It is intangible and personal. The information from these assessments will be used by the company to make decisions about salary increases, promotion, bonuses and training needs. From the employees' viewpoint it should improve job clarity leading to enhanced motivation. An effective appraisal system should provide formal feedback about job performance and supplement the informal feedback which managers should give to their employees on a daily basis. The errors in appraisal systems are mainly concerned with the concepts of validity and reliability.
Validity refers to the quality of the components in the performance appraisal system.
Validity has to do with whether or not the components measure what they are supposed to measure. Reliability refers to the consistency and stability of performance appraisal measures. Consistencies mean that if two items rating the same performance characteristic appear on the same rating form the rater's scores should agree if the same subordinate is being rated. Stability refers to the performance measuring items that should yield the same scores at various evaluation periods if the performance characteristic has not changed. Managers can improve the quality or performance appraisal practices by conducting a job analysis and improving the reliability and validity of the performance measures.