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What Is Performance Management?

If your company has a staff of employees working for it and is hiring new talent from time to time, it needs a way to both measure and encourage good performance in their work. This is what performance management is all about. The performance management definition we’re going to cover in this guide includes best practices for encouraging staff productivity by managers and business owners. It can be used in person or even applied in a remote worker context.

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What Is Performance Management?

Performance management is the process of overseeing employee activities to create a healthy and efficient work environment that helps these active staff members perform at their best and happiest.

Unlike a traditional employee appraisal system, performance management enables managers to engage proactively in the productive output of their team members throughout the year rather than waiting for annual performance evaluations or reviews.

In this way, employers can step in to fix problems when they arise and modify behaviors immediately instead of trying to correct a pattern of poor productivity that might have formed earlier without being modulated.

In this way, performance management is both an encouragement strategy and a mitigation method. Its purpose is to cut off work-related productivity problems before they become habitual. Performance management doesn’t involve evaluation forms, appraisal meetings or the use of metrics to track and assess an employee’s performance after set intervals. It’s much more active than that.

An effective performance management system follows an entire employment lifecycle, beginning when a role is identified and ending when an employee leaves your organization. Ideally, this process creates a learning environment where you the employer or manager and your employees are focused on constant improvement, increased productivity and achieving better outcomes. The process should be handled with guidance in mind and shouldn’t depend on punitive measures or criticism.

What a performance management program aims to achieve

One of the goals of a performance management system is to help employees align their work with the expectations and goals of the company they’re involved with. This should include their understanding of the company’s overall vision, its daily work ethic and its policies about interaction between staff and with customers.

There’s no absolute performance standard involved in performance management. Instead, you the employer or manager should try to create relative harmony between your employees and your company’s goals through their work habits.

To achieve this somewhat ambiguous objective, most performance management programs focus on using tools like measurable goals and milestones that they can introduce to their employees. Your organization might also help individual staff members define what good productivity looks like in the context of their tasks or goals, and how it can be achieved with minimal friction.

Doing this doesn’t always require that the employees in question constantly look productive. It’s more results-oriented and can give staff leeway for relaxed workplace behavior as long as they’re capable of showing genuine productivity and achieving the goals they’ve previously agreed upon with you.

In other words, performance management can actively help prevent make-work behavior in favor of optimal performance. This requires clear, honest communication and coordination between you and your staff.

What a performance management program includes

There are many performance management software packages and templates, but they’re often customized to the type of company using them. However, what most quality programs do have in common are the following key elements:

Mission alignment: The program should work to align employee goals and productivity objectives with the central mission of the company they work for.

Active work-specific performance analysis: The program should help an employee understand exactly what their own job is producing for the company and what effect it has on outcomes. This also involves understanding how their performance affects coworkers, supervisors and customers.

Measurable performance expectations and outcomes: An employee should be able to establish measurable goals and outcomes in cooperation with their manager or the business owner. The employee should also have the right to give input on how they think their success should be measured.

Defining job duties and best practices: Employees and their managers should be able to clearly define what their work involves and how they can improve it through new procedures, new learning or changes in work policies. This can involve negotiating on specific details for the sake of optimal productivity and smooth employee/employer workflow.

Regular meetings: Productivity management is by definition an active process of frequent communication and feedback. It depends on regular interaction, clear discussions, and frequent but concise meetings.

How can your business benefit from performance management?

When implemented correctly, performance management leverages ongoing accountability and regular, honest mutual communication to improve employee performance.

By shifting away from annual reviews or employee assessments and focusing on consistent feedback and personal responsibility, you can create a more open and communicative environment for everyone in your workplace. Open discussions between employees and managers increase employee engagement, reduce work stress and build a stronger commitment to meeting company objectives.

An effective performance management system consists of four components that you can apply for your company’s benefit:


Your performance management system should start at the beginning of the employment process. When preparing job descriptions for new hires, develop a clear employee recruitment plan and identify the skills, attributes and qualities you seek in an ideal candidate. Include your company values in your job description to attract candidates who are motivated by a similar vision.


As the leader of your team, it’s essential that you’re aware of all your employees’ projects and activities. Don’t wait until an employee is finished with a project to review their work. Take time to discuss their progress and to offer guidance and encouragement throughout the process. Engaging regularly will help increase team members’ skill and confidence, and it will also improve employee-manager relationships.Additionally, work to increase employee satisfaction and motivate performance by developing attractive compensation packages, providing career development opportunities and defining clear paths for career advancement.


This component requires you to supervise employee progress and identify potential roadblocks or obstacles that may prevent your staff members from performing at their best. It also ensures that you recognize employee achievements and successes so that your employees can be aware of their accomplishments and further motivated by them. Monitoring also helps employers provide the appropriate education, training, coaching and feedback necessary to help employees improve their performance.


The review component focuses on results and goal achievement. To begin an employee evaluation, you should sit down with each employee individually and walk through their accomplishments within a specific timeframe. This also involves asking team members to share what they learned from the process and what they will focus on improving in the future.

You can also take this opportunity to highlight your employee’s contributions toward company objectives. The more employers recognize and show appreciation for employees, the more likely the employees will be to see the value in their efforts as part of your workforce.

Shifting to a performance management process from a traditional employee evaluation system can take time, but using this approach can benefit your organization by creating a more satisfied and motivated workforce. By following the steps above, you can begin integrating the performance management process piece by piece into your business with minimal disruptions to productivity.

Performance management FAQ

Does performance management require special software?

No, it doesn’t. You can apply performance management strategies at any time without any particular software suite or implementation package. Performance management is more of an interpersonal process than a simple evaluation metric that depends on documents.

Can I apply performance management even to a small business?

You absolutely can apply performance management techniques to a small business with just a few employees. In fact, this level of growth is ideal for getting started with performance management and making it a firmly and early-established part of your company’s culture.

Does performance management apply only to full-time staff?

Not at all. Performance management can and should be implemented for all of the formal staff members in your company. It works well even for employees who work remotely or part-time.

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