Performance appraisal refers to the assessment of performance for the purposes of performance management. In this chapter, you will learn how organizations evaluate performance of employees. This chapter addresses the reasons why organizations typically develop performance appraisal systems; the ways in which performance can be assessed, and the strengths and limitations of different approaches; the characteristics of an effective performance appraisal system; potential rater errors in performance appraisals and ways to deal with them; the effects of the performance appraisal context on the fairness and objectivity of performance ratings; how to conduct a performance appraisal interview; steps that can be taken in appraisal system design and application in order to deal with common problems with performance appraisals; and current issues and research around performance management.