Regardless of size, all businesses need to employ various tools to assess progress and efficiency. Most of these tools relate to evaluating processes, employees, products and quality to ensure that the company is meeting the requirements and promises of production and client service. Performance management and performance appraisal are two such tools managers use to run a company.
The first difference between performance management and performance appraisal is definition. Performance management is a set of activities and evaluations that ensure the company is being effective and efficient in the process of meeting its goals. It analyzes and concentrates on various elements inside the company structure, such as the overall performance of the company, the performance of a specific department, phases of producing a product or service and employee performance. Performance appraisal is the specific analysis of the performance of employees inside the company. It evaluates the employee's work and quality for the year. Performance appraisal can be considered one step in the greater effort of performance management–a step that focuses on the employee's past performance–while performance management is an ongoing process that evaluates day-to-day performance.
Managers and supervisors are vital to both methods of assessment. In performance management, the supervisor or manager acts as a coach, someone who is driving every employee and structure in the department he is in charge of to achieve a common goal through constant encouragement. He then plans and sets realistic expectations, finally measuring the results on a daily or weekly basis. In performance appraisal, the supervisor acts more like a judge of the employee's work and performance, and he generally does so through a face-to-face interview (annual or semiannual). The supervisor evaluates the employee's performance, identifies weaknesses and strengths in the employee's work and sets plans for how to improve on those weaknesses by utilizing the employee's strengths. Employers and managers can use the results of performance appraisal to achieve goals through performance management's daily approach.
The methods employers use in performance appraisal are more structured and formal than the methods in performance management, and they usually consist of specific evaluations that rate employees in specific areas of performance based on the company's goals. Performance appraisal sets a high performance measurement to show employees what is expected and encourage them to meet those expectations. The methods used in performance management are more flexible than those used in performance appraisals, since performance management bases itself on daily performance. For this reason, its parameters for evaluation are more tangible. It has ideal performance goals as guidelines, but it is not fully invested in these ideals. Rather, it is sensitive to what an employee can realistically achieve in a day of work.
These two types of performance measurement, put together, create a powerful tool for management and evaluation, allowing the company to achieve a higher level of performance.