Needs for performance appraisal are as follows:
1. It is required to inform the employees about the criteria being used by the organizations to decide the productivity and utility of employees in the organization.
2. It is required in an organization to evaluate the achievements and failures of employees related to their work. It also helps the employees to know their position in the opinion of their supervisor and organization.
3. Performance appraisal is needed to motivate the employees to become more efficient in their work. It provides them with a summary of their past performance, which helps them in planning their future in a better way.
4. It helps to recognize the personality differences because each person differs in personality and has different situational, psychological, physiological, and social traits.
5. Performance appraisal helps to identify the strengths and weaknesses of an employee. Consistent appraisal makes this information easily available during allocating new assignments.
Knowing the strengths and weaknesses also helps the management in effectively selecting the right employee for the right team, which is necessary for effective management.