Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development.

Performance appraisals are a regular review of employee performance within organizations.

Generally, the aims of a scheme are:

• Give feedback on performance to employees.
• Identify employee training needs.
• Document criteria used to allocate organizational rewards.
• Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, etc.
• Provide the opportunity for organizational diagnosis and development.
• Facilitate communication between employee and administrator.
• Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates and customers while also performing a self assessment. This is known as 360° appraisal.

The most popular methods that are being used as performance appraisal process are:

• Management by objectives (MBO)
• 360 degree appraisal
• Behavioral Observation Scale (BOS)
• Behaviorally Anchored Rating Scale (BARS)

Trait based systems, which rely on factors such as integrity and conscientiousness, are also commonly used by businesses. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are two-fold:

1) because trait based systems are by definition based on personality traits, they make it difficult for a manager to provide feedback that can cause positive change in employee performance. This is caused by the fact that personality dimensions are for the most part static, and while an employee can change a specific behavior they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone.

2) Trait based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to fill them out based on who they want to/feel should get a raise, rather than basing scores on specific behaviors employees should/should not be engaging in. These systems are also more likely to leave a company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioral information.