At first, performance appraisal is the foundation of recruitment and promotion. According to the standard and job description which the organization provides, the organization can make decisions on whether the staffs should be promoted or retained based on the quality of their performance (Saibou, 2011). Performance appraisal is also an important basis for reward management. Employees who are evaluated to have good performance will be rewarded, while those who have poor performance may get a little punishment (Smith and Rupp, 2003; LAWLER, 2003).
Performance appraisal is the approach to motivate employees. It makes the employees better understand the requirements of the organization. Through performance appraisal, the employees will take the actions in which the organization desires and then result in the corresponding performance which the organization needs (Saibou, 2011; George, 2013). It helps the employees to develop their own abilities. Once the employees’ performance conform the organizational objectives, they will get future development.
Because performance interview is a crucial ring of performance appraisal, it offers a formal opportunity for employers to communicate with employees and inform the demands of the organization to employees (George, 2013). Moreover, the result of performance appraisal can be utilized in training and development of employees. The appraisal can diagnose the weakness of employees’ working performance (Abu-Doleh and Weir, 2007). At the same time, it helps the organization to identify the training need of employees according to their work and develop practical as well as effective training program for them. Then the employees will know the direction of future work and development (Saibou, 2011; George, 2013).
2.3 How important is performance appraisal to organizational performance
According to Mondy and Noe (2008), organizational performance is the achievement related to productivity, market share and level of service delivery. Human resource practice can help the organization to improve its performance and enhance the competitiveness (Bratton and Gold, 2000). Performance appraisal which belongs to human resource practice can be a powerful management tool for an organization to improve individual and organizational performance (Laud, 1984). Effective performance appraisal has been frequently believed to play a major role in connecting employees’ competence to organization performance (Wanjiku and Sakwa, 2013). The final goal of performance appraisal is to improve the organization performance (Denisi and Pritchard, 2006).
Employees are the determinant of an organization. The whole organizational performances which invest much in systems and innovations consist of the performance of every employee (Wanjiku and Sakwa, 2013). After the right personnel are selected and recruited by the organization, employees must be evaluated and motivated. Only when the employees consider that they are well evaluated, they will work more effectively for the organization (Osmani and Maliqi, 2012). Thus, the effectiveness of the whole enterprise can get improved. Hence, effective performance appraisal system plays an important role to push the high effectiveness. The need of performance appraisal is also discussed by a few researchers (Mullins, 2002; Verbeeten, 2008).
Performance appraisal is a kind of incentive means. In addition, it promotes the competition among employees. Hence, every employee expects to show the best performance to the organization. At last, it motivates not only individuals but also the whole team. Through every employee’s efforts and effective management by managers, the performance of the whole firm can be enhanced. By all kinds of incentives, performance appraisals motivate high performance departments to work hard to improve performance and low performance departments change find out the gaps to ameliorate performance (Smith and Rupp, 2003).
2.4 Context impact on perform
