‘Performance appraisal’ and ‘performance management’ are two different concepts. Using these two interchangeably is wrong.
Performance appraisal is a confined practice regarding the evaluation of the performances of employees. Here, managers rate their subordinates every year on the basis of their performance.
Whereas, performance management is a wider and integrated approach intended for the betterment of the organization as a whole.
Here, the roles and responsibilities are assigned to every employee, and performance standards have been set in order to derive greater performance from employees.
In performance management, employees are prepared to work as a team so that performance improvement at the individual level directly impacts organizational performance positively.
Performance appraisal is different item performance management in the following manner:
| Basis of Difference | Performance Appraisal (PA) | Performance Management (PM) |
| 1. Objectives | Focuses only on individual objectives | Stresses upon integrated, i.e., organizational and team objectives along with the individual objectives |
| 2. Nature of Performance Measuring Methods | Qualitative as well as quantitative measures | Quantitative measures on the basis of skill required to perform a particular task |
| 3. Repetitive Occurrences | Conducted annually | Constant reviewing |
| 4. System of Evolution | Ratings are assigned by the managers to the subordinates | Combined and collective discussion |
| 5. Reward System | Mostly associated with monetary benefits | No direct reward system |
| 6. Ownership | Conducted by the HR department | Directed by line management |
| 7. Nature of Intent | A separate process, i.e., not in line with the organizational development | An integrated approach, i.e., intended to achieve individual as well as organizational goals |
| 8. Approach of Assessment | Reactive approach, i.e., on the basis of past performance | Proactive approach, i.e., in order to improve future performance |
| 9. Nature of Questions | Feedback on earlier performances, e.g., how well the task was implemented? | Discussion regarding future tasks, e.g., how employees should be assisted to derive effective performance. |