The Potential Appraisal refers to the appraisal of the possible abilities and talents of the employees. Potential appraisal aims at identifying those skills of which the employees might not even be aware. Potential appraisal is future oriented, as it is used to consider the ability of the employee to be promoted. Potential appraisal may be used as a tool to predict the performance of an employee by identifying his strengths and weaknesses beforehand. It makes it easier for the employers to determine the career path for their employees. One of the difference between potential appraisal and performance appraisal is the criterion. The criterion used is to analyze the goals achieved by an employee and what skills he or she currently possesses that could be helpful in indicating the ability of