Job performance appraisals are needed in order to provide information about performance rankings. This information helps in making decisions regarding salary fixation, confirmation, promotion, transfer and demotion. In addition, job performance appraisals provide feedback information about the level of achievement and behavior of subordinates. This information helps to review the performance of the subordinate, rectifying performance deficiencies and to set new standards of work, if necessary.

These appraisals play a pivotal part in providing information that helps to counsel the subordinate. The information helps to diagnose deficiency in employees regarding skill and knowledge; determine training and developmental needs; prescribe the means for employee growth; and suggestions for correcting placement. Moreover, job performance appraisals prevent grievances and disciplinary activities.

Performance appraisal aims at attaining various purposes. The first purpose is to create and maintain a satisfactory level of performance. The second purpose is to contribute to employee growth and development through training, self and management development programs. The third purpose is to help the superiors to have a proper understanding about their subordinates. They also play a significant part in guiding employees to job changes with the help of continuous ranking. The fourth purpose is to facilitate fair and equitable compensation based on performance and to facilitate for testing and validating selection tests, interview techniques through comparing their scores with performance appraisal ranks. The last purpose is to provide information for making decisions regarding layoff and retrenchment; ensure organizational effectiveness through correcting the employee for standard and improved performance; and suggesting the change in employee behavior.

Every organization has to decide upon the content to be appraised before the program is approved. Generally, content to be appraised is determined on the basis of job analysis. Content to be appraised may be in the form of contribution to organizational objectives (measures) like production, cost saving, return on capital etc. Other measures are based on behavior, which measure observable physical actions, movements. Then there are objectives which measure job related results, like amount of deposits mobilized. Finally, there are traits which are measured in terms of personal characteristics observable in employee job activities. Content to be appraised may vary with the purpose of appraisal and type and level of employees.