Purpose of Performance Evaluation in SMBs

The main purpose of performance evaluations and appraisals is to evaluate and assess the performance of their employees and organization in the past year. However, there are several purposes that lead organizations, companies and firms undergo performance evaluation and appraisal.

One classic reason for engaging in performance evaluation is to induce superior employee and organization performance. Performance evaluation motivates the whole workforce of the organization. Evaluation and appraisals give employees the knowledge of what the organization they work for considers as superior performance and thus motivates them such standards. In addition to that, performance evaluation and appraisals give employees the venue to show their efforts in achieving the “superior” standards of the company.

Another purpose of the performance evaluation and appraisal would be to familiarize employees, workforce and the organization itself about the tasks, duties, goals and objectives they have set and wished to achieve. PEs are also tools to measure whether the planned tasks, objectives and goals are on the right track to be achieve basing on the efforts exerted.


Aside from motivating employees, performance evaluations are also used to know whose employees, as well as departments, are not performing well to meet the company’s standards. Employees found to be inefficient are counseled, put into training or laid off.

Reinforcements to be given are also determined through performance evaluation and appraisal. Undergoing performance evaluation gives the company or organization the information about the proper and equal pay for those who perform best to reach company’s specific goals and objectives. Such reinforcements may be in the form of bonuses, additional leave grants and outing/team building of the company.

Moreover, performance evaluations give the company information about areas where there is poor performance. Knowing such information, the company could provide training for improve performances. Coaches or supervisors are also at the same time given the information about whose employees need coaching as well as areas that need additional focus and attention.


Companies and organizations also need to know what departments are excelling and which are not. They need to know whose people are performing best to keep them in the company. Companies and organization see these people as a good investment and thus upscaling their intellectual horsepower that is needed in order for them to survive the challenges in the future.

Lastly, purposes for conducting performance evaluation includes knowing the opinions of the whole workforce and thus have a good exchange of ideas between them and the management. Good communication within the company will bring much success since disputes and misunderstandings as well as needs and wants are clearly voiced out and given attention.

Performance evaluations and appraisals are very essential for the growth a company, organization or firm. Learn about different types of Employee Performance Evaluations and how to conduct an Employee Performance Review or Appraisal with this video:


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2 Comments Add yours

  1. Samantha Rachel Barrett says:

    Keep in mind that many companies have forced rankings and can only mark a certain percentage of employees as exceeds expectations. You may have been spectacular, but if you weren’t as spectacular as your coworkers, you may find your rating lower than you truly deserve.


  2. Max Oriah says:

    I believe that in addition to preserving the measurement quality and basic integrity of performance management systems, organizations can get more out of these tools when they are linked to the strategic goals of the company.


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