Employees want to know and need to know where they stand. Managers are expected to improve performance and stimulate productivity. Informal appraisals are made by every medical group manager on a daily basis. When these appraisals are channeled into a more formal, systematic appraisal program, management, employees, and the organization can all benefit. The ingredients of a positive, effective employee performance appraisal system are identified here and critical areas are addressed, including program prerequisites, setting up a workable plan, completing the written appraisal, and conducting the evaluation interview. KEY WORDS:MANAGEMENT, EMPLOYEES,PERFORMANCE APPRAISAL,MANAGERS,ORGANIZATION