What is the primary problem with performance appraisals?

The number one issue is the underlying, negative assumption they make about people. They work from the perspective that people are flawed and therefore need motivating, monitoring and measuring. The alternative is to build from a positive assumption: that people are awesome, creative, trustworthy and want to do a good job - if we’ll only let them! From this negative assumption comes all the other problems, such as the need to control people. Anything that’s used as a process to control other people, however well-intentioned, is just a substitute for the real work that’s needed: relationship, listening and serving. But control is easier, so we settle for that.

A close second is that in the name of efficiency, appraisals try to achieve several different things at once (feedback, professional development, career planning etc). These different intentions often compete with and contradict one another: you can’t expect honest conversation from an employee face-to-face with a manager making pay considerations. This means nothing is done well; each individual purpose of the appraisal needs thinking through on its own merit.