Performance management is an important area of work handled by the HR managers or the senior managers of a company. This business discipline exists to ensure that employee performance is aligned with organizational goals and that the employees are delivering on these goals. Performance management also helps an HR manager to track and evaluate the gaps in the processes and the changes or decisions to be made for corrective action.

This business discipline is maturing quickly to gain equal importance with the other key business functions like sales, marketing, finance, operations and even human resources. Alongside these key functions, performance management plays an important role in enhancing an organization’s value. Just like we use feedback to improve our performance in general, performance management in business uses feedback and analysis to improve business processes.


Performance management works as a business cycle with five stages of the cycle.


  • Expectation & Planning: What is it that we want to achieve through the business process?
  • Execution: The plans or strategy laid out in the planning stage are executed through relevant decisions and consequent action.
  • Monitoring: Once the plan is rolled into action, its progress must be tracked. This is extremely important for time-bound objectives.
  • Analyzing: The data from tracking activities can be analyzed to assess reasons as to why the activity is on track or not. If the activity is on track, this analysis may help in creating best practices for the future. If not, then the analysis can help determine the reasons for slacking.
  • Forecasting: This stage helps in predicting the outcome of the processes. If the outcome follows in line with the objective, forecasting becomes a method to refute or confirm the choices made for the line of action and tactics adopted to meet the objective.


What is the role of Performance Management in an Organization?


A robust performance management and development process allows the organizations to harness the full potential of their employees by ensuring their constant learning, development and growth. Following are the roles performed by Performance Management function in an organization:


Aligns Goals


An elegantly designed performance management function enables employees to understand how their work leads to the overall success of the company’s strategies and goals. This understanding keeps them focused and ensures that their work offers real value to the business.


Facilitates Employees’ Learning & Development


Performance management ensures that employees are continuously developing their skills and capabilities along with the changing needs of the business landscape. By constantly rendering employees with opportunities to grow, companies can build a strong workforce that is capable of achieving organizational goals.


Boost Productivity and Engagement


The constant performance management and development programs enable the employees to identify new skills and interest areas, thereby offering them the opportunity to expand their horizon. When employees stay motivated and positive, it significantly reduces the employee attrition and turnover.


Encourages Open Communication, Recognition, and Feedback


An effective performance management system leads to managers and employees having regular conversations about goals, expectations, challenges, and development needs. This ensures that employees obtain the essential feedback and recognition they need to continue to improve their work


To successfully implement Performance Management systems in the workplace, the HR managers must pursue a strategic performance management course, seminar or training to be better equipped to help the organization in achieving its goals. Moreover, with skilled personnel, performance management can actually help the organization to reduce waste, improve employee performance and thereby, improve overall production. This will, in turn, improve the ROI of the company as well. Also, by removing underperforming employees, the company is able to create the image of quality and a no-nonsense approach.


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