POTENTIAL APPRAISAL AND DEVELOPMENT

The potential appraisal refers to the appraisal involving identification of the hidden talents and skills of a person. The person might or might not be aware of them.

Potential appraisal is a future-oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy.

Many organizations consider and use potential appraisal as a part of the performance appraisal processes. Potential appraising is different from appraising performance.

Potential refers to abilities of an employee which are currently not brought to use by an organization. Potential means the talent capacity to under-take higher challenges on job in future.

Potential Appraisal – Introduction (According to Modern Era)

A fundamental premise behind potential appraisal is that every individual has certain hidden qualities in varying proportion. When these qualities are not properly tapped and utilized, these remain dormant. For example, K. Ramchandran, Director, Human Resource and Operational Policy, Philips India Limited, where potential appraisal is undertaken in a very systematic way, has observed as follows-

“People are like icebergs. What you see above the surface (performance) is only a small part. A large part of the attributes needed to perform excellently in a future job, which I call potential, is not immediately visible. It is hidden below surface.”

Potential appraisal is concerned with unfolding these hidden attributes. These attributes may be in the form of analytical power, creative imagination, sense of reality, ability to see future, ability to work in varied environment, risk propensity, initiative, being proactive, passion for high achievement, problem-solving and decision-making skills, and so on.

All these attributes constitute potential of an individual and through potential appraisal, all these are identified. From this point of view, potential appraisal differs from performance appraisal; the former is related to future role of an individual while latter is concerned with his present role.

In the modern era of human resource management, appraisal system lays greater emphasis on the development of employees rather than on their evaluation. This is better fulfilled by the potential appraisal which involves assessing the capability of an employee which he possesses but that is not being utilized fully.

It may be mentioned that an employee who is doing his present job effectively may not be equally effective in a higher-order job specially when transferability of skills relevant to his present job is limited because of the nature of different jobs.

Potential appraisal is used in a number of human resource management functions such as human resource planning, career planning, succession planning, promotion/termination decisions, and employee training and development. Because of different uses of potential appraisal, it has become one of the important tools for managing human resources throughout the world including India.

Many companies in India undertake potential appraisal either independently of performance appraisal or integrating both the systems into one. However, potential appraisal system works better when it is taken independently.

In this context, potential means a prospective employee who is capable to undertake different challenging assignments. Potential of employees need to be discovered for organizational effectiveness. Organizations must aim to utilize the full potential of the workforce, institute an environment to unleash the latent creativity, create conditions promoting innovation and team working, and so forth. Potential is actually a useful succession term if you filter it through the leadership pipeline model.

Three categories of potential are turn potential, growth potential, and mastery potential-

• Turn potential is the ability to do the work at the next level in an organizational hierarchy in the next three to five years, or sooner.
• Growth potential refers to the ability to do work which is complex, more challenging, needs innovative skills, pioneering expertise, etc., at the same level in the near future.
• Mastery potential is the ability to do the same type of work that is currently being done, in a better.

Assessing the Potential of the Employee:

• Find out the requirements of the higher job and see how the employee meets those requirements.
• Does the employee have the knowledge, skills and attitude which could be utilised in the higher job?
• How good are the personal performance parameters such as quality of decision making, willingness to take up additional load/responsibilities, dependability, initiative, imagination, open minded to suggestions and new ideas, interpersonal relationship etc.?
• How could the employee develop those qualities required for performing the job at higher level effectively?
• Follow-up – Once the management has identified the person, they could provide necessary guidance, training and development so that the person can take higher responsibilities and perform well in his new role.

Potential Appraisal – Meaning (With Examples)

The potential appraisal is made up of two words viz. potential and appraisal. Potential means the abilities of an employee which are required for meeting the challenges of future assignments while appraisal means the evaluation of those abilities in present status of an employee.

Thus, potential appraisal is the process of evaluation of the abilities of an employee that uses by employee in the future assignments. It is different from performance appraisal and needs to be carried out at regular intervals.

The potential appraisal refers to the appraisal involving identification of the hidden talents and skills of a person. The person might or might not be aware of them.

Potential appraisal is a future-oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy. Many organizations consider and use potential appraisal as a part of the performance appraisal processes.

The Potential for Improving Performance, or PIP, measures the performance of the average worker versus the best person performing a particular task. Large differences suggest that performance can be improved by bringing average performance up closer to the best performance. Small differences suggest little potential for improvement.

