This paper theoretically examines the impact of employee performance appraisal on performance of business organizations. It notes that well designed performance appraisals is vital to the improvement of employee performance and productivity, as well as to assesses achievements and develop plans for individual and team development. Some uses and benefits of employee appraisal identified include: human resources planning, promotions, training and development, career planning, compensation programs, among others. The challenges of employee appraisal noted include leniency, central tendency, halo effect, personal bias, recent behaviour bias and manipulation of the evaluation. The paper concluded that employee performance appraisal is a vital input that leads to the organization performance, and is an important tool used to assess employees’ efficiency and performance in the workplace. Additionally, employee appraisal is desirable needed by business organizations in order to operate profitably and enhance both employee and organizational performances. It is recommended that managers should improve on the training and development needs analysis element of performance appraisal policy in order to meet the aspirations of employees as training and development enhances employee performance and organizational growth. Employees should be properly educated on the purpose of performance appraisal exercise so that they are clearly aware that it is not a weapon of punishment but an instrument designed to assist them to grow. Management should provide the employees with timely feedback whether results are positive or negative so that they may know whether their performances are in line with the expectations or goals set by the management. Additionally, managements should set up and adopt employee appraisal systems in order to help them identify staff training needs, help employees meet performance targets, offer poor performers the chance to improve, and assist the managers to make informed decisions about promotions and assignments based on applicable facts.                                

KEYWORDS: performance appraisal, feedback, motivation, organizational performance, improved productivity,