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What is a Performance Management Framework?

By Osmand Vitez
Updated May 16, 2024
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Performance management framework is a set of guidelines companies use to facilitate high success levels and measure the effectiveness of business operations or employees. These guidelines are often set by company directors and executive-level managers. Large companies usually include this framework in their corporate governance rules and guidelines. Performance management framework outlines key performance strategies and financial needs for business operations, aligns goals and responsibilities for individuals in the company, and collects performance data of various business departments.

Key performance strategies in performance management framework help companies use a specific set of processes or methods for accomplishing various business taxes. Strategies are found in the planning phase, production processes, marketing or advertisements, sales management department, accounting or finance functions and other various business functions. Strategies can also help companies create a competitive advantage in the economic marketplace. A competitive advantage allows the company to create or produce unique products that are not easily duplicated by other businesses.

Companies can use financial management to enhance business relationships for developing streamlined operations. Performance management framework may provide guidance for developing specific business relationships that will lower the cost of business inputs or economic resources. Obtaining external financing through bank loans or direct capital investments can also be outlined in this framework. Companies often develop performance indicators to set minimum levels of acceptable financing terms.

Individual goals and responsibilities usually fall under the employee guidelines in performance management framework. These guidelines help create a sense of understanding for each employee on what they need to accomplish each day in their job function. Companies may also use training sessions for educating employees on how to best complete each of their tasks. Using extrinsic rewards is another feature of performance management framework. These rewards can include annual compensation increases, financial bonuses, additional time off, or other similar rewards for meeting goals.

An important feature of performance management framework is the ability to collect data and analyze the information against predetermined guidelines, goals, or objectives. This review process is usually specific to the task or function being reviewed. Many companies use business technology software to gather and collect this information electronically in a real-time format. This process allows directors or managers to review the information in a timely manner and make changes if necessary to improve the business function performance. Employee reviews may be less intense than a business function review. Most companies conduct employee reviews on an annual basis when assessing their performance.

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