How Do You Define Performance Management?

CoachHub · 21 April 2022 · 10 min read

Performance management is a tool to help managers or supervisors evaluate and monitor their employees’ work performance. The main performance management goal is to develop an environment suitable for people to perform and effectively and efficiently produce high-quality work.

Performance management helps to view individual employees in a workplace diversity system. Therefore, there will be transparency, accountability and clear expectation understanding in the organization.

What is a performance management system?

It is a tracking mechanism for employees’ performance measurably and consistently. A performance management system allows the organization to ensure all departments and employees work effectively to achieve the business’s products and strategic goals. Successful companies gain benefits from aligning their employees with their corporate goals.

You might be asking yourself, what is the performance management process? Performance management is a constant communication process between managers and employees with the aim of working together to improve and develop the whole organization. Performance management offers diversity in the workplace making coaching, reviewing and planning employees simple and effective.

More information about effective performance management

One of the most important elements in any business or company is effective performance management. Through informal and formal processes, performance management helps many companies and organizations align their resources, systems, and employees to a specific strategic objective.

Effective performance management acts as a dashboard in that it provides an early warning of an arising problem, allowing managers to know what to do and when to make certain adjustments to maintain good business performance. Organizations that take performance management seriously and correctly become terrifying competitive machines in the market.

For example, many companies have gained their success through getting many, if not all, employees moving in the same direction and toward the best of their personal abilities. Developing a good corporate culture is the key to effective performance management. The beginning is coming together, the progress is keeping things together, and success is working together.

However, many companies do not pay attention to their performance management, resulting in an unsafe, slow, or downright broken system. These organizations are now working to their very best or as effectively as they can. Therefore, any alteration to market, technology or matrix management can leave them helpless and unable to respond.

Strong and perfect performance management lies on simple performance management strategies like what gets measured should get done. In a flawless system or liberated company, managers are responsible for creating a cascade of targets and metrics from the top-level objectives to the daily activities of the frontline employees. It is the work of supervisors to regularly monitor the set targets and metrics and engage the responsible team for progress discussion.

Underperformance will trigger an action to deal with the issue, but a good performance is rewarded as the project continues.

Managers can utilize performance management tools to recommend new action courses, adjust workflow and make other specific decisions that favor employees to reach the company’s objectives. A company that focuses on continuous accountability will create a more transparent and healthier work environment.

Since effective performance management enacts strict rules, everyone knows what is expected from them, allowing remote management practices. Employees are not working to impress the manager when doing a random task, and supervisors are not worried and afraid to tell employees the performance is poor.

If the system works perfectly and effectively, everyone will know what to do and when they underperform.

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Effective performance management model

Despite the fact that there is a performance management software package, templates are made specifically for a certain company. However, performance management models contain several universal elements like:

Coming up with a specific job performance outcome

This element aims to self-question: What type of goods and/or services does my area of expertise produce? How should my interaction with colleagues, customers and supervisors be? What is the effect of my work on the whole company? What procedure should I follow when doing my job?

Aligning company’s goals and mission with employees’ activities

Employees need to understand how their overall goals contribute to the company’s growth in achieving diversity and inclusion.

Defining job development plans

Employers and employees should define their duties clearly. Employees should be given a platform to say what new things they learnt from a certain project and how to use their knowledge for company benefits.

Developing performance-based expectations (measurable)

Employees should take part in how success is measured. Results and expectations (the produced goods and services), actions (the processes used by employees to produce services and products) and behaviors (the values and demeanor an employee demonstrates while working).

Meeting regularly

Instead of waiting for an annual performance appraisal, leaders and employees should meet and regularly engage in evaluating progress. Managers should develop an easy to follow guide to managing HR trends and resources to develop an effective meeting plan.

Developing a strong and effective performance management system

The best organization will build a performance management system that can help them actively avoid project pitfalls. All those performance management examples have the same number of similar characteristics that include the below points.


Regardless of the changes to targets and metrics or diversity in the workplace, the best organization will keep reviews and meetings constant to make them part of everyday operation. A regular heartbeat and standard work characterize it.

The emphasis on standardized processes extends beyond performance management strategies into all aspects of the organization’s operating models.


Most companies manage and measure their performance by using lagging indicators like quality targets and monthly output compliance. Therefore, it will be too late to change the consequences by the time the results are out.

Best companies track similar metrics but with an integrated performance management system. Internet technologies like distributed control systems help pass the information on performance change, making managing remote employees easy. Therefore, the manufacturing team will react long before any variation undercut the quality or output.

Some changes don’t require the installation of any technology. For example, after every workday, the functional and production team can meet and complete a checkout form to assess the day’s work. A combination of qualitative and quantitative metrics and straightforward graphics offer highly effective and easy tools for correcting and identifying issues before the next workday.

