TO evaluate workforce performance, one of the techniques adopted by organisations is that of Annual Performance Appraisal (APA). While it provides a structured plan to assess employee contribution, it often creates more problems, adversely affecting both employee satisfaction and organisational effectiveness. APA is a subjective system under which supervisors, having deliberate or unint-entional biases, get influenced while evaluating subordinates. Furthermore, this technique creates a false dichotomy between high and low performers, negl-ecting the potential for development in those who may be struggling. Besides, there is recency bias and employee disenga-gement. Therefore, the reliance on a single annual review, in the shape of APA, often results in a narrow view of performance, ignoring the growth and contributions made by employee throughout the year. Instead of fostering a growth mindset, the APA technique has inadvertently encouraged a fixed mindset where empl-oyees feel pigeonholed by their ratings. The competitive environment fostered by APA hinders teamwork and collaboration, and, instead, pits employees against one another for promotions and perks. Moreover, it discourages knowledge-sharing and mutual support, breeds stress, anxiety and resentment, and affects employee’s morale. Besides, employees often experience performance-related pressure, affecting their mental health, especially as they come closer to the evaluation period. The organisations should understand the limitations of the APA technique and explore alternative approaches, like the Continuous Performance Management (CPM) technique, which emphasises regular feedback and an open commun-ication environment, allowing employees to receive guidance and recognition in real time. Finally, the CPM approach fosters a culture of collaboration, encourages professional growth, and ultimately leads to enhanced organisational performance.