You are here reading this blog and might wonder if there is a difference between the terms ‘performance review’ and ‘performance appraisal.’ Well, there is. These terms are often interchangeably used by the people in the management due to their common denominator – measurement of employee performance.

Upon a closer look, both have similarities that are easy to spot. Performance reviews and performance appraisals go back in time, generally touching upon the past year’s achievements, successes and hurdles. The overall process draws criticism as one focuses on the time that has gone by, and then the review is carried out. 

What is Performance Review? 

A performance review is a formal assessment carried out by a manager to evaluate an employee’s work performance, identify the strengths and weaknesses, offer feedback for further improvement and set targets and goals for future performance.  

Forgo the days when managers used to review performance annually. The earlier traditional approach was mostly confidential and an annual affair. Today we come across organizations moving forward to a frequent performance management system where the managers review the employees on a quarterly, monthly, yearly, for that matter, even a weekly basis.   

These days, some organizations are not going in for a formal approach. They are adopting a more informal approach in terms of managers dropping in and doing a one-on-one with their team members to get feedback, reviewing what they have done, and thus avoiding the wait time for a formal review process. 

Performance reviews help the manager to deliver fair assessments. It increases employee engagement and encouragement and creates concrete paths for employee growth.  

What is Performance Appraisal?  

On the other hand, performance appraisal determines the employees’ contribution and competencies to the company, such as skill set, responsibilities taken, leadership qualities, consistency, decision-making abilities, etc. It refers to the systematic evaluation of employee performance and acts as a tool to monitor employee performance and development opportunities.  

Further, performance appraisal also helps the organization to decide on employee compensation based on the overall performance and efforts put by the employees. For employees with weaknesses, the organization duly carries out specific training arrangements. The evaluation is a motivational tool, improving employee efficiency and productivity. 

Performance Review vs Performance Appraisal: What’s the Difference? 

Now that you know the meaning of both terms, let us look at the key aspects that differentiate performance appraisal and performance review. 

Performance review helps an employee develop and increase their performance, efficiency, and productivity, whereas performance appraisal evaluates the employee’s actual performance.  

Performance reviews are qualitative and quantitative in approach as they constantly measure employee performance and formulate strategies for employee development. On the other hand, performance appraisal is quantitative in approach as it follows a protocol (primarily through rating scales) to assess performance and focuses only on the result of employee performance. 

There is more room for discussion in a performance review as it encourages two-way communication. In contrast, in performance appraisal, communication has a top-down approach towards employee performance as the discussion takes place only after the appraisal process. 

Performance review is future-oriented, keeping in mind the strategies required for maintaining employee performance for the following year. It finds ways to improve employee performance. Performance appraisal is retrospective and past-oriented, reflecting on past events and situations. It takes into consideration an employee’s performance over a period of time. 

Performance management needs to be flexible with the organization’s growth. Monetary compensation, salary revision, etc., are a part of this process. In addition to this, performance management also takes into account the plans for areas of improvement. Performance appraisal is inflexible as it is concerned with an employee’s past performance. It does not take into account their growth. 

Performance Review vs Performance Appraisal: The Outcomes 

Performance management ensures employees a better sense of belonging than performance appraisals. In performance appraisal, employees may get skeptical as there is a lack of developmental strategies and may leave the organization if they don’t see any scope for development.  

Performance review reduces the employees’ anxiety as the reviews take place continuously. The discussion revolves around the employee’s productivity, which is linked to management’s productivity. As the performance appraisal is done periodically, it leads to anxiety amongst the employees. The communication is confined to the manager, due to which the employees might negatively perceive appraisals as it does not have anything to do with improving themselves to meet the organization’s objectives. 

Performance review has all the necessary documentation about the employee, and the managers can access it anytime. This helps the manager to provide the employee with training in skillsets and other aspects they need to work on. Performance appraisals are timely and automated, and all documentation is available with respect to employee evaluation. After employee self-evaluation is done in performance appraisal, managers provide feedback on employee performance other than giving relevant training.  


All organizations are unique in their values, goals, and competencies. The performance reviews ensure that the organizational and personal goals are spelled out early and clearly, and a proper feedback mechanism is laid out. 

On the other hand, performance appraisals reward employees who achieve their KPIs while adhering to organizational competencies and values. Performance reviews are very flexible as they take many factors into account and focus on employee development as part of the process. 

Employee engagement, as well as performance, should be every organization’s focus area. Though performance appraisals are required in an organization, developing strategies for performance improvement and productivity post the appraisal process is necessary. This effort maintains overall business productivity. 

Enspire HR offers KPIs and target-based performance management software where managers and employees can create multiple goals and objectives, evaluate them with flexible review cycles and improve their productivity with insightful MIS. To enhance the overall productivity of your company, call us at +91 99510 53333 or write to us at to find out more.

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