
Performance appraisals are important for evaluating employees. It is important to know which employees are performing their jobs efficiently and effectively. This is important for the purpose of deciding about things like pay and promotions.
However, performance appraisals are also important for developing a better firm and work force. Appraisals tell the firm which things its employees are and are not doing well. This can help them to know what traits to look for in future hires. It can also tell the firm what things it needs to improve in terms of its training procedures.
In these ways, performance appraisals can be used for two major purposes.