The performance appraisal is confrontational in nature and stressful for both employee and manager. More and more companies now shift from the reactive performance appraisals to the broader and more proactive performance management.
Performance management removes much of the limitations of the performance appraisal. It defines performance expectations, monitors progress and measures results to see if progress meets expectations, and rewards or corrects performance. The proactive nature of this approach allows for correcting mistakes or sounding the alarm for improvements as and when they occur, changing wrong perceptions, challenging subjectivity, when the situation is live, rather than at a later stage when the issue is out of people’s radar.
Organizations retaining performance appraisals would do well to separate pay revisions from the performance appraisal process. This would preclude the major criticism of performance appraisals being discriminatory, and allow the appraisals ratings to focus solely on employee development.
Very often performance appraisals don't work because it harps on the negatives rather than the positives. A good approach to performance appraisal concentrates on positive aspects, such as trying to review the past to understand how to avoid the same mistakes and what can be done to better performance in the future, rather than using the appraisal as an exercise in a witch-hunt.