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Performance Management- A Boon Or Bane For Business?

by Soft2share.com

Keeping an employee interested in his work and workplace is one of the keys to keeping your business running efficiently. A good relationship between employees and managers will keep the employee charged up. Every employee should feel wanted. If he feels that he is not getting his due or his needs are not fulfilled, they will not have the zeal towards the company, which will ultimately affect the end results of the company.

To ensure a better relationship between all employees and the company, one should formulate a performance management strategy.

What is Performance Management?

Performance management is how an organization identifies the Performance of each employee by monitoring goal completion, feedback, and discussions. By analyzing successes, strengths, learning from mistakes, and examining the potential for growth, businesses can enhance talent and individual Performance and weed out problems. 

A good performance management system works towards the improvement of the overall organizational performance by managing the performances of teams and individuals for ensuring the achievement of the overall organizational ambitions and goals. 

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A functional performance management system can play a very vital role in managing the organization by:

  • Ensuring that the employees understand the importance of their contributions to the organizational goals and objectives.
  • Ensuring that each employee understands what is expected out of them and equally checking whether the employees possess the required skills and support for fulfilling such expected goals.
  • Ensuring proper aligning or linking of objectives and facilitating effective communication throughout the organization.
  • Facilitating a friendly and harmonious relationship between an individual employee and the line manager based on trust and empowerment.

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Performance management practices can have a positive influence on job satisfaction and employee loyalty by:

  • Regularly providing open and transparent job feedbacks to the employees.
  • Establishing a clear linkage between performance and compensation
  • Providing ample learning and development opportunities by representing the employees in leadership development programs, etc.
  • Evaluating Performance and distributing incentives and rewards on a fair and equated basis.
  • Establishing clear performance objectives by facilitating open communication and a joint dialogue.
  • Recognizing and rewarding good performance in an organization.
  • Providing maximum opportunities for career growth.

Components of a performance management strategy

To help the employees and the HR to produce the best results, a performance management tool plays a vital role. Any effective performance management system includes the following components:

Performance Planning: 

Performance planning is the initial but one of the most crucial steps of any performance management process, which forms the basis of performance appraisal. Performance planning is jointly done by the appraisee and also the reviewee at the beginning of a performance session. During this discussion, the employees decide upon the targets and the key performance areas which need to be achieved over a year within the performance budget. After the discussion, all the points are finalized after a mutual agreement between the reporting officer and the employee.

Performance Appraisal and Reviewing: 

The appraisals are normally performed twice in a year in an organization in the form of mid reviews and annual reviews, which is held at the end of the financial year. In this process, the appraisee first offers ratings in the self-appraisal form and also describes his/her achievements over a period of time in quantifiable terms.

The same process is followed by the appraiser for the quantifiable and measurable achievements of the employee being appraised. The entire process of review seeks the active participation of both the employee and the appraiser for analyzing the causes of loopholes in the Performance and how it can be overcome.

Feedback on the Performance, personal counseling, and performance facilitation: 

Feedback and counseling are given a lot of importance in the performance management process. This is the stage in which the employee is corrected by the appraiser regarding areas of improvement and also on expected levels of Performance. The employee receives open and very transparent feedback, and along with this, the training and development needs of the employee are also identified. The appraiser adopts all the possible steps to ensure that the employee meets the expected outcomes for an organization through effective personal counseling and guidance, mentoring, and representing the employee in a training program that develops the competencies and improves the overall productivity.

Rewarding good Performance:

This is a very vital component as it will determine the work motivation of an employee. During this stage, an employee is publicly recognized for good Performance and is rewarded. This stage is very sensitive for an employee as this may have a direct influence on the self-esteem and achievement orientation. Any contributions duly recognized by an organization helps an employee in coping up with the failures successfully and satisfies the need for affection.

Performance Improvement Plans: 

In this stage, a fresh set of goals are established for an employee, and a new deadline is provided for accomplishing those objectives. The employee is clearly communicated about the areas in which the employee is expected to improve, and a stipulated deadline is also assigned within which the employee must show this improvement. This plan is jointly developed by the appraisee and the appraiser and is mutually approved.

Potential Appraisal: 

Potential appraisal forms a basis for both lateral and vertical movement of employees. By implementing competency mapping and various assessment techniques, a potential appraisal is performed. A potential appraisal provides crucial inputs for succession planning and job rotation.

The performance management process

Now that we’ve laid out a clear understanding of why performance management is important and the components you’ll need to include to get it right, let’s break down what the performance management process will look like.


  • It is defining roles, duties, and responsibilities.
  • Prioritizing the duties.
  • Creating an improvement plan for adverse situations
  • Gathering all necessary documents
  • Examining previous records and areas of improvement


  • Create an environment for discussion.
  • Discuss with employees further areas of improvement
  • Create a check on the goals accomplished.
  • Set goals for the upcoming quarter.
  • Set a time frame to follow up.


  • Conduct follow up Performance and feedbacks.
  • Feedback from employees should be taken care of
  • Formulate important documents and pass them further

Some best performance management software

  1. Paylocity
  2. ADP Workforce Now
  3. Lattice
  4. 15Five
  5. UltiPro

Performance management is a crucial part of the success of any business. If done correctly, it can ensure that all members of each department are aligned with the objectives of the company and can benefit the organization for a long period. When Performance at a company is well-managed, and employees are working at their full potential, organizations reap the rewards. Remember that the goal of your employees is to achieve the company mission and vision, but this isn’t possible unless their own mission and vision aren’t accomplished, too. Hence we can clearly say Performance Management can be a Boon to business owners.

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