What are performance appraisals?

Performance appraisals (also known as performance evaluations or performance reviews) refer to the process of systematically evaluating employees’ performance.

They’re especially useful for understanding each employee’s abilities and limitations in order to explore future opportunities.

According to investopedia, a performance appraisal is:

An annual review of an employee’s contributions to the company by his/her manager. Performance appraisals […] evaluate an employee’s skills, achievements and growth, or lack thereof. Companies use performance appraisals to give employees feedback on their work and to justify pay increases and bonuses, as well as termination decisions.

Performance appraisals encompass, therefore, all activities involved in gathering, analyzing and keeping track of the information related to an employee’s performance.

They’re a powerful tool for refining and improving said performance by providing the employee with guidance and action plans.

How do performance appraisals work?

Performance evaluations are the starting point for employees and managers to create a development plan.

Exploring the employee’s strengths and weaknesses, managers are able to suggest potential training opportunities as well as situations in which it’s possible to increase the employee’s responsibility.

The performance appraisal process normally follows the steps below:

  • Employee evaluation: The employee evaluates himself and his performance according to pre-established criteria;
  • Manager evaluation: The manager evaluates the employee and his performance according to the aforementioned criteria;
  • Feedback meeting: Manager and employee meet face to face to discuss the results of the evaluations, compare and contrast the gathered information;
  • Action plan: Both parties work together towards developing an action plan to keep/improve the performance results;
  • Follow up: Employee and manager schedule subsequent meetings to keep track of the goals established on the action plan.

Even though performance appraisals are a moment of direct communication between employee and manager, ideally it’s not the only time they sit down to talk about it.

Investing in continued communication and frequent conversations is extremely helpful to keep everyone on the same page. Also, scenarios in which managers and employees have a strong relationship with frequent communication help make annual reviews less stressful (for both sides).

Why are performance appraisals done?

As we mentioned above, performance appraisals are the most commonly used way to keep track of an employee’s performance. They’re very useful for identifying each employee’s strengths and weaknesses and placing the right people on the right positions.

They’re also frequently used for assessing each employee’s potential for growing and developing within the company as well as awarding bonuses, pay raises, etc.

As pointed out in the steps, this process is also about providing employees with feedback on their performance.


Pipefy offers a free performance evaluation template that helps managers follow up on their team’s performance. Evaluating your employees is extremely necessary within companies – without performance evaluations, employees don’t know what their strengths are and behaviors they need to work on.

This template allows you to set feedback meetings with your employees as well as collect and give feedback, helping them improve their performance as well as overall behavior.

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Written by Isabelle Salemme, Product content manager at Pipefy. She uses her extensive Pipefy knowledge to write informative pieces teaching users to make the best of Pipefy. Besides being responsible for all product-related content, she's an avid reader, a coffee lover and a professional photographer.