Potential appraisal refers to the identification of hidden skills, talents and abilities in a person which even he may be unaware of. It is a future oriented concept and is a powerful tool for employee advancement. The latent skills of a person are tracked and his true potential is evaluated.

An employee with high potential is a good candidate for assuming more responsibilities in future. In western countries, many organizations use potential appraisal as a part of performance appraisal process. However, in India, not many managers are aware of this term though informally every organization makes potential assessments.

Higher officials often determine whether a particular employee has the potential to take added responsibilities in future. Potential appraisals help in deciding a career plan for the employees.

It also helps to evaluate candidates for promotions and developing a suitable employee base for succession planning. This method is based on the aptitude of the employee, his willingness to take additional responsibility and his motivation for accomplishing tasks.

Potential appraising is different from appraising performance. Potential refers to abilities of an employee which are currently not brought to use by an organization. Potential means the talent capacity to under-take higher challenges on job in future.

The latent capacity of an individual may mean an individual’s ability to foresee opportunities and their impact on current decisions, ability to identify resource gaps, abi-lity to perform in very tough or diverse settings, displaying a high degree of personal and intellectual integrity at all times. The main objective of potential appraisal is to know the employees potentials and to use those later by putting on them higher responsibility-ties.

It is a normal practice to promote employees based on their past performance. Past performance gives us a feedback regarding the ability of the person to do a given job at a given level successfully or not and it could be a future indicator of potential if the jobs are similar. However, capabilities required to perform one role may not be the same as those required to perform a higher role having different functions. Therefore, past performance is not necessarily a good indicator of the suitability of the individual for a higher role.

Example:

A good salesman need not be a good manager in the sales function since the job of a sales manager requires managerial qualities apart from selling skills.

Potential appraisal aims at identifying and assessing the capabilities of an individual to perform higher level of functions or responsibilities. It forms the basis for decisions associated with the promotions and succession planning.

In potential appraisal, attributes like velocity (speed and direction in which the employee is progressing), people and customer (listening skills, interpersonal relationship) orientation, focus on results, initiative etc. are assessed.

They have become significant in the changing world today because:

• They help the management to have a blue print of their succession plan. With the data available to them, the management can easily identify who all to be given leadership positions in future.
• Organizations today take the responsibility about advising their employees with potential to improve themselves for career advancement in the organization. It is very essential for organizations to do so because if the employee with potential leaves the organization, it may be difficult to fill up the gap.
• The organizations have to train employees within specific areas from time to time so that they gain “core competence” in the specific areas.

Potential Appraisal – 8 Basic Objectives

Generally, people earn promotions on the basis of their past performance. The past performance is considered a good indicator of future job success. This should be true if the roles to be played by the promotes are similar. However, in actual practice, the roles that a job holder has played in the past may not be the same if he assumes a different job after his transfer or promotion to a new position.

Past performance, therefore, may not be a good indicator of the suitability of an indicator for a higher role. To overcome this inadequacy, organizations must initiate the process of potential appraisal.

The main purpose of potential appraisal is to identify the potential of a given employee to occupy higher positions in the organizational hierarchy and undertake higher responsibilities.

The basic objectives of potential appraisal are to:

• Identify the abilities of an employee in order to evaluate whether that employee is suitable for future assignments or otherwise, and
• Occupy higher positions in the organizational hierarchy and undertake higher responsibilities because past performance may not be a good indicator for future and higher role.
• Inform employees about their future roles;
• Make suitable corrections in training efforts from time to time;
• Inform employees about they must do something for their career prospects;
• Help organization for suitable succession plan;
• Improve quality and quantity of performance of an employee; and
• Give proper feedback to the employees for their potential.

Potential Appraisal – Top 6 Features

Potential appraisal forms an important part of HRM in finding out the hidden talents of employees.

The following are the features of potential appraisal:

• Helps assess the employees’ capacities, which pave way for them to give their best performance
•   Helps assess an organization’s ability to develop future managers
•   Helps assess the employees’ analytical power, which indicates the ability to analyze problems and examine them critically
• Helps build creative imagination, which is the ability of presenting an existing thing in an unconventional and new manner
• Helps analyze the sense of reality, which refers to an employee’s way of interpreting a situation
• Helps develop leadership skills, which refer to the abilities to direct, control, and harmonize with people.

