Introduction to Performance Management System: Meaning, Uses, And Purpose Of Performance Management


Performance management system is tool which is used to communicate the organizational goal to the employees individually, allot individual accountability towards that goal and tracking of the progress in the achievement of the goals assigned and evaluating their individual performance. Performance management system reflects the individual performance or the accomplishment of an employee, which evaluates and keeps track of all the employees of the organization.

Importance of Performance Management System

Performance Management System is the tool that helps the managers to manage their resources and eventually result in the success of the organization. Performance management system is a very broader and complicated function of HR. It includes activities such as joint goal setting, frequent communications, continuous progress review, feedback of the performance and rewarding the achievements.

Following are the actions included in performance management systems:

  1. Providing career development support and promotional guidance to the employees.
  2. Performance management system helps in giving regular feedback and coaching during the period of delivery of performance.
  3. By proper selection process, selecting the right set of people.
  4. Making clear a job description and employee performance plan.
  5. Arranging training and development programs based on the evaluations of the performance of the employees.
  6. Conducting the exit interviews in order to know the reason for the discontentment and from the organization.

Advantages of Performance Management System

Several benefits of performance management systems, which can improve a company’s performance are listed as below:

  1. Performance based conversation- This enables the managers to talk about the performance of the employees individually. They may help the employees in case he is not performing well, on the other hand appreciate him in case he does good work.
  2. Performance management system can also help to identify the employee development opportunities, which could be the crucial part of the succession planning process.
  3. It rewards the employees who are good performers as employees deserving the promotions can easily be identified.
  4. The under performer can be identified and eliminated or helped improving his performance with various training and development programs.
  5. Proper maintenance of the past performance records of the employee in a systematic order, which can be used for future references.
  6. Employee himself can gauge his performance and work upon it accordingly.

Purposes of Performance Management System

Performance Management is often a misunderstood concept most people associate it with concepts such as: Performance appraisal, Performance-related pay, Targets and objectives, Motivation and discipline. But, performance management is much more than this. Performance management is about getting results. It is concerned with getting the best from people and helping them to achieve their potential. It is an approach to achieving a shared vision of the purpose and aims of the organization. It is concerned with helping individuals and teams achieve their potential and recognize their role in contributing to the goals of the organization.

A performance management system consists of the processes used to identify, encourage, measure, evaluate, improve, and reward employee performance at work. Employees’ job performance is an important issue for all employers. However, satisfactory performance does not happen automatically; therefore, it is more likely with a good performance management system.

A performance management system serves two  fold purpose:

(1) to improve employees work performance by helping them realize and use their full potential in carrying out their firms missions

(2) to provide information to employees and managers for use in making work related decisions. More specifically, performance management system serve the following purposes:

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  1. Feedback Mechanism

Appraisals provide feedback to employees therefore serve as vehicles for personal and career development. Performance appraisals must convey to employees how well they have performed on established goals. It’s also desirable to have these goals and performance measures mutually set between the employees and the supervisor. Without proper two-way feedback about an employee’s effort and its effect on performance, we run the risk of decreasing his or her motivation.

  1. Development Concern

Once the development needs of employees are identified, appraisals can help establish objectives for training programs. It refers to those areas in which an employee has a deficiency or weakness, or an area simply could be better through effort to enhance performance for example suppose a college professor demonstrates extensive knowledge in his or her field and conveys this knowledge to students in an adequate way. Although this individual’s performance may be satisfactory, his or her peers may indicate that some improvements could be made. In this case, then, development may include exposure to different teaching methods, such as bringing into the classroom more experimental exercises, real world applications, internet applications, case analysis, and so forth.

  1. Documentation Concern

A performance evaluation system would be remiss if it did not concern itself with the legal aspects of employee performance. The job related measure must be performance supported when an Human Resource Management (HRM) decision affects current employees. For instance, suppose a supervisor has decided to terminate an employee. Although the supervisor cites performance matters as the reason for the discharge, a review of this employee’s recent performance appraisals indicates that performance was evaluated as satisfactory for the past two review periods. Accordingly, unless this employee’s performance significantly decreased (and assuming that proper methods to correct the performance deficiency were performed), personnel records do not support the supervisor’s decision. This critique by HRM is absolutely critical to ensure that employees are fairly treated and that the organization is “protected”. Additionally in cases like sexual harassment, there is a need for employees to keep copies of past performance appraisals. If retaliation such as termination or poor job assignments occurs for refusing a supervisor’s advances existing documentation can show that the personnel action inappropriate.

Because documentation issues are prevalent in today’s organizations, HRM must ensure that the evaluation systems used support the legal needs of the organization.

  1. Diagnoses of Organizational Problems

As a result of proper specifications of performance levels, appraisals can help diagnose organizational problems. They do so by identifying training needs and the knowledge, abilities, skills, and other characteristics to consider in hiring, and they also provide a basis for distinguishing between effective and ineffective performers. Appraisal therefore represents the beginning of a process, rather than an end product.

  1. Employment Decisions

Appraisals provide legal and formal organizational justification for employment decisions to promote outstanding performers; to weed out marginal or low performers; to train, transfer, or discipline others; to justify merit increases ( or no increases); and as one basis for reducing the size of the workforce. In short, appraisals serve as a key input for administering a formal organizational reward and punishment system.

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