The metrics used by different organizations as performance management system development will become more complex. Holacracy will ensure that work is completed at the set time and quality as team members help each other. This technique will offer creativity, transparency and productivity.

Continuous improvement

All levels of a certain organization, including the senior management, should be involved in standard work. Standard work for senior individuals forces a routine that develops a throughout expectation, while the work is uncomfortable at the beginning. Because of that, the expectation and the specific metrics will drive sustainable and predictable performance.

The manager should consider some techniques like frugal innovation to optimize performance level by spending at least 50% of their time coaching employees. Attending safety briefings, improving reviews, shift huddles, and production meetings will ensure an effective performance across the organization.

Why is performance management important?

System performance or managing employees facilitates the effective delivery of operational and strategic goals. Some proponents believe in a correlation between improving organizational and business results and using performance management software or programs.

However, it is not a guarantee that a performance management program will make a positive turn to the entire organization when installed. The failure or success of performance management depends majorly on the context into which the software is implemented and the characteristic of the system.

Diversity management through integrated software instead of the spreadsheet-recording system for employee performance management may have positive sales and operational efficiency benefits.

Motivated workforce

  • Create transparency during goals achievement process
  • Optimization of incentive plans for over achievement
  • Improve employee engagement in different projects like agile project management

Direct financial gain

  • Stopping project overrun
  • Grow sales
  • Reduce organization costs
  • Reduce strategy making time

Improved management control

  • Display data relationship
  • Simplifies strategic goals communication
  • Provides well communicated and documented process

Mistakes that lead to poor performance management

It is not easy to get the performance management system right in real life through the first attempt. This is because of different mistakes that organizations make along the way. They include:

Poor targets

Make the right target selection in art and science. However, if they are too easy to acquire, they cannot work toward improving performance. On the other hand, if they are readily available, staff will have difficulty hitting them.

The best targets are the ones that are attainable while using a healthy stretch element. To set the right targets, companies need to overcome digital culture barriers.

In some companies, missing even a single target is deeply embarrassing hence leading to too low targets set by managers. In contrast with other companies, setting a lower target than the previous one is unacceptable regardless of the reasons brought forth.

Poor metrics

The metric chosen by an organization should promote a particular performance it wants. However, it can only achieve this by incorporating several metrics into a balanced scorecard. A good performance management example of this kind is when a manufacturing company set a production target for every shift individually.

So, each shift will receive incentives based on their performance; hence workers have a choice to make: to complete full units or wait for their next shift to complete the work. This makes every shift start with little work in process, which reduces output and productivity.

A perfect approach would combine each individual team’s target with the plant’s output to make employees benefit from their shift and from doing extra work to support the coming shift.

Lack of relevance

Getting the right set of metrics in a business will depend on different factors like location and organization size, whether it is mature or start-up, the growth characteristics and the activities scope. To accommodate all those differences, the organization needs to consider both bottom-up and top-down approaches. One available option is the development of policies.

Therefore, every employee will determine their targets and metrics of the company. Employees who dwell on setting their targets and goals tend to be committed and have a greater sense of ownership than those waiting from above. If your company has toxic managers, employees will have low productivity and output.

Lack of transparency

Employees need to believe their targets are working for the better of the organization. However, the link between the company objectives and individual effort gets diluted as targets and metrics flow through the company. Different management trends from the different departments may put buffers into targets in the name of boosting their standings or trying to fight underperformance.

An effective performance management system ensures that the entire company operates from a verified and single version of the truth. Every employee knows the overall organization performance and how they take part in it.

At the end of every shift, employees in some companies pass through the daily production board to see their performance and its impact on the plant. The organization has made sure there is a link between the top-line financial metric of the board of directors and shareholders and the production line on the ground.

Lack of proper management engagement

In many companies, senior managers visit their plant rarely except during business reviews or a new capital improvement. Interaction between the management and the frontline personnel is important as a powerful performance management tool.

The manager’s involvement in interaction shows respect to experts in the production department and makes seniors act as good role models. This can be a quick way of identifying improvement and solving the problem. This form of neuromanagement will help explore economic, behavioral and managerial issues through brain activity and mental processes.

Lack of dialogue

No organization can have working performance management without honest, frequent, effective and open communication. Metrics are not categorized as a passive measure of a company’s progress but rather an active part of everyday management. Toolbox talks, after-action reviews and daily shift huddles help engage team members to focus on what matters the most.

One-on-one employee sessions help to reinforce good habits and demonstrate concerns at every career development and innovation management in the organization.

Lack of consequences

There are consequences in every performance. Weak accountability will translate to your employees that even showing up is acceptable. Rewarding good performance is another important step than penalizing poor performance.

Different companies have different formal and informal reward and recognition systems, but few follow this morale building. Encourage female leadership to motivate others who feel they are not recognized enough to have a senior position in the company.

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