If you think that your company’s annual performance appraisal or review means you’re doing performance management, think again. Understanding how the two are different and how they relate to each other is a key learning point for today’s HR and talent management professionals.

The problem, of course, is that for the vast majority of employees today, their sum total experience of performance management is an annual performance review (or appraisal or evaluation or assessment). Here’s how the academics distinguish between the two (source):

Performance management is the process of identifying, measuring, managing and developing the performance of the human resources in an organization.

Performance appraisal, on the other hand, is the ongoing process of evaluating employee performance.

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There are all kinds of ways to think of the difference between the two. Performance management is about what you’re going to do to help an employee continue in their development to become increasingly better in their performance for your organization. Performance appraisal is how you evaluate the progress being made by assessing or measuring the employee’s actual performance on a regular basis over time.

Another way to think of the difference between the two is that performance appraisal is about the past, meaning how the employee performed in the immediate past period being reviewed during the appraisal process. Performance management, meanwhile, is focused on the present and the future. In the present, you’re doing things in real-time to help make sure the employee’s performance reaches the desired level. With an eye on the future, you’re also planning what can be done to further develop that employee’s capabilities for periods to come.

When you think about it, another way to distinguish between the two is to say that performance appraisal is a reactive process while performance management is a proactive process.

In many cases, it’s useful to see performance appraisal as an essential process that goes along well with performance management. Some would even argue that performance appraisal is just one piece of the larger puzzle of performance management.

However you look at them, they both should result in increased performance over time! If you’re not getting the results you need, then either or both pieces need to be re-tooled.

Performance appraisal has been around for a long time. After all, how else do you know whether an employee deserves a raise, bonus or promotion? What performance management does is take that process up several notches to proactively manage employee performance so that it aligns with and accomplishes the overall vision, mission, goals, objectives, and strategies of the organization. Performance appraisal is all about an individual and how they’ve performed in the past, while performance management takes that information and explicitly evaluates how it relates to what’s important to the organization as a whole.

Here’s a table that gets at some of the more interesting and important differences between performance management and performance appraisal:

Performance appraisal	Performance management
Operational	Strategic
Top-down assessment	More likely to involve dialog
Retrospective for corrections	Future-oriented for growth
Typically once or twice per year	Ongoing or continuous review, interspersed with formal reviews
Often uses ratings or rankings	Less likely to involve ratings
Rigid structure/system	Flexible process
Not linked to business needs	Linked to business needs
Usually takes a quantitative approach	Combines quantitative and qualitative approaches
Individual	Collective
Often linked to compensation	Not usually linked to compensation
Often very bureaucratic with a focus on paperwork/documents	Less concerned with documentation
Usually housed in HR department	Conducted by managers and supervisors

 

If you tend to use the terms performance management and performance appraisal interchangeably, it’s time to start building a more nuanced approach to these related but distinct concepts. By keeping them too muddled together, many organizations have failed to realize the full benefits that can come from building a top-notch performance management system that includes robust performance appraisals.

Download the free e-book: The Skeptic’s Guide to Performance Management eBook.

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