Potential Appraisal – Purpose and Requirements

The purpose of potential appraisal is to predict whether an employee is capable of taking on more demanding work, and the speed at which he/she is capable of advancing. It is necessary to inform employees of their future prospects, enable the enterprise to prepare a management succession plan, modify and update training and recruitment programmes, and advice employees of what they must do to enhance their career prospects.

In the potential appraisal process, attempt is made to match the employees’ abilities and aspirations with the organizations forecast of requirements for managerial staff. In this light, a responsibility may be cast on the supervisors to provide specific instances of how the employee can further his/her development and achieve specific goals.

A consensus should be reached as to the employees’ goals for the next evaluation period and the assistance and the resources to be provided by the management. This aspect of employee appraisal should be the most positive element in the entire process of employees’ development and help the employee focus on behaviour that will produce positive results for all concern.

The objective, thus, of the potential appraisal system is to help the top management make decisions regarding the suitable persons for a particular job by generating data about the employees and their potential for performing different, and often, higher level roles.

It also helps in giving some pointers on how the organization can develop the managerial talent by identifying develop-mental inputs required by promising employees. Performance review serves a positive purpose in this direction. The potential appraisal is concerned with forecasting the direction in which subordinates’ career can and should go, and the rate at which he/ she is expected to develop.

The assessment of potential requires an analysis of the existing skills, qualities, and how they can be developed to the mutual advantage of the company and the employee. There is also an important counseling aspect to the review of potential which consists of discussions with the individual about his/her aspirations and how these can best be matched to the future foreseen for him/her.

These discussions are a vital part of the procedure because they can provide management with information about employees’ feeling on the subject, which may have a direct impact on the plans for development, including training and job rotation. They can also provide employees with additional motivation and encouragement which they need to remain with the company.

Potential Appraisal – 4 Main Mechanisms

Potential appraisal presupposes the existence of clear-cut ‘job or role descriptions’ and ‘job or role specifications’, i.e., qualities needed to perform the role.

The mechanisms that could be used for potential appraisal are discussed below:

• Rating by Superior – The potential of a candidate could be rated by the immediate supervisor who is acquainted with the candidate’s work and also his technical capabilities.
• Psychological Tests – Managerial and behavioural dimensions can be measured through a battery of psychological tests.
• Games – Simulation games and exercises (assessment centre, business games, in-basked, role play, etc.) could be used to uncover the potential of the candidate.
• Performance Records – Performance records and ratings of the candidate on his previous jobs could be examined carefully on various dimensions such as initiative, creativity, risk-taking ability, etc., which might play a key role in discharging his duties in a new job.

Potential Appraisal – Process: Role Descriptions, Rating Mechanisms, Organizing the System and Feedback

Potential appraisal proceeds in the same way as the performance appraisal with some adjustment.

It is to identify the potential of a given employee to occupy higher positions in the organizational hierarchy and undertake higher responsibilities. Many organizations consider and use potential appraisal as a part of the performance appraisal processes. Many Indian organizations like Glaxo, Cadbury, Pfizer, Proctor and Gamble, and Philips use potential-cum- performance appraisal system.

Potential appraisals are required to- inform employees about their future prospects, help the organization chalk out a suitable succession plan, update training efforts from time to time, motivates the employees to further develop their skills and competencies and to identify training needs.

Potential appraisal follows a four step process which is explained below:

• Role Descriptions:

Organizational roles and functions must be defined clearly. For this job descriptions must be prepared for each job.

Qualities needed to perform the roles- Based on job descriptions the roles to be played by people must be prepared (i.e. technical, managerial jobs and behavioural dimensions).

• Rating Mechanisms:

The various mechanisms to judge the qualities of the candidates are:

• Rating by others to examine technical capabilities.
• Psychological tests to know managerial and behavioural dimensions.
• Simulation games to uncover the potential of the candidate.
• Performance records and ratings on candidates’ previous jobs can be examined on dimensions like creativity, risk taking ability etc.
• Organizing the System:

HR manager sets up a system to allow the introduction of the scheme smoothly incorporating answers to some complex questions such as:

• How much weightage to accord to merit in place of seniority in promotions?,
• How much weightage to accord to each of the performance dimensions-technical, managerial, and behavioural qualities?
• What are the mechanisms of assessing the individual on different indicators of his/her potential, and with what degree of reliability?.

