Difference between Performance Management and Performance Appraisal

1. Difference between
Performance Management and
Performance Appraisal

2. Comparison Chart
Basis for Comparison Performance Appraisal Performance Management
Meaning
Performance Appraisal, means the
analysis of an employee's
performance and their caliber for
future growth and development.
Performance Management is the
management of human resources in
an organization.
What is it? It is a system. It is a process.
Nature Rigid Supple
Type of tool Operational Tool Strategic Tool
Owned by Human Resource Department Managers
Conducted Annually Continuously
Approach Individualistic Holistic
Focused on Quantitative Aspects Qualitative Aspects
Corrections Retrospective Prospective

3. Definition of Performance Appraisal
• Performance Appraisal is defined as an assessment of employees by
the manager, in which he/she evaluates the overall contribution made
by the employee to the organization. It is a systematic and logical
review, conducted by the organization annually to judge his potential
in performing a task. It helps to analyze the skills and abilities of an
employee for their future growth that increases the productivity of
employees. It helps to identify, the employee who performs their task
well and those who are not, along with the reasons for the same.

5. • Performance Appraisal is an organized way of evaluating employee
performance, for which a comparison is made between actual
performance and the preset standards. The results of the
performance appraisal are documented. After that reviews are given
to the employee about their performance during the year, to tell
them where they require improvements. Employees also wish to
know their position in the organization after a particular period of
time.

6. Definition of Performance Management
• Performance Management is a continuous process that aims at
planning, monitoring and evaluating the objectives of an employee
and his total contribution to the organization. The basic purpose of
performance management is to encourage and improve employee’s
efficiency and effectiveness.
In this process, both the employees and the managers participate in
setting the objectives, assessing the performance or progress,
providing training and feedback to the employees at regular intervals
for improvement, implementing development programs for
employees and rewarding them for their achievements.

7. • With the help of this process, both the employee and the employer
get a chance to set the combined goals of the employee that relates
to the ultimate goal of the organization by considering the employee’s
performance. In this way, the objectives of the parties became clear
that helps to achieve the overall objectives of the organization and
the growth & development of the employee as well.

8. Key Differences Between Performance Appraisal
and Performance Management
The following are the major differences between performance appraisal and
performance management:
• An organized way of evaluating the performance and potential of
employees for their future growth and development is known as
Performance Appraisal. The complete process of managing the human
resources of the organization is known as Performance Management.
• Performance Appraisal is a system while Performance Management is a
process.
• Performance appraisal is inflexible, but performance management is
flexible.

9. • Performance Appraisal is an operational tool to improve the efficiency
of employees. However, performance management is a strategic tool.
• Performance Appraisal is conducted by a human resource
department of the organization, whereas managers are held
responsible for performance management.
• In performance appraisal, corrections are made retrospectively. In
contrast to performance management is forward looking.
• Performance Appraisal has an individualistic approach which is just
opposite in the case of Performance Management.
• Performance Appraisal is carried on eventually, but Performance
Management is an ongoing process.

11. Conclusion
• Therefore, we can say that the term performance appraisal and
performance management are completely different. But, it can’t be
said that they are contradictory because performance appraisal itself
is a part of performance management. In this way, we can say that
performance management is a bigger term that involves some steps.