Abstract Small and medium-sized enterprises (SMEs) are the mainstay of China’s social and economic development, and the implementation of performance appraisal systems in SMEs is an important way for enterprises to promote the growth of their employees, and each enterprise has a performance appraisal system that matches the characteristics of its own corporate culture. However, at present, objective factors such as the scale and operation of SMEs in China lead to the fact that employee performance appraisal cannot play a good role, and the decision-making level of SMEs understand the implementation of the performance appraisal for subordinate employees in a formal way, and cannot develop a performance appraisal system that is in line with the enterprise itself by combining with its development status. A reasonable performance appraisal system can improve the corporate cohesion and industry competitiveness of the company’s employees. The imperfection of the current corporate employee performance mechanism is not addressed, and the planning of objective employees is not uniform and reasonable enough. This paper constructs a model by analyzing many factors influencing the implementation of performance appraisal systems in SMEs and combining them with incomplete information race theory. Ultimately, we explore the strategies and methods of the performance appraisal for SMEs, cultivate talents for SMEs, enhance the sense of belonging and creativity of enterprise employees, and provide a strong guarantee for enterprise development.

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