Application of Knowledge Management on Performance Appraisal and Management System Abstract The goal of competitive strategy is to create competitive advantages and gain the maximum value. On the other hand, competitive advantage lies in differentiation which originates from exclusive ¡§core competence and resource¡¨. In fact, what so called ¡§core competence and resource¡¨ tightly relates to ¡§knowledge¡¨ because to compare with other resource, knowledge has the characteristics of being ¡§scarce¡¨, ¡§difficult to imitate¡¨ ¡§unable to copy¡¨, and ¡§granted with exclusive rights¡¨ (Hsu Shihchun, 2000) and these are the essential elements for a company to remain its competitive advantages. Thus, Knowledge Management (KM) determines powerfully the survival of a company. In terms of business management, the ultimate goal of Performance Management System is to enhance organization efficiency which is built on the integration and improvement of business operation. It is also an important system aiming for improving or strengthening the system of ¡§core competence and resource¡¨ building. This coincides with the nature of knowledge management and benefits each other. Management activities such as production, marketing, R&D, accounting, purchasing, and human resource tie with ¡§the import , capture , retrieval , access , use , sharing , creation of knowledge¡¨ and this evidently indicates the popularity and long existence of KM activities. This study attempted to use KM Process as the base to construct a case study model with theoretical and practical application through the application demand of Knowledge Technology (KT). Before constructing the model, this study first reviewed the previous literature and understood the definition of KM and Performance Appraisal and Management. With the help of diagnosis tool, Six Box Model (Weisbord, 1976), we improved the study model of Knowledge Based Performance Appraisal and Management System (KBPAMS). Meanwhile, we adopted dimensional elements to compile an ideal ¡§Study Form for KBPAMS.¡¨ We also selected certain companies as the cases to examine the existing system and conducted one by one in-depth interviews with employees of chosen companies. Due to the limitations on study time and human resources, random sampling as well as convenience sampling were excluded; purposive sampling was chosen to understand the actual demand and opinions of workers. Next, Flow Chart and handling description were two methods of presentation to construct a simple ¡§KBPAMS¡¨ case study model as the reference for future establishment of information system. In the end, we used the improvement of the ¡§KBPAMS¡¨ case study model. To analyze the six dimensional elements of the ¡§KBPAMS¡¨ and studied it by open-system-view. Four suggestions were offered for conclusion as follows: 1.Returning to the humanity; 2.Integrating business culture and creating business characteristics; 3.long-term Investing on KBPAMS; 4.Gaining full-support from the top-manager. Keywords¡G Knowledge Management (KM), Knowledge Technology (KT), Performance Appraisal and Management, Performance Appraisal System (PAS)