• Feedback:

Like performance appraisal, the system of potential appraisal must provide every employee opportunity to know the results of his/her assessment.

Many organizations like Tata Consultancy Services, Infosys, CITI Bank and Sate Bank of India are conducting potential appraisal.

Most organizations include potential appraisal as a part of the performance appraisal. This has advantages but also disadvantages too:

• Potential is about the future while performance deals with the past. Good performance in the past in a given job need not be a good indicator of the likely performance in future in that role which individual has not performed.
• Biases of the boss who is just one level above may creep into potential appraisal.
• Potential should relate to competencies while performance related to KPS’s and other tasks assigned to the individual. Potential is about assessing people against competencies required for higher roles.
• Performance on a given job is partly dependent on the support provided by the organization including his reporting officer and reviewing officer and their judgment may be more reflective of the situation in which the performer has performed rather than his actual capabilities.
• It is only fair to create the conditions under which the individual is likely to perform the new job and test him out in relation with the situation as well as his competencies. That is how assessment centers become relevant tools for promotion decisions.

Combining the potential appraisal with performance appraisal may be appropriate under the following conditions:

• There is no significant difference in the current job of the individual and the future job for which his potential is being tested.
• The current job offers adequate opportunity for the individual to demonstrate the competencies needed for the future job.
• The reporting officer or the reviewing officer is experienced enough and unbiased so as to judge accurately the potential of the individual.
• It is useful to supplement the data with 360-degree feedback and assessment centers.

Potential Appraisal – Behavioural Parameter (To Measure Future Potential of an Employee)

The potential appraisal is a future-oriented appraisal by which the potential of an employee to occupy higher positions and to assume higher responsibilities is evaluated. The potential appraisal can help the extension staff to know their strengths and weaknesses and can motivate them to further develop their skills.

Thus the potential appraisal helps in planning overall career development of employees. Some of the techniques used for the appraisal are self-appraisals, peer rating, the management by objectives (MBO) approach, psychological test and simulated work exercises, case analyses and leadership exercises.

The future potentials of an employee can be measured using certain performance and behavioural parameters.

Performance Parameters:

• Targets accomplished in the current appraisal period.
• Particular areas where superior performance is shown.
• Overall performance rating.
• Skills, knowledge and talents which have scope for development.
• Steps taken by the employee for improving his performance and furthering his career development.
• Knowledge of the    employee regarding his  job and related fields.

Behavioural Parameters:

• Level of independence and autonomy.
• Decision-making capabilities.
• How the employee handles stress and work pressure.
• Degree of confidence.
• Communication and interpersonal skills.
• Leadership and motivation.
• How he handles and diffuses conflicts at work place.

Potential Appraisal – 4 Main Methods

Potential appraisal can be made with the help of following mechanisms:

• Rating by Superior – The potential of a candidate can be rated by his immediate superior who is in regular touch with him on the job. The superior can rate him on his technical as well as behavioral capabilities.
• Simulation games – Simulation games and exercises could be used by managers to unearth the hidden potentials of employees.
• Performance records in previous job – Present employer may check previous job ratings of the employee to know his initiative, creativity and risk taking ability etc. If these dimensions are indicating very high ratings, the employee has good potential for growth with the present employer also.
• Psychological testing – These days some organizations take up some scientifically proven psychological tests to measure managerial and behavioral dimensions.

Potential Appraisal – Quality Determination (According to Philips Model)

Potential appraisal means assessing the potential; that is, the highest level of work a person could ultimately be expected to perform without being overstretched. Parameters for assessing potential appraisal include strength of character, ability to work under pressure, personal drive, and emotional stability.

The following qualities determine the potential of an employee:

• Analytical Power
• Creative Imagination
• Leadership Ability
• Sense of Reality.

These qualities are described in detail in the concept of potential appraisal.

• Planned Separation – Employees with low potential and low performance are asked to improve their performance; if they fails, the planned separation strategy is applied.
• Solid Citizens – Employees with low potential and high performance are called solid citizens. The Philips recognize their limitations and take care their needs. Generally their percentage in the organization is 70 to 75.
• Problem Children – Employees with low performance and high potential are called problem children. They do well if boss or job profile or location is changed. After introducing corrections if they continue to show low performance, the separation process is initiated.
• Stars – Employees with high performance and high potential are called stars. They always seek challenging jobs.

