Often in an organization, we see that the concepts of performance management and performance appraisal are used interchangeably. But little do we realize that both the concepts are very different from each other. The reason for this confusion is that both the concepts deal with evaluating performance and both come under the same umbrella term of the performance management system. Let us start by defining both the concepts first.

Performance management refers to the set of activities and tasks that make sure that the employees meet their goals on time. The goals need to be aligned with the objectives of the organization. Performance management ensures the efficiency and effectiveness of the performance of the employees when the goals are reached. Performance management has a holistic approach in the sense, it analyzes employee performance keeping in mind the development needs of the employee & organization.

Performance appraisal, on the other hand, is nothing but the evaluation of an employee’s performance. Feedback forms are given to the employee. After the employee has given self-feedback, the manager gives a final review. Performance appraisal also deals with the evaluation of an employee’s competencies such as commitment to the organization’s core values, ability to take initiatives, responsibility for tasks, strengths, and weaknesses, skill set and training, etc. 

While both performance management and performance appraisal deal with the performance of the employees, we are going to look at the key aspects that differentiate performance management and performance appraisals:

Performance Management	Performance Appraisal
Performance management is about actually helping an employee to develop and increase his performance and productivity.	Performance appraisal evaluates the actual performance of the employee, but it does not focus on the employee’s performance productivity.
Performance management looks at an employee’s performance keeping in mind the present and the future.	Performance appraisal evaluates the employee’s performance based on how he has performed in the immediate past.
Performance management proactively manages an employee’s performance and ensures that the employee has accomplished all the goals, vision, mission and the core values of the organization.	Performance appraisal only looks at the employee’s performance objectively for the year and give a final feedback to the employee.
Performance management has a holistic approach that evaluates the relationship between the employee and the organization and examine ways in which employee engagement can be fostered.	Performance appraisal is individualistic in nature and pertains to the employee and his past performance.
Performance management is strategic in the sense that it is constantly measuring an employee’s performance and formulating new strategies for the employee’s development.	A performance appraisal system is operational because it follows certain protocol for performance, and it focuses only on the result of the employee’s performance.
Performance management is very dynamic because it involves a lot of dialog between the employee and the senior managers. There is more room for discussion in performance management.	Performance appraisals are very linear in terms of the communication because it has a very top down approach towards employee performance. There is a discussion that takes place only after the performance appraisal process.
Performance management is future oriented keeping in mind the strategies required for maintaining the employee performance for the next year. Performance management finds ways to improve employee performance.	Performance appraisal is very retrospective in the sense that it looks back on past events and situations. It looks at an employee’s performance over a period. Performance appraisal is very past oriented.
Performance management is a continuous ongoing process by giving real time instant performance reviews. Luckily, with the advent of an employee performance management software, there is a performance management tool that has a continuous feedback mechanism for effective performance management.	Performance appraisal system facilitates performance appraisals only once or twice a year. There is a performance management tool for appraisals, feedback happens in a periodic manner during appraisals, but the feedback may not focus on development. Typically, the discussion during appraisals revolves around justifying the rating and feedback.
Performance management has a qualitative and quantitative approach in the sense it has ratings and more continuous feedback. If an organization has an employee performance management software, then performance management is usually in the form of comprehensive feedback given to the employees and their performance.	Performance appraisal on the other hand, has a quantitative approach towards an employee’s performance. In an employee performance management software, performance appraisals use rating scales to evaluate employee performance. There is minimal scope for constant feedback. The ratings are the only final measurement that is used for performance appraisal.
Performance management is flexible in terms of keeping in mind the growth of the organization. Compensation and salary revisionsare a part of PMS, but performance management comes up with developmental plans for more improvement	Performance appraisal is usually rigid because it is only confined to an employee’s past performance. It has little to do with his growth.

Although organizations are looking for different processes to evaluate employee performance, there is obviously no one system that fits all. To delve deeper into the differences let’s look at some of the various outcomes of performance management and performance appraisal to understand the differences clearly. 

Performance Management	Performance Appraisal
Performance management is strategically executed. Leads to increased performance in the organization.	Performance appraisal is often perceived as a difficult process for the employee and HR
Performance management results in improved communication between the organization, manager and the employees. There is frequent communication in the organization that fosters collaboration in an organization.	Performance appraisal does not address the perception gaps as the intent of the employees and HR differs most often.
In performance management, rules are clearly defined for the employees. There is an informed discussion about the goals and objectives of the organization in the process of employee management.	The objectives of the organization are not communicated to the employees in appraisals at times. There is a lack of transparency when it comes to performance appraisals.
Performance management reduces the anxiety of the employees because, employee management reviews are a continuous process. The discussion revolves around the productivity of the employee with relation to the productivity of the management as such. More room for management-based discussions.	Performance appraisals lead to anxiety at times because the process is periodic and not continuous. Employees often perceive appraisals in a negative manner because it does not have anything to do with improving themselves to meet the objectives of the organization. In performance appraisals, the communication is often confined to the manager and the employee without discussing what is needed for the organization.
Appraisals are a part of performance management. Appraisals are more accurate in performance management because of the continuous feedback process. Performance management addresses the problems effectively leading to better appraisals.	Lack of proper communication: performance appraisal focuses a great deal about the employee’s performance as such. It does not clearly lay down what is expected from them in the future. The discussion is often less constructive for the employee in performance appraisals.
Performance management is timely. Performance management is automated. It has all the relevant documentation about the employee and managers can access it any time. They can give training in skillset and other aspects they need to work on.	Performance appraisal are timely and automated. Everything is documented and there are feedback forms. After the employee evaluates himself, the manager then gives his feedback. The feedback is often related to what the employee has done other than giving him relevant training.
Performance management leads to better employee engagement because employee management focus on the personal development of the employee compared to appraisals.	There is a lack of employee personal development strategies in appraisals. Since it is only objective performance review. Appraisals do not deal with formulating developmental plans.
Performance management ensures that employees feel a better sense of belonging compared to performance appraisals.	There is a lack of developmental strategies for employee performance in the appraisal process. Employees may get cynical and leave the organization if they don’t see any scope for development.

Conclusion 

Every organization has its own unique set of objectives and core values. Performance management ensures that goals and objectives are established clearly and there is a continuous feedback mechanism in place. Appraisal on the other hand, is a part of the whole performance management process but however, performance management is more flexible and multi-dimensional in terms of communication.  

Compared to appraisals, performance management takes a very holistic approach by not just limiting itself to salary revisions and compensation. Performance management manages employee goals effectively. There is a continuous feedback mechanism in place. There is better employee engagement because there is more recognition of employee’s work and rewards are given whenever necessary.  

Every organization must ideally focus on employee performance and engagement with a holistic approach. While performance appraisal is mandatory in an organization, creating developmental strategies for improving the employee’s performance and productivity after the appraisal process is also necessary. This ensures better business productivity. 

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