What Is Performance Management?

By Chris Kolmar
Mar. 15, 2021

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Communication is an important component of any healthy relationship. However, without the proper expectations and understanding, communication has less of an impact. This is especially true in the professional world. Effective communication between supervisors and their employees is critical to everyone’s long-term success.

In particular, the communication of success and failure is key to the relationship between a supervisor and their employee. When projects are assigned and completed, it is up to the supervisor to observe if expectations are met. Equally important, it is up to the supervisor to evaluate the behavior of the employee.

Perhaps the employee performed above expectations and did very well, but the employee feels frustrated with their work. Or maybe an employee did not satisfactorily complete a project, yet the employee feels happy with the result. In either case, tension could result in a way that harms the employee, the supervisor, and the company.

Supervisors and employees alike need to understand their roles within the organization. They need to be able to gauge their productivity and development to feel invested in their work. It’s up to a supervisor to communicate this message properly. To achieve the best results possible, a supervisor may want to consider a performance management system.

What Is Performance Management?

Performance management is the systematic strategy and process that increases the effectiveness and success of employees through consistent development. The goal is to create a work environment where employees can maximize their talents.

The focus is on the person and their current needs and future growth. This reduces harmful behaviors such as burnout or apathy.

Performance management is as much a workplace culture as it is a process. Supervisors take on a role that involves an invested interest in the happiness and fulfillment of their employees.

Performance management is a people-focused approach to management. In this system, the welfare of the employee, their goals, and areas of improvement are put into an empathetic context.

The key component of performance management is aligning the needs of the employee with the needs of the company. When both party’s values align, the success of the employee becomes the success of the company and vice versa. This can only be achieved through a constant flow of communication between the employee and their supervisors.

Without a persistent channel of communication that sets goals and expectations, provides constructive feedback, and acts as a healthy outlet for disputes and rewards, the employee will not feel connected to their organization. Performance management takes this action.

Performance Management vs. Performance Appraisals

Performance management may sound familiar to you. Many workplaces have annual or semi-annual appraisals between supervisors and their employees.

However, it is important to understand that a performance appraisal is not the same as performance management. They may be similar in intent, but they are vastly different in their design.

A performance appraisal is a one-time evaluation that focuses on the past, while performance management continuously incorporates past results into its focus on present performance and future development.

A performance appraisal is only interested in categorizing success and failure under a strict system of metrics that are decided at a specific time.

Performance management is a strategic plan of action that allows for flexibility based on the needs of the employee. This means that in performance management, unlike an appraisal, a supervisor is less focused on the past because they have been constantly involved in their employees’ development.

A performance appraisal is a top-down structure and is unable to incorporate the needs of the employee and merge them with the needs of the company. Instead, it becomes a situation of checking boxes to fulfill a bureaucratic requirement. Whereas performance management is a mutually beneficial dialogue between the supervisor and the employee.

That is not to say appraisals are not important or helpful. They can be as long as they are tied to a system that emphasizes the future success of the employee. In other words, appraisals are helpful when they evolve into multi-dimensional performance management.

What Makes up a Performance Management System?

Every company will have different performance management systems due to their differing needs and qualities. However, certain elements are found in most performance management systems.

These core components reinforce one another and the overall goal to achieve product development in employees. They include:

  • Equity and empathy. An effective performance management system needs to be based on fairness. To achieve professional fairness, supervisors are encouraged to focus on empathetic perspectives towards their employees.

  • Efficient goal and expectation strategy. A plan needs to be laid out in such a way that goals are met efficiently. Otherwise, the justification for a performance management system is lost on the upper management of the company. To do this, goals and expectations must be set in a tangible, achievable manner from the start.

  • Clear communication through accountable collaboration. Along with equity, accountability and collaboration ensure that the channels of communication remain a professional dialogue. With clear expectations, employees can feel that their needs are heard and will respond in kind.

  • Constructive and regular feedback. Setting goals means nothing if they are not achieved as expected. There will be mistakes along the way, so a robust performance management system contains constant feedback that is delivered professionally and productively.

  • Employee development focused on elevated performance. This is the main theme of performance management. Companies will succeed in their growth if their employees succeed likewise. Supervisors should therefore focus on elevating their employees as opposed to reprimanding them when it comes to their regular evaluations.