Some of the techniques used in potential appraisal are given below:

• Self-appraisals
• Peer appraisals
• Superior appraisals
• Psychological and psychometric tests
• Management games like role playing
• Leadership exercises, etc.

Once the functions, the qualities required performing these functions, indicators of these qualities, and mechanisms for generating these indicators are clear, the organization will be in a sound position to establish and operate the potential appraisal system. Such establishment requires clarity in organizational policies and systematization of its efforts.

An open culture enables the growth and development of employees, and hence should be facilitated. In such a culture, conversations around feedback, growth and development can be conducted in a positive and comfortable way. An effective potential appraisal system leads to the assessment of employees, their strengths and challenges, while enabling them to grow and reach their potential. Continuous and consistent efforts through counseling and guidance enhance realistic perceptions of one’s skills and abilities thereby leading to effective career planning and management.

While some organizations may use a less formal way of identifying potential that needs development, other organizations have a more formal approach.

Some of the steps that can be included in a formal and structured approach are:

• High performing employees are identified and assessed on their strengths and areas of development in their current role as well as possible future roles.
• They are also assessed on some basic but critical parameters such as interpersonal skills, critical thinking, decision making capability, leader-ship style, and innovation as decided by the organization.
• The employees are then mapped on a Potential vs. Performance Matrix and evaluated.
• Once this is done, the high potential employees, called high-pots, are identified.
• Once the high-pots have been identified, a specialized training programme is designed for them.
• As a part of this training, they are provided with job enlargement opportunities or vertical movement.
• The main aim of this training is to prepare these high-pots to take up senior level positions in the future and be the heads of various departments.

At Piramal Glass Ltd, the PMS process consists of goal setting, mid- year and final end year reviews. The employee is reviewed at three levels – self, immediate supervisor and a level above the manager. The PMS form was updated to a central database providing access to the employees for their KRAs and achievements. A sense of empowerment was instilled in the employees and the process itself became error free and smooth.

Many companies, which carry out performance appraisal, also keep records on the potential of their employees for future promotion opportunities. The task of identifying potential for promotion cannot be easy for the appraising manager, since competence of a member of staff to perform well in the current job is not an automatic indicator of potential for promotion. At the Strategic Engineering Division of the Tata Power Company, continuous improvement, recognition and engagement of employees is the key to manage performance.

The organization launched the placement recommendation framework to enable employees to better align with organizational objectives by also taking into account their aspirations, expectations and competencies.

A grid positioning map indicator is developed highlighting well- placed employees to show potential for career broadening and increased responsibility or not so well placed or early for evaluation. This evaluation helps the employees to understand the direction in which they have to grow and build their skills. Manager roles include building the framework as well as conducting gap analysis and identifying training needs.

Potential Appraisal – 5 Main Steps Suggested for Good Potential Appraisal System

The following are some of the steps required to be followed while introducing a potential appraisal system:

• Role Description – Organisational roles and functions must be defined clearly. To this end, job descriptions must be prepared for each job.
• Qualities needed to perform the roles – Based on job descriptions, the roles to be played by people must be prepared (i.e., technical, managerial jobs and behavioural dimensio
• Rating mechanisms – Besides listing the functions and qualities, the potential appraisal system must list mechanisms of judging the qualities of employee such as –
• Rating by others – The potential of a candidate could be rated by the immediate supervisor who is acquainted with the candidate’s work in the past, especially his technical capabilities.
• Tests – Managerial and behavioural dimensions can be measured through a battery of psychological tests.
• Games – Simulation games and exercises (assessment centre, business games, in-basket, role-play, etc.) could be used to uncover the potential of a candidate.
• Records – Performance records and rating of a candidate on his jobs could be examined carefully on various dimensions such as initiative, creativity, risk taking ability, etc., which might play a key role in discharging his duties in a new job.
• Organizing the system – After covering the above preliminaries, a system should be set up that will allow the introduction of smoothly giving answers to puzzling questions
• How much weightage to merit in place of seniority in promotions?
• How much weightage to each of the performance dimension technical, managerial, behavioural qualities?
• What are the mechanisms of assessing the individual on different indicators of his potential and with what reliability?

• Feedback – The system must provide an opportunity for every employee to know the results of his assessment. “He should be helped to understand the qualities actually required for performing the role for which he thinks he has the potential, the mechanism used by the organizations to appraise his potential and results of such an appraisal.”

