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Performance appraisal refers to the process where the employees in an organization are assessed and graded periodically (Sudarsan, 2009). This is done with regard to the already existing objectives. The better performing employees are rewarded through promotions, tokens, other kinds of awards, while those performing poorly are demoted, or their tenure is terminated. When conducted in an effective way, performance appraisal improves the employee performance (Schweitzer, Ordonez & Douma, 2004). People like to be recognized and once they know that their efforts will be rewarded, they will raise their performances and increase their output. Therefore, there will be competition within the workforce, which will be geared towards giving the best personal output. In this case, even the lowly ranked workers tend to give good results.

Performance appraisals have strategic advantages (Mayer & Gavin, 2005). Some of these advantages include the appreciation and boosting the morale of the hard working employees through recognition, tokens, and promotions. Poor performers are warned or even sacked to ensure that the organization has the best team of employees. Another advantage is that the employer has a well documented account on why certain actions were taken against a certain employee. This way, the organization has proof in case there are lawsuits or such legal clarifications.

Despite their improvement in the employee output, performance appraisals may be biased (Sudarsan, 2009). They could be biased, thus the best workers in terms of performance may not get the deserved title. For instance, the employee’s first impression that the people are carrying could be deceiving, thus give the wrong job impression (Mayer & Gavin, 2005). Other factors that can be biased include the halo and horn effect, where the employee is appraised on the positive and negative values alone respectively. At the same time, personal feelings and biases could result in biased appraisal, where the personal perception of the supervisor does not correspond to the performance of an employee.

Performance appraisal is vital in the achievement of the strategic goals and objectives of any firm (Selden, Ingraham & Jacobson, 2001). This is why the employees are among the most important factors that determine the course of a business. If the reward system is satisfying for the employees after a successful performance appraisal, they would definitely work hard in pursuit of their personal and career development.