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What is Performance Management?

A Performance Management System is a systematic approach to measure the performance of employees.

It is a process through which the organization aligns its mission, goals, and objectives with available resources (e.g. Manpower, material, etc), systems and sets the priorities.

These systems are often based on organizational and job-specific competencies that need to be obtained for successful job performance.

In other words, performance management is simply an ongoing process of communication between a supervisor and an employee that occurs throughout the year in support of accomplishing the strategic objectives of the organization. It is a direct/indirect relationship between an individual’s and an organization’s goals and objectives.

So, when we talk about performance management, there are multiple things that need to be brought together to have the best performance management system in place.

Terms and processes like Goal Setting, Individual Development Plan, Feedbacks, or reviews play a vital role in defining the best Performance Management System.

There are basically 4 steps involved in the Performance Management Process. Those are as follows :

#1. Business Role i.e. explaining and setting the right expectations to the individual so that they can draw a plan to achieve those goals accordingly.

#2. Performance Planning i.e. planning about how to achieve the set standards.

#3. Performance Development i.e. working towards the individual development plans and organizational goals.

#4. Performance Measurement i.e. Evaluating performance and checking for any deviations to take corrective actions.

Why is there a need for Performance Management System? The Performance Management System is needed because of the following reasons :

#1. To improve the company profit margin.

#2. If the performance of employees is good, it impacts the level of productivity which directly impacts the revenue and company profit margins. It also helps the organization to scale business by growing talent.

#3. To guide personnel along a suitable career path.

#4. It is needed to guide the individual towards the individual development plan. The employees should be made to focus on their career development plans for growth and development of both technical and soft skills

#5. To furnish staff with valuable progressive feedback.

It is very important to develop a feedback culture in the organization to create an environment where we can communicate openly and without reservation. The aim is to build high performing teams by giving continuous feedback.

To ensure staff attains their SMART goals.

SMART stands for Specific, Measurable, Attainable, Relevant, and Time-Bound.

Goal setting is important to allow team members to drive results or a behavior change within the organization. It helps team members to decid3 a future road map and focuses on a particular period.

To ensure employee goals relate to and advance organizational objectives.

It is very important to align the individual goals and objectives with that of the organization. Now let’s understand what is an effective Performance Management System? An effective management system is one which is:

#1. Continuous and not annual.

#2. Approved by management, executives, and senior staff.

#3. Incorporates continuous feedback as a mandate and not routine.

#4. Result based.

#5. User friendly that gives an overview of the performance management activities.

In other words, we can say that the Performance Management System should be simple, consistent, and should be able to truly manage performance and build a culture of feedback.


Author / Educator – Isha Gaur, Lead – Talent Engagement Partner

Isha is HR Professional with 6+ years of experience currently working with 3Pillar Global and has prior experience in organisations like Thomson Reuters and hCentive Technologies. She started her corporate journey with the Recruitment function of HR, then moved to HR Operations, and then finally working as an HR Business Partner role for the past 4 years. She has a good hold on HR processes like Performance Management, Employee Engagement, etc.


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