Performance Management – Definition, Purpose and Benefits

To make a long story short:

Performance management (PM) is a process that makes it possible to ensure that a set of activities and outputs meet an organization’s goals in an effective and efficient manner.

It may focus on several things but mainly it analyzes the performance of an organization, a department, an employee, or the processes in place to manage particular tasks.

PM is not a one-time event. It’s generally more about creating a set of processes in the communication between a supervisor and an employee. It’s a continuous effort that should be implemented throughout the entire year to make sure that the strategic objectives of the organization are accomplished.

For that, the person in charge should have a systematized approach to performance management that includes:

  • clarification of expectations
  • setting objectives
  • identifying goals
  • providing feedback
  • reviewing results

Managing Employee Performance

Monitoring performance and providing feedback is an ongoing process that happens throughout the year, even though it is kind of related and focused on the annual performance review. To best describe the nature of this measurement, we’ll define its course of action as a cycle with year-to-year variations based on changing objectives.

This cycle is made up of three phases: Planning, Checking-In, and Review.

  • The planning process serves to structure overall expectations you and your employee might have. It includes collaborating on the development of performance objectives. A point of difference in this process is that individual development goals are also regularly updated. The focus is on developing a performance plan that can direct the employee’s efforts toward achieving specific results to support organizational excellence and employee success.
  • All goals and objectives an organization has, are examined and debated during the entire year, on routine check-in meetings. These occasions ensure a certain framework that establishes a method for employees to achieve results through coaching and mutual feedback.
  • The last element of the performance period is the review. The employee’s performance is reviewed by comparing it with the expected objectives, but also with the means that were used and the behaviors that were demonstrated in achieving what was previously outlined.

Human Resources and Performance Management

Accord­ing to John Lock­ett and his 1992 book Effec­tive Per­for­mance Man­age­ment: A Strate­gic Guide to Get­ting the Best From Peo­ple, per­for­mance man­age­ment can be seen as a sys­tem that aims to devel­op indi­vid­u­als with the required com­mit­ment, skills, and com­pe­ten­cies. All of that is done so that the entire organization can be work­ing towards shared mean­ing­ful objec­tives with­in its framework and in line with the company’s vision and mission.

The department that invests a lot of time, resources, and effort into perfecting all per­for­mance man­age­ment process­es – is the HR department. They are the ones that first noticed that performance management was on the brink of a huge change. The main difference that became more and more visible in the past few years is the rejection of the old system, where performance goals were set once a year and re-examined at the year-end review. HR recognized that when it’s set up this way, the process creates a lot of extra work and the worst part is that it isn’t even properly linked to employee engagement and performance.

Year-long goals easily become stagnant in the months that pass between their actual review and the time they were set. This can seriously demotivate employees, as they can feel that the process itself is not relevant to them or that it’s even threatening.

Something had to be done.

So, what we have today is Performance Management that is modern, engaging, and transparent – making it possible to create many other positive changes in how employees are managed and exposed to learning in a digitally transformed world.

Don’t get us wrong. Performance management is still a rather long and complex process with many elements that need to be addressed. Also, the complexity comes from the fact that every single employee needs to participate simultaneously even though each employee has different individual goals and characteristics. Therefore, it is way easier and simpler to use some sort of platform that supports the process and helps managers handle and operate it from beginning to end – when monitoring the performance of individual employees as well as departments, and the overall organization.

The true purpose of Performance Management (and some benefits)

A good and solid performance management system works constantly to improve the overall organizational performance. It is done by managing the performances of teams and individuals and how they correlate with the overall organizational ambitions and goals.

The positive influences it has on the way an organization is doing its business are many.


The benefits are:

  • First of all, a PM regularly provides open and transparent job feedback to the employees.
  • A PM creates a direct link between performance and compensation.
  • It helps recognize and reward good performance in an organization in a timely manner.
  • It encourages teamwork, collaboration, and communication – by using a mixture of social activities and access to the right technology in order to develop a sense of togetherness and team spirit.
  • It ensures that every employee is achieving their SMART goals – for this, it’s essential that employees understand what is required of them. Getting there is not the responsibility of just an employee. The manager and HR are also in charge of ensuring each individual’s goal.
  • It identifies all development fields as one of the key purposes of PM is talent management that builds development plans together with employees. Once a company invests in personal development and career aspirations, employees will feel respected rather than replaceable. Add to that providing maximum opportunity for career growth, and you got yourself a bingo when it comes to creating a clear career path for your employees!
  • A PM is important for taking so-called corrective actions as it allows managers and HR to step in at an early stage to address performance issues. Managers should be able to get to the root cause of the problem at any time (like unmotivated personnel) and work with their team to turn their overall performance around.

When implementing Performance Management into your company, what you get at the end are motivated employees with improved performance and you, as a manager, get to know their strengths and weaknesses so you can engage them in a better and more effective way. Employees understand better their duties and responsibilities and all administrative actions are solid and fair.

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