Performance appraisals are of great need for the effective work and ‘health’ of a staff. Performance appraisals assist in developing individuals, in improving company’s performance, and in effective business planning. Performance appraisals are usually done every year for all the staff in the company.

Performance appraisals are also necessary for person’s career and successful business planning. Appraisals are significant for the motivation of a staff, correct behavior, effective communication process, and developing positive attitude of management to the staff. To sum up, performance appraisals that are carried out without training and without adhering to the rules, without necessary explanation are conducted in a wrong way and in most cases can be counter-productive. In other words, they are simply a waste of time.

Successful companies have an appraisal system that evaluates employee performance in accordance with the company’s strategic goals. Such companies know very well what they should do to win in today’s competitive world - they must attract and retain productive employees. Successful companies get their competitive advantage with the help of effective performance appraisals that assist them in hiring productive employees and in putting them in the right place (position) and in developing their abilities that greatly contributes to the company’s success.

Generally speaking, a good performance appraisal no matter what type is it, is effective if it is conducted in a right way when everything is clearly explained to the staff and agreed with the authorities. Benefits of effective performance appraisal are the following:

improved productivity;

maintenance of top reformers;

improved employee morale;

increased profitability.

Performance appraisals can be counter-productive for those employees who need much training and development. A successful performance appraisal affects positively the employee work performance in case of the employee high job motivation. In case with an employee who has low job motivation, performance appraisals are counter-productive. Performance appraisals should be adapted to the employee’s individual needs and features. In other case, there is a risk of a poorly-conducted appraisal with all the negative consequences.

To sum up, performance appraisals that are carried out without training and without adhering to the rules, without necessary explanation are conducted in a wrong way and in most cases can be counter-productive. In other words, they are simply a waste of time. Well-prepared and well-conducted performance appraisals give additional chance for managers and companies in general, to continue improving and developing their work. Badly-prepared and badly-conducted performance appraisals are not working and are counter-productive.