Performance Management

Performance management is a routine, systematic process by which a company involves its employees in improving the effectiveness of the organisation through enhancing the efficiency and productivity of its individuals and teams.

Definition and Purpose

Performance management is an ongoing process that involves evaluating and tracking the performance of an individual and aligning it with the organisation’s goals.
The main purpose of performance management is to boost productivity by improving employee performance through understanding and managing performance within an agreed framework of planned goals, standards and competency requirements.

Importance of Performance Management

Performance management supports the accomplishment of strategic and operational goals by assuring individuals’ performance aligns with organisational aspirations.
It is important for fostering open communication between managers and employees, creating a better understanding of expectations and promoting employee development.
Performance management systems help to instil a performance culture where managing employee performance is a continuous process that nurtures employee skill development, learning, and growth.
Effective performance management leads to high morale among employees. When employees know their strengths, weaknesses, and are given the opportunity to improve, they feel motivated.

Key Elements in Performance Management

Goal Setting: This involves defining clear and specific performance expectations for each job role, which aligns with objectives at both the departmental and organisational level.
Continuous Feedback and Coaching: Regular feedback helps employees understand their strengths and areas of improvement, and provides them the opportunity to correct their mistakes and improve their performances.
Performance Appraisal: It is a formal review carried out annually or semi-annually wherein manager evaluates employee performance against the set goals.
Reward and Recognition: Linking rewards and recognitions to performance encourages employees to perform better and feel valued for their hard work.

Types of Performance Management

Traditional Annual Performance Review: This is a yearly review where the performance of an employee is evaluated against the set expectations.
360-Degree Feedback: This includes the appraisal of an employee by supervisors, peers, subordinates, and sometimes clients, suppliers, and stakeholders.
Management By Objectives (MBO): Here, specific measurable goals are set for an employee and their performance is rated upon their accomplishment of these goals.
Continuous Real-Time Performance Management: This involves providing regular, real-time feedback to employees about their performance.

Challenges in Performance Management

One of the biggest challenges of performance management could be biasness, or judgement error, from the manager’s part in the evaluation process.
There might be a lack of clarity and understanding of performance expectations among employees.
Providing constructive feedback without demotivating employees can be a challenge.
The process of performance management can be time-consuming and may divert the manager’s focus from other essential tasks.
Lack of clear communication channels may lead to unresolved issues, detracting from overall team or individual performance.

Performance Management vs Performance Appraisal

While both performance management and performance appraisal are significant components of HRM, they are not the same.
Performance appraisal is a subset of performance management consisting of evaluating employee performance against predefined standards.
In contrast, performance management is a continuous process of planning, monitoring, reviewing and rewarding the performance of an individual and aligning it with organisational goals.