What is Performance Management?

Performance Management is the process by which an employer aligns employee goals with company objectives. This improves accountability and encourages engagement.


The main sense of the word is related to artsy events such as a play or concert, but it can be used to describe any event or activity that involves effort and results. For example, if John Cage fills a room with electrical devices and lets them move randomly around the space, the audience would call it a performance.


Performance is a form of entertainment that includes drama, music, and other acts. It is also the process of executing work or a task to a specified standard. A person’s ability to perform a job depends on their skill, motivation, and training. It is also influenced by non-linguistic factors, such as the time of day or their emotional state.

Performance management is a structured process that provides ongoing communication between managers and employees to clarify expectations, set objectives, provide feedback, and review results. It is used to align employee goals with strategic business objectives, and promote a continuous learning culture. It can also be used to identify and address performance issues early, before they escalate.

During the initial phase of performance management, goals are set by both managers and employees and documented in a goal book or other system. Managers and employees then discuss their progress throughout the year. These discussions are typically developmental and future-focused to ensure that team members understand their impact on the organisation’s goals, and how they can build on successes to make improvements.

A good performance management solution should support the process by having dynamic goal-setting tools that allow managers and employees to change their goals on the fly as circumstances change. It should also allow for continuous, real-time communication between team members and managers. This is particularly important for teams that are distributed or working remotely. In addition, it should also offer tools for feedback collection from multiple sources, such as peers, supervisors, and customers.


A successful performance management process consists of many parts. It includes meaningful discussions, establishing expectations and feedback loops, providing learning & development opportunities, and monitoring and accountability. The goal is to align employee goals and professional growth with business strategies.

It involves a continuous flow of feedback, where managers and employees collaboratively set short-term and long-term goals to manage performance. It also helps to evaluate progress toward those goals and reward success. It can be a powerful tool to help maintain employee accountability and cultivate a clear understanding of employer expectations.

It is important to empower managers by providing them with the authority and autonomy to effectively manage employee performance. This should be complemented by offering regular training and support to strengthen their capabilities. Leaders also play an important role in ensuring the success of the performance management process by monitoring the results and identifying opportunities for improvement. By doing this, leaders can help improve the quality of conversations between managers and employees, as well as make sure that the performance management system is working to its fullest potential.


A key element of performance management is the collection and analysis of business metrics. These are measures that display a measurable value and track a company’s progress towards intended goals. Some businesses use performance measurement techniques such as graphic rating scales, management by objectives and forced ranking to measure employee performance. Others rely on internal process improvement measures to identify opportunities for reducing cost, improving productivity and mission effectiveness.

The process of measuring performance is often complex and time consuming. To streamline the process, companies should focus on measures that are relevant to their business goals and objectives. These measurements should be clearly communicated to employees so they can understand the importance of meeting and achieving these objectives.

Several different measurement techniques are used in performance, with the most common being metric-based and outcome-based measures. Metric-based measures focus on the tangible results of a specific activity, such as the number of products produced or customers served. Outcome-based measures, on the other hand, are based on the impact of an activity on a desired business result, such as revenue or customer satisfaction.

Regardless of which measurement technique you choose, it is important to regularly update and review your measurement system to ensure that it’s effective. For example, if you’re measuring an employee’s performance by the number of sales calls they make, but it turns out that the quality of the calls is more important than quantity, then it may be time to shift to a new metric.


Having the right management techniques in place is crucial to ensure performance stays on track. Managers and employees must be able to talk openly about employee performance, discuss any issues, and share ideas. This helps create a healthy and supportive workplace. If employees feel they are not being supported or recognised, their commitment and effort to the business may wane.

Managing performance can be a complex task, and getting it right takes time. Many organizations struggle to set objectives and review employee performance effectively, resulting in a poor team culture and an ineffective business.

The key to success is to use a range of techniques, and choose those that are appropriate for each situation. For reviews to work, managers and employees must be involved in the process – they must be committed to ensuring that it is not just a tick-box exercise.

The best companies integrate their performance management systems into critical processes, so they can act as a real-time feedback loop. For example, one manufacturing company makes its daily production results visible to all frontline employees, so they can see how their individual work impacts the overall business results. This allows them to react long before a variation starts to undercut output or quality. This approach is not easy to implement, however, and requires a lot of trust between managers and employees.