Requirements of Potential Appraisal System:

The following requirements are to be followed while introducing a potential appraisal system in the organization:

• Role Description:

The roles and functions associated with different jobs should be defined clearly. The tasks and processes involved in the performance of each job in the organization should be extensively described.

• Qualities Required:

There should be a detailed list of qualities that a person should possess in order to perform a particular job.

These qualities may be broadly divided into the following categories:

• Technical knowledge and skills.
• Managerial capabilities.
• Behavioural qualities.
• Conceptual capabilities.

• Indicators of Qualities:

A good potential appraisal system should have a mechanism for judging the various qualities in a given employee.

Some of these tools are:

• Self-appraisal.
• Ratings by superiors and peers.
• Psychological tests.
• Performance appraisal records.
• Simulation games.

Criteria for Effective Potential Appraisal Systems:

Potential appraisal system is a managerial process through which the conceptual effectiveness, interpersonal effectiveness, operational effectiveness and achievement motivation levels of appraises are uncovered.

These criteria are as follows:

• Conceptual Effectiveness:
• Vision
• Business orientation
• Sense of reality
• Entrepreneurial/intrapreneurial
• Orientation
• Operational Effectiveness:
• Result orientation
• Individual effectiveness
• Initiative
• Risk taking and control
• Interpersonal Effectiveness:
• Network directedness
• Negotiating power
• Personal influence
• Verbal behaviour
• Empathy
• Achievement Motivation:
• Drive
• Self-development and learning
• Professional ambition
• Innovativeness
• Stability

Potential Appraisal – How to Discern the Potential? (8 Main Ways)

There can be several ways of locating the talent:

• Outstanding performance in the current job.
• Putting the subject individuals through Pry/situation tests.
• Promotion examination.
• Mutual assessment by employees.
• 360° appraisal.
• Deep interview of high fliers.
• Carefully designed special tests.
• Self-appraisal scrutiny of individuals.

Potential appraisal depends upon the expertise of the appraiser.  The appraiser has to be an unbiased person with inbuilt quality to see through the person beyond the words and deeds, to read in between the lines and identify future employability of the subject individuals.

Potential Appraisal is a regular feature in the Defence Services wherein it forms an important part of appraisal system. The Annual Confidential Reports have a dedicated portion dealing with Potential Appraisal wherein the Appraisal Initiating officer, reviewing officer and the Senior Reviewing officers comment on future employability of the individuals. Similarly while the individuals are put through various professional training courses, the instructors also assess the potential of the candidates to be posted as Instructor at the respective schools of instructions.

Likewise, it is not uncommon even in the corporate sector to identify High Fliers early in life, groom them well and judiciously and suitably honour the potential with quicker/out-of-turn promotions. Good Companies recognise the potential and reward befittingly to retain the talent and reduce the chances of good employees leaving the organisation for greener pastures.

At the same time, such talent becomes public sooner and later and if the Company doesn’t honour the potential, the competitors pick them up at the first possible opportunity.

The brain drain from India to various countries can be assigned to improper potential appraisal in domestic parlour. It is not unusual to see NRI’s doing great in various fields elsewhere in other countries, some of them holding enviable assignments in NASA, WB, WTO, WHO, UN, etc.

Potential Appraisal when applied to various sports and athletic events would mean early identifying of talents and harnessing the same to bring out the best in the individuals. “Catch them young” is the key word or buzz word as it is easier to mould and bring up the individuals younger in age than the older who are difficult to be transformed.

See the young swimmers, gymnasts, tennis players and cricketers, they mostly are identified when they are young and groomed suitably to the best advantage of the sport. An example of good singers, dancers who get identified at younger age will not be out of place towards performance appraisal carried out by their parents/gurus/mentors.

Potential Appraisal – 4 Main Uses

Some of the uses of potential appraisal are given below:

• Helps in designing a career plan for the employees based on his potential skills.
• Provides career development      guidance and exploration of future prospects of employees.
• Identifies the areas where employees need additional training.
• Motivates employees to further develop their skills and capabilities.

Potential appraisal identifies the hidden potential of the employees and helps the organization to take appropriate steps for converting the latent potential into actual performance. It helps the company build a base of highly productive and motivated employees for meeting future manpower requirements.

Potential assessment should be undertaken as a part of performance appraisal so that employees can be developed to achieve their highest potential and contribute towards organizational goals.