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What is Performance Management?

What is performance management, and why should it matter to an organisation?


The workforce of an organisation drives the success of a business. Having involved and efficient employees should therefore be a top priority for a business. This involves employees knowing clearly their role in an organisation, the goals they are expected to achieve, and how they can expect their employers to help them achieve these goals through proper management, training, and support. The aim of performance management is to ensure that an organisation’s key aims are met by and through the workforce by keeping track of, and improving, employee performance.

It is the job of departments, like HR, to manage the workforce to ensure the smooth running of the organisation. Performance management aids these departments to maximise the value of the workforce they maintain to achieve the employer’s objectives. Whilst, also helping individual employees meet their own goals and grow professionally.

Performance management should always be in line with the business’s objectives and strategy, and may differ between industries as business objectives differ. Despite individual differences, performance management generally describes activities that:

  • Improve performance among employees, departments, and organisations as a whole.
  • Establish aims to help situate a department or teams’ efforts in the whole organisation.
  • Encourage people to improve their performance by linking success to a reward or career progression.

What doe correct implementation result in?


If implemented correctly, performance management should embrace and synthesise many good people management principles. These are focused on open channels of communication between employer and employee, and supportive feedback of progress towards objectives. It is not simply a traditional ‘annual review’ or actions to deal with a flagging employee, but encompasses and exceeds both of these things. Performance management requires planning, and includes both formal and informal processes. Things like setting team goals, linking those goals to the wider business objective, and agreeing on actions to achieve those goals can be effective ways of managing performance. Making effective use of meeting time, whether they are whole team meetings or one-to-one meetings between line manager and employee, is another important aspect of performance management.

HR is a central department for performance management as they aspire to be the connection between individual employees and the wider organisation. Managers should also be able to give feedback to motivate and improve individuals, as well as acting in a disciplinary capacity, alongside HR if needed. However, performance management should involve the whole organisation, and managers should encourage individuals and groups to take responsibility for their own improvement. A lot of performance management is shaped by organisational norms, so communication between workforce and leadership is key.

How does Performance Management Work?


The best approach to performance management will differ for each organisation, based on the business objectives and the workforce composition. Practices should be relevant to a specific context, and have a clear goal to improve or grow an area of an organisation’s culture. There should also be a certain level of flexibility to account for different processes or functions within the workforce.

Performance management is continuous, but the starting point for all performance management should be an employer’s goals and aims. This should translate to individual employee goals for their development, without losing sight of the larger aims of the organisation. Feedback and evaluation is essential, and should be regular, but should also encourage open communication between individuals and their managers. If necessary, this could also be supported by training in any areas which a manager feels a need for more support.

Traditional performance management methods can be effective, but a good model of target setting should also consider:

  • Objectives that are specific and challenging are not always the best approach. Each employee is different, and therefore will respond to different approaches. With some employees and objective focused on learning or behaviour may prove more effective.
  • Performance ratings can be biased, but there are ways to guard against this. For instance, having two separate persons checking the ratings, such as a manager and a HR professional.
  • The purpose for performance ratings should always be transparent. Using them for administrative purposes (e.g. for pay decisions) requires a different approach to using performance ratings to improve individual performance.
  • Employee reactions to feedback are vital, and often influenced by personality. Feedback methods may differ from employee to employee, and should always be individual.
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