Performance appraisals is a system for achieving organisational goals through the review of employee performance against individual and/or team objectives.

The basis of the performance appraisals system is the organisation's goals. These goals are broken down into departmental or team goals that show how each will contribute to the overall organisation goals.

The appraisal process starts with a manager and employee setting goals for the year together. The most effective goals are measurable and have easy to understand performance standards.

The employee needs a specific set of skills and knowledge to meet their goals. At the start of the year, the manager and employee need to determine whether there are any gaps between the skills needed and the skills the employee has. A development plan is created to build those skills.

Regular feedback is given on the employee's specific achievements and learning progress. A half-yearly meeting is typically used to review achievements, identify any performance issues and plan any further development needs.

At the end of the year, a formal meeting is used to review performance. Many organisations have a reward process that is based on performance. This includes salary increases, bonus payments, share options and other incentives.

As part of the performance appraisals process, objectives will also be developed and agreed to for the following review period.

Performance appraisals is the first component of an effective employee performance management system and addresses the all-important question of "What?"