What is performance management?

Performance management is a system that analyses employees’ performance and weed out the problems that they are facing.

Michael Armstrong gave the most relevant definition of performance management in his book Performance Management: Key Strategies and Practical Guidelines.” It states-

Performance management is a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results from the organization, teams, and individuals by understanding and managing performance within an agreed framework of planned goals, standards, and competency requirements.

Effective performance management within the organization is crucial to unlocking your employees’ full potential.

The main objective of performance management is to enhance the skills and competencies of the employees so that they efficiently attain strategic business objectives. It also helps in self-development through the proper guidance of managers and leaders.

With its clear cut objectives, companies now have understood the importance of implementing an effective performance management program in their system.

Why can it be a hard shell to break?

Here are some statistics to give you more insights about how well performance management systems are holding up:

  • Only 14% of organizations are happy with their performance management systems.
  • 58% of organizations rated their performance management systems below C-grade.
  • Only 23% of HR executives think that their performance management process accurately reflects employee contributions.
  • Two-thirds of performance management systems misidentify high performers.

Going by these numbers, we can state that performance management needs more understanding and a new framework that goes hand in hand with the current changes.

Most of the systems have been in use for a long time without any proper evaluation. And at the same time, problems also arise due to

  • Unclear expectations: Your employees are not clear about what they need to do and what is the organization expecting from them.
  • Lack of Will: Employees are not interested in their work anymore and find it too monotonous.
  • Lack of Skill: No proper training programs in the organization to foster the skill set of your employees, impeding their ability to perform a specific task.

Therefore, to run an effective performance management system, it is crucial to identify and restructure the whole process.

Performance Management features that you can incorporate

The modern performance management system needs to be more employee-centric. It not only allows the ease of use for the HR but also makes it easier for the employees to understand the policy.

Such updated systems provide:

  • The expected goals and requirements.
  • Proper planning for efficiency.
  • Personal development plan.
  • Regular feedback and continuous tracking.
  • Recognition daily.
  • More portability with mobile access.

5 Ways to build an efficient Performance Management System

Well, if you are still struggling to figure it out on how to implement such a system, then look no further. Here are five ways you can build an efficient Performance Management System in your workplace.

1. Goal Setting

Well defined goals for employees helps them to enhance their performance and improve their results. With more definite goals set in front, workers know exactly what they need to do. And with these distinct goals, employees find it easy to visualize what the organizations expect from them.

Your performance management system should have that ability that allows users to revisit their goals continuously. Employees should be able to set their goals weekly, monthly, or annually. Also, they should be able to share their progress whenever they can so that their managers can keep track of their performance.

2. 360 Degree Feedback

360-degree feedback is a system where employees get anonymous feedback from their managers and peers. Such schemes allow you to ask a random set of questions to the reviewer and whose responses are then saved.

The advantage of having this system is that it will allow you to create a developmental plan for an employee whose review you got. It lets you have more insights on what is the employee’s strengths and weaknesses are and work according to it.

3. OKR Implementation

OKR is the abbreviation for Objectives and Key Results. In 1968, Andy Grove developed the system of MBO or Management by Objective, and it became OKR, which we use today.

The main objective of OKR is to connect company goals with the employee’s work. Implementing this system helps managers to create a transparent, accountable, and measurable way to achieve goals. OKRs also helps in keeping track of an employee’s total development during their tenure in the organization.

4. One-on-one Meetings

It is always crucial to keep track of your employees happiness, what they think about the company culture, and if the environment suits them for their work. And the best and impactful way to understand those aspects is by conducting one-on-one meetings. It is done between the supervisor and the employee so that the employee can suggest areas for improvements within the organization.

This type of meeting helps you to build relationships and work around the problems that your employees are facing. One-on-one sessions also help enhance performance, boost productivity, and gives you a perspective on employee satisfaction.

5. Easy to Use

If you have an established performance management system within the organization, but it is quite complex to understand, then it can pose a problem. You need your system to be sustainable and flexible, which will allow users to have a more in-depth understanding. And to achieve that, the PM system needs to be simple and easy to use.

The system should be employee-centric, and it should be optimized in such a way it fills the needs of the people working in the organization. With the rise of millennials in the workforce, gamification has become a necessary part so that employees do not get annoyed to use it often. You can add fun contests or games related to work so that the tasks become more fun. Thus, improving engagement along with morale-boosting.


Incorporating a system is not a task that can be achieved in a day. It takes proper planning and a bit of time to reach the potential that we want fully. The same goes for performance management systems. It has to be well planned and well executed so that you get the best out of it. Once you have a proper system in place, you will be able to see the positive results it bears for your organization.

Read more: Improve Your Employees’ Performance