Speaker 1: Hi, welcome to Talent Management 360. My name is Jamie, and today my team and I are going to be discussing a little bit about the difference between performance appraisal and performance management.

Speaker 2: If you think that your company's annual performance appraisal or review means that you're doing performance management, think again. Understanding how the two are different and how they relate to each other is a key learning point for today's HR and Talent Management professionals. Here's how the academics distinguish between the two. Performance management is the process of identifying, measuring, managing, and developing the performance of the human resources in an organization. Performance appraisal, on the other hand, is the ongoing process of evaluating employee performance. Or, here's another way to think of the difference between the two. Performance appraisal is about the past, meaning how the employee performed in the immediate past period being reviewed during the appraisal process. Performance management, meanwhile, is focused on the present and the future. In the present, you're doing things in real time to help make sure the employee performance reaches the desired level. With an eye on the future, you're also planning what can be done to further develop the employee's capabilities for periods to come.

Speaker 1: Financial institutions can often be slow to change. A friend of mine was working for a temp permanent position at a financial institution. They conducted performance appraisals, but not as part of a full performance management system. I know this because what happened was he received monthly performance evaluations for his first 90 days. Then, at the end of 90 days, they would evaluate to decide whether he would actually get to move on to a permanent position. Unfortunately for him, he'd been maxing out their performance indicators the whole time he was there, so he never showed any improvement and was let go. We can see the mistake there, obviously. This is somebody who's doing the best that the company asks for every day from the very beginning and is clearly a great asset, but because their performance appraisal system was limited and not part of a larger, robust performance management system, nobody was watching for development opportunities for him to bring this great asset into their company.

Speaker 2: However you look at them, they both should result in increased performance over time. If you're not getting the results you need, then either or both pieces may need to be retooled. Performance appraisal has been around a long time. After all, how else do you know whether an employee deserves a raise, bonus, or promotion? What performance management does is take that process up several notches to proactively manage employee performance so that it aligns with and accomplishes the overall vision, mission, goals, objectives, and strategies of the organization. If you tend to use the terms performance management and performance appraisal interchangeably, it's time to start building a more nuanced approach to these related but distinct concepts. By keeping them two-modeled together, many organizations have failed to realize the full benefits that can come from building a top-notch performance management system that includes robust performance appraisals.