Performance Appraisal
Also known as: Performance review
A performance appraisal, also called a performance review, is the formal process by which a manager assesses how well an employee has performed against expectations over a period, usually a quarter, half-year, or year. It looks at outcomes achieved, the competencies and behaviours shown, and progress on goals, and it produces feedback, a rating or summary, and often actions for the period ahead. It is the moment where day-to-day performance is turned into a documented judgement.
Appraisals feed several downstream decisions. Ratings and summaries commonly inform merit increases, bonuses, promotions, development plans, and, where performance is weak, interventions such as a performance improvement plan. Methods vary — goal-based reviews tied to objectives or OKRs, competency frameworks, 360-degree feedback that gathers input from peers and reports, and continuous check-ins that replace or supplement the annual cycle. Good appraisals rest on clear expectations set in advance, evidence rather than impression, and a two-way conversation rather than a one-way verdict.
Performance appraisal is universal, but its emphasis has shifted, and this matters for GCCs competing for scarce senior talent. Many organisations have moved away from a single annual rating towards more frequent, forward-looking conversations and calibration across managers to reduce bias and inconsistency. Because appraisal outcomes shape pay, progression, and who is placed on succession or PIP tracks, a fair, well-calibrated process is closely tied to engagement and retention: employees who see appraisals as accurate and developmental are more likely to stay, while those who see them as arbitrary are a flight risk.
Frequently asked questions
What is a performance appraisal?
A performance appraisal is a structured evaluation of an employee’s work over a defined period, assessing results, competencies, and behaviours against agreed goals and standards. It provides formal feedback and informs decisions on pay, promotion, development, and role fit.
What is the difference between a performance appraisal and a performance improvement plan?
A performance appraisal is a periodic evaluation of overall performance that applies to all employees and feeds pay and development decisions. A performance improvement plan is a targeted, time-bound intervention used only when performance is below standard, setting specific goals the employee must meet to remain in the role.
What are common performance appraisal methods?
Common methods include goal-based reviews tied to objectives or OKRs, competency-framework assessments, 360-degree feedback that gathers input from peers and direct reports, and continuous check-ins that supplement or replace the annual review. Many organisations now combine ongoing feedback with periodic calibration across managers.
How do performance appraisals affect retention?
Appraisals shape pay, promotion, and development decisions, so how fair and accurate they feel has a direct effect on whether employees stay. People who see appraisals as evidence-based and developmental tend to be more engaged, while those who see them as arbitrary or biased are more likely to leave.