What are Performance Management Systems?

Erin J. Hill
Erin J. Hill
Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

In short, performance management systems are plans with set guidelines to help employers see how efficiently goals are being met. There are five main parts to developing an effective performance management system, each one being used to grade, change, and reward employee behavior and performance. Managers, company owners, and supervisors should spend time thinking about company goals, steps to attain them, and the proper way for employees to be trained in reaching them.

The first step in developing performance management systems is to clearly establish goals for the company as a whole, and to define job expectations for each employee. This can include a general description, as well as particular performance goals for each team member for each quarter. For example, a sales manager may require that every person on his sales force call 100 potential clients per day, or close five new sales a week. This gives all employees a clear-cut standard to live up to.

Managers should also regularly speak with employees about their performance. This is important to any performance management systems because it allows poor performers to correct behavior or try more effective strategies before things get out of hand, and it lets top performers know that what they are doing is working. The frequency will depend on the company, but most choose to do it on a quarterly schedule, meaning every three months or so.

During these evaluations, employers should offer steps or tips for improving performance. This can include ongoing education, speaking with coworkers who are performing better, or trying new tactics when possible. Managers and employees should be able to speak freely about ideas and criticisms without fear of anger or rejection. While companies cannot afford to continue on with sub-par performance, a good employee will accept feedback and take the necessary steps to promote change and improvements.

In order for employees to fully understand performance management systems being implemented, it is important for managers to describe in detail what constitutes good and bad performance. Good employees will strive to meet the minimum requirements, and great ones will learn how to surpass them. Additionally, employers should offer rewards to employees who consistently provide the company with good work. While poor performers should be made aware of consequences, it is equally as important to provide incentives for good work. This is a vital part of any effective performance management system.

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