  • Employee recognition through rewards, compensation, and opportunities. Successful outcomes need recognition. Employees are working towards some goal and performance management is aimed at helping them. However, along the way, some form of compensation motivates an employee for further development.

The Performance Management Process and Cycle

Performance management is a continuous process, so it should be thought of as an ever-revolving cycle. Inevitably, different employees will find themselves at different stages which is what makes performance management so flexible.

Based on the needs of the employee, it allows for supervisors to balance their focus on different parts of the cycle.

The process goes like this:

  • Align. Before goals can be set and met, the supervisor and the employee need to make sure they are on the same page. The most successful performance management system is one that aligns the goals of the employee with that of the company. This can be extra helpful when hiring, as a supervisor can align the new member from the start.

  • Plan. Performance management is a systematic approach which means a strategy needs to be developed with contributions from the employee. The plan sets goals, how they will be achieved, and their expectation for success. To make the plan fair and effective, goals should be tangible and realistic.

    Most performance management systems incorporate the SMART goals approach. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. SMART goals are more productive because they are based on specifics and allow for healthy expectations.

  • Perform. Once the goals are set and the plan is made, it is now up to the employee to take action. Some of the goals will be focused on the company while others may be focused on the employee’s personal professional goal. Either way, the employee will follow through on what was strategized with their supervisor.

  • Track/Monitor. The supervisor will keep an eye on the progress of the employee. Since the goals should be measurable, the supervisor can use metrics to gauge performance. However, the supervisor must not also forget the empathetic element and remember to monitor the employee’s overall well-being.

  • Review. Consistent feedback means moments of review. The review should be focused on the goals and expectations discussed earlier as well as current and future progress. The reviews should remain professional yet empathetic and act as a dialogue between supervisor and employee.

  • Reward. Employees want to gain something out of their efforts. This could be a financial incentive or it could be more abstract. Some employees might seek networking opportunities or simple recognition. In any case, performance management requires some form of reward to incentivize further growth.

  • Repeat. Performance management is a cyclical process that is ever-changing and ever-growing. When one goal is met, another should be set to continue the growth of the employees and the company.

Challenges and Strengths of Performance Management

Performance management is not a perfect system. However, the strengths of the philosophy outweigh the challenges. When a company adopts a people-focused performance management system, they see their investments into their employees’ success pay dividends into the success of the company.

Performance management is time-consuming so unfortunately, not all companies are willing or able to invest. There is also the potential for a poorly designed performance management system to ignore the past, lack consistency, or create situations based on biases and discrimination.

Yet these problems can be resolved if the performance management system is based on empathetic objectivity with a clear strategy. Performance management allows for agile employee development that meets specific needs. This comes with a targeted and invested approach that aligns the long-term success of the employees with the company.

Highly effective performance management gives clarity in the hiring and team-building processes. Supervisors can seek out employees whose values and goals match that of the company. This creates a positive feedback loop where the needs of the employee reinforce the needs of the company.

A well-run performance management system will rely on these strengths to be effective. An effective system is fair, engaged, and rewarding as opposed to an ineffective system that is unfair, apathetic, and relies on punishment.

Performance Management Best Practices

When structuring a performance management system, companies can look to other successes for guidance. Some best practices that have proven positive impacts on their company include:

  • Bottom-up focus. Performance management relies on a healthy dialogue between supervisors and their employees. This is achieved by building up the employees for success which in turn builds up the company for success.

  • Manager training. Performance management requires skills in empathy, communication, strategy, and data analysis. These are skills that can always be developers so managers should be given the appropriate training to help them succeed.

  • Empathetic professional tone, not personal. Empathy can be confused with personability. However, the professional goals of the company should not be ignored by management. Discussions should remain focused on clear goals and outcomes to avoid confusion and biases.

  • Actionable goals with clear roles and responsibilities. A goal that cannot be completed will only result in frustration. Performance management aims for success through realistic goal completion.

  • Organized channels of communication. Feedback and general conversation between supervisors and employees should be set with clear expectations at the start. This helps reinforce the professional tone and increases efficiency.

    Supervisors and employees should feel like they can talk to one another frequently, as long as it remains within the realm of professionalism.

Final Thoughts

Performance management looks different for every company, but the core elements of the process create a successful framework to work off of. In the end, you want to see your company succeed and the people who make up your company succeed together.

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Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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