What is Performance Management ?

Introduction to Performance Management

Performance management is the process of measuring and evaluating an individual’s performance against a set of objectives. It is done by aligning employee performance and their efforts in achieving the goals efficiently. It is important to note that performance management should be a two-way street. The effective performance management can only be achieved through proper communication. Before reviewing the performance of all the employees, the supervisor or manager needs to properly communicate about what is desired. The expectation of managers is to communicate and the goals of the employees should also be understood. It also includes assessing the performance of employees, providing feedback and coaching, and taking corrective action.

Individuals generally get promoted when they perform as per the expectations of the employer.  Performance management is also necessary for achieving organizational  objectives. Thus, the organization honors the efforts of the employees by promoting him/her. 

Performance management is also an important function of human resource management. It is a continuous process where managers identify, measure and develop the performance of the employees. It is not always associated with making employees accomplish a certain task. It is also important in understanding the gap in the employee’s knowledge, skills and abilities. The gap is filled with required training and development provided to employees. Thus, the objective is to analyze the personnel performance and direct their efforts towards achieving the organizational goals.

Implication of Performance Management

Mary Barra, CEO of General Motors, became CEO position through promotion. She initially joined GM in 1980 as a co-op student. Through the years, she was promoted to several positions inside the company. Her consistency and productivity in accomplishing what was expected made her the CEO of the company.

Companies such as Amazon extensively provide training and development opportunities to its employees. Training and development invests a major part in employees. Similarly, Goldman Sachs runs “Goldman Sachs New Analyst Program” which provides business and professional experiences as well as tools and skills required for employees to succeed in a position. Therefore, understanding where the employees are succeeding and falling short is also an outcome of performance management.

Importance of Performance Management in an organization

  1. It helps employees to understand the long term and short-term objectives of the company and what they are expected to do to achieve those objectives.
  2. It helps employees to change or structure their personal goals with that of organizations, to create a win-win situation.
  3. It lets managers know the difference in actual and expected performance of the employees and provide necessary training and development opportunities to employees.
  4. It helps in boosting employee productivity.
  5. Performance Management provides a clear understanding of job expectation to employees.
  6. It encourages employee recognition and reward.
  7. It facilitates smooth exchange of feedback and grievance through performance appraisals.

Issues in Performance Management faced by managers

There are several issues that are evident with effective performance management. Aligning the goals of the organizations to that of employees is very challenging in itself. In addition, there are several other issues that are to be addressed by managers. These issues are explained below:

Poor Communication

It is very important for managers and supervisors to properly communicate the expectations from the employees. Similarly, it is also crucial for them to understand the employee’s expectations. When there is discrepancy in the flow of communication, it is difficult to conduct the performance management. At times, managers are involved in one way communication with the employees. They hesitate to understand the employee’s weaknesses or challenges. This leads to ineffective communication and thus the objective of performance management can never be achieved.  

Ineffective Performance Review method

Performance review is a part of the performance management system. It is often divided into qualitative and quantitative. However, more specifically, performance review is performed through several different methods. Some of the widely known methods are Management by Objectives (MBO), 360-degree feedback, assessment centers methods, Behaviorally Anchored Rating Scale (BARS) etc. A single set of these methods may not work effectively for the entire organization.

For a company like Amazon which operated both front end and back end, the same approach won’t work. The employees at the backend may deal with administrative tasks and the front-end deal with logistics. Therefore, the goals in each area differ. Therefore, it needs to design a review method accordingly. This is a major issue in performance management. Understanding the nature of the task, the employees perform and the proper mechanism to measure it must be aligned.

Biases in performance appraisals

People are often guided by their instincts when they need to make decisions. Similarly, managers are also prone to instincts which often comes in the form of biasness. Some employees may be consistent in performing beyond expectations and some may be on average. But managers can have these assumptions that good performing employees can never perform bad and vice-versa. In addition, biases in the form of race and gender can also impact the performance management system. In the long run, biases related to such sensitive issues can pose a significant threat to the organization.

Coca-Cola in 2000s faced a lawsuit for racial discrimination in terms of pay, promotions and evaluations. It was charged $192.5 million as per the lawsuit and agreed to make changes to the way it evaluates, promotes, treats and manages its diversity. Facebook also has been penalized for discriminations in evaluations, promotions and pay.

Employees trust

Gaining the trust of employees that their efforts will be rewarded is an issue as well as a challenge for managers. According to the report on Control, Opportunity and Leadership, 58% of the employees agree that recognition and praise drive employee engagement and satisfaction. However, at most of the times, managers do not clearly communicate what kind of reward and recognition employees would get. Without assurance and trust, employees hesitate to perform beyond their expectations. Also, they must be rewarded after the expected performance is achieved so that they can build up the trust and are motivated to perform best.

Lack of evaluation metrics

Performance management requires proper performance evaluation. Evaluation is a tricky aspect and it requires proper criteria. Biased thinking affects the evaluation metrics. For effective performance management, evaluation criteria needs to be independent. This is another issue in performance management.


Leave a Comment