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What is Performance Management?

Tricia Christensen
Updated May 16, 2024
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The field of performance management can comprise two separate types of management. In one aspect, an analyst may view the performance of a company as a whole, and also evaluate the effectiveness of the managers and heads of companies in reaching goals. In another sense, it may be a system of evaluating employees to help them reach reasonable goals and thus ensure that the company performs better. How the performance of individual employees is managed can differ, but it generally includes planning work, setting goals, offering feedback and reviews, offering opportunities to learn more in one’s field, and rewarding employees who perform well.

Employee performance management works best when work is planned and goals are consistent. This may mean having a clear way to communicate regarding work expected at the moment and in the future. Planning also includes defining expectations of the employee so that he or she is not broadsided by evaluation criteria not included in planning.

Planning and setting goals also creates a system of predictable rewards for good performance, and consequences for poor performance. This way the employee can reasonably assume the consequences of work performance, whether good or bad.

It also involves giving feedback to employees on a consistent basis, more often than just in the average annual review. Instead, an employee’s ability to exceed or failure to meet goals may be monitored on a monthly basis. This provides the employee with either the opportunity to receive compliments and rewards fairly regularly, or to make behavior changes sooner if performance is not up to par. Often, employees feel that end of the year reviews contain criticisms of work in the past year that were never openly discussed with the employee. The employee benefits from a more consistent evaluation, since this gives a person time to address issues and change problem issues.

In a performance management model, employees must also be given ways to grow and develop in their field. This means giving them opportunities to work on harder projects, pairing less-skilled employees with expert employees, and offering team models where employees can direct and make decisions. Greater responsibility and opportunities to advance in one’s field are essential to maintaining happy and productive employees.

Rewards are also a huge part of performance management. The greatest part of this is rewards of monetary nature, either in bonuses or raises, when employees perform well. Employees who are gain qualifications to work in a high level of their field should be placed in positions of greater responsibility, and receive a greater share of pay as well. Performance analysis should focus as much or more on positive performance than it does on the negatives. Rewards must be real and tangible, or else the company runs the risk of becoming a “negative action” company only.

Techniques for managing employee performance may be taught to companies that have difficulty maintaining performance of employees or who have a long history of unhappy employees and turnaround. Some companies may also hire experts to learn how to model its concepts.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.
Discussion Comments
By manyansa — On Oct 23, 2010

While not undermining the integrity of managers in entity, as far as decision and policy making is concerned, I personally feel the first and most important role of managers is to lead others towards achieving the organisational goals as a principle of motivation for employees who are the executors of these goals. It is wise to involve them in policy making to make them more responsible for what they decide for the entity.

imposing targets on them does not really motivate them, because sometimes managers turn out to be too optimistic concerning employees' performance targets. Also, the imposition of goals kills creativity and innovation in employees, since they only look to the manager even on simple issues on which they could make a decision.

By BostonIrish — On Jul 16, 2010

@BigBloom - A certain degree of flexibility is good, but certain ground rules should also be set in place to ensure that goals are helpful to the workgroup as a whole. In order for this to be ensured, it is often necessary that people have goals set for them which may not lie in their interest and/or expertise. It is up to the manager to not only be an encourager of individuals, but primarily an organizer of the group as a whole.

By BigBloom — On Jul 16, 2010

I have found that when goals are set strictly by managers without the input of employees, the goals are (not surprisingly) less likely to be met. It seems that no one knows their own strengths better than the individual, and because of this it is helpful to assume that an employee is going to set appropriate goals for him/herself. The most helpful goal of the employer is to make sure that these goals are met by incentive and supervision, but a negative assumption that someone is going to set low goals for him/herself often leads to just that (a "self-fulfilling prophecy").

By yntern — On Apr 01, 2010

I used to work for a company that put a lot of emphasis on performance management, but seldom did much to back it up. There were regular employee reviews, but too often no one was given much praise or criticism outside of these reviews, so you'd go for months and months assuming that things were fine, only to get hit with negatives when the review came around. That's assuming that the review came on time; most managers I've dealt with regularly failed to actually provide reviews or other feedback on time.

Tricia Christensen
Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia...
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