What is the difference between performance review and performance evaluation?

Basically, the terms performance review and performance appraisal mean exactly the same thing. Different companies use somewhat different words to describe the process of sitting down (manager and employee) to discuss, appraise, or review performance. There are other terms that also mean the same thing. Here are some synonyms:

• employee review
• annual review
• annual performance review
• performance evaluation
• employee evaluation

We prefer terms that stress that the employee and manager work together to discuss performance, rather than terms that focus on the idea that it's the manager's job to appraise or evaluate employee performance. We recommend that companies call them reviews or discussions rather than appraisals or evaluations.

However, it's worth noting an important exception. Performance management does not mean the same thing as these other terms.

See also: What Is Performance Management? and
What Is The Difference Between Performance Management and Performance Appraisal?

Although human resources purists point out the numerous distinctions between the two, in practice, performance appraisal and evaluation are used interchangeably. Both refer to a process by which your employer reviews how well you've done your job and possibly determines any increases in salary or benefits you'll receive as a result. In strict terms, however, an evaluation generally precedes an appraisal.

While many organizations group the terms "performance appraisal" and "evaluation" together, in most cases, evaluation is just one step in a performance appraisal – the latter being a broader part of an organization's performance management system.

In an evaluation, a person intimately aware of an employee's work, such as a supervisor, manager or peer, provides feedback on measures such as work quality, punctuality and job skills. In the strictest sense, performance appraisals attempt to assess the overall value of an employee's work in terms of contribution to business objectives.

Appraisals are the tail end of a long chain of business procedures. They start with your business's strategic plan, which lays out goals for the company to reach through a set of strategies. These strategies are fulfilled by individual business units, which heavily determines how individual job tasks and requirements are defined. These looming goals and strategies also play a role in setting the skills and core competencies each employee must have to successfully complete her job and contribute to meet the strategic goals.

These factors, in theory, form objective measures on which to evaluate an employee's actual performance. Performance consists of behaviors as well as results. In the end, individual components of the appraisal are weighted by a pre-determined scheme. For example, conducting work tasks might be more important than "organizational citizenship" qualities like being a team player.

An evaluation can occur outside the context of determining an annual pay increase. Ideally, informal employee evaluation is an on-going process in which an employee receives routine feedback on how he's doing. Logistically speaking, performance appraisals and evaluations are time-consuming, costly and conducted by subjective human beings. That's why in practice, evaluation and appraisal look alike.

There's a difference between a job evaluation and performance evaluation in the wider context. The former evaluation measures topics such job skills, quantity and quality of work, and achievement of task-specific goals. The latter looks at performance more widely in such areas as work habits, communication, initiative, judgment and leadership.

Evaluations sometimes take into account goals set between the employee and his supervisor, as well as an employee's self-evaluation.

Talk to any group of human resources and business leaders and you're likely to hear many opinions about the fairness, accuracy and usefulness of performance appraisals and employee evaluations. A 2018 article by Payscale, citing research from management research firm CEB, said that over 95 percent of manager hate performance reviews. Among the criticisms are that they're too bureaucratic and based on an outdated system, rather than need, and that they fail to yield accurate information about performance.

The article drives home the fact that, to be effective, performance evaluations cannot be just once a year.