What is Performance Management?

In this article, we offer insights into what performance management system is, the performance management process, and the benefits of a well-defined performance management system.

Performance Management Definition

Performance management is a continuous process of feedback and communication in which people are enabled to perform to the best of their abilities. It is the main vehicle by which supervisors communicate what is required from employees and provide feedback on how well they are achieving their goals. It brings into play many of the elements that make up the key principles of people management, including employee motivation, engagement, and training.


According to Gallup’s State of the American Workplace Report, each year disengaged employees cost the U.S. economy between $483 and $685 billion dollars.

The key point here is that the performance management process is continual, with a regular session where both supervisor and employee have the opportunity to review and assess progress. Quality performance management should, thus, bring together a number of activities together to form a performance management cycle.

Why Performance Management System?

As a manager, you need to adopt a performance management system that will facilitate continual growth and success of your team in order to deliver the company’s objectives. By managing the performance of the employee, the team and organizational performance will follow. By raising individual and team levels of performance, organizational performance will drastically improve.

Annoyance, discontent and conflict is often found within teams where the performance of individuals is not managed. According to Gallup’s State of the American Workplace Report, each year disengaged employees cost the U.S. economy between $483 and $685 billion dollars.

Performance Management Process

Performance management system begins when a job is well-defined and begins with the assumption that it’ll help the individual perform to the best of their abilities. It focuses on accountability, responsibility, transparency, and sets a clear understanding of expectations. The performance management cycle can be broken down into four main categories: planning, training, reviewing and rewarding.

1. Planning

Historically, organizations tended to carry out the planning stage once a year. Today, the planning process has evolved to include a comprehensive description of key objectives, long and short-term goals, and a clear metric for how those objectives and goals will be accessed.

2. Training

Once the key parameters of the job and objectives for the coming year have been set, the next step of the performance management system begins.

This performance management process involves reviewing the overall performance of the employee, how well the training worked, and it also includes the reward and recognition – which is the key to help employees stay motivated.

3. Reviewing

At this stage of the performance management system, it is important for both supervisor and employees to look over the previous quarter/year and see how well the performance management process worked.

Here are a few questions you can ask during the performance management review:

Were your organizational objectives met? If not, why? What challenges did you face? What training would help you perform better?

A key part of the performance review process is to give and receive continual feedback. Supervisors should provide actionable feedback for the employees so know what their problem areas are and what training/interventions can be applied.

4. Rewarding

The final step in the performance management process is the reward and recognition. A reward does not necessarily have to be monetary, although certain rewards such as bonuses, raises, and special commissions can bolster engagement levels.

At the end of the performance management system the supervisor and employee can create new goals, objectives and celebrate milestones.

Benefits of Performance Management System

A well-defined performance management system created a healthier, more transparent work environment. Since it establishes a clear set of rules, goals, and milestones, everyone has a clear understanding of the expectations. When individual expectations are clear, the quality of everyone’s work becomes more efficient and effective. In the presence of a performance management system supervisors are not worried about how to tell employees that they are not performing well. If the performance management process isn’t working, they have a fair idea about it already.

Whether you want to stay up-to-date on HR news, read in-depth HR articles, or find new ideas on strategy, innovation, and leadership, The HR Digest Magazine is here to suit your needs and help you stay more informed.

Priyansha Mistry
Currently editor at The HR Digest Magazine. She helps HR professionals identify issues with their talent management and employment law. | Priyansha tweets at @PriyanshaMistry

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