Performance Management As A System: A Brief Overview

Performance Management As A System: A Brief Overview

The performance Management system is the system that can be used to measure employees’ performance and to track the progress, failure, and developments of the employees in terms of their assigned goals. The competency, skills, and knowledge gaps are also identified through this process which can be improved by providing support, guidance, training, coaching, and benefits to employees or teams at different levels and designations. It continuously measures, monitors, and supervises performance standards in accordance with the assigned goals. 

The performance management system is a systematic process of managing and monitoring the employee’s performance against their desired goal. 

The Performance Management system is used to focus on the goals and objectives of the organization, reinforce individual accountability for meeting those assigned goals, and track individual performance.

Performance management can be described as the system through which organizations set assigned goals that should be aligned with the work, determine performance standards, assign and evaluate work, provide performance feedback of the employees ( positive or negative feedback), determine training and development programs and organizing rewards and recognition programs.


  • To plan out and to decide what to do and how to do it.
  • To carry out the assigned work and to implement it accordingly.
  • To measure and monitor the outcomes in order to track the progress of the employees 
  • To review the performance in accordance with the assigned goals to implement what needs to be done and to take corrective action, if the performance is not at par with the desired goals.


  •   It should be fair, consistent, and reliable.
  •   It is supported by the managers and executives.
  •   Communicates performance expectations regularly.
  •   It promotes continuous employee development
  •   It aligns individual goals with the department and organization
  •   It seeks to maximize employee performance
  •   It can be used for successful planning.
  •   It links performance to compensation, rewards, and recognition.


  •        Seek constructive feedback from others.
  •        Engage in professional development activities.
  •        Keep track of their performance throughout the year.
  •        Conduct Self-Assessment
  •        Participate in an individual development plan.
  •        Develop effective and challenging goals.


There are so many responsibilities of HR Managers in every organization:

  •   Review the employees’ performance in a timely manner.
  •  Holds employees accountable for completing the process on time.
  •   Provides feedback to the employees.
  •   Recognize employees for their contribution.
  •   Ensure rewards are fair.
  •    Ensure rewards are fair.


The main focus of the PMS is on the Goal setting Technique:

Goal setting allows the employees to focus on the following parameters:

  • It allows the employees to give priority to what is important.
  • It aligns individual objectives with the business objectives of the organization. 
  • It optimizes employees’ individual performance.
  • ·It helps to identify the strength and weaknesses of the employees and to work on the areas that require improvement.

The most popular Goal setting Technique is the SMART GOAL.

Smart Goal Technique is accomplished to create, build and achieve both short-term and long-term objectives. Smart Goals should be SPECIFIC, MEASURABLE, ACHIEVABLE, RELEVANT AND TIME BOUND.

  • SPECIFIC: The goals should be “Exact Goals “. It should be particular and precisely defined.
  • MEASURABLE: The goals should be identified so that the performance and the progress of the employees can be tracked. 
  • ACHIEVABLE: The goals should be realistic to attain, given the time and resources.
  • RELEVANT: The Goals should be aligned in a manner that should be covering the overall objectives of the organization.
  • TIME BOUNDATION:  The goal needs to be accomplished within the stipulated time period.


  1. The foremost objective of any employee management software is to enhance the performance of the employees at the workplace.
  2. Promoting healthy, two-way communication between employees and the management and promoting a healthy relationship.
  3. Creating a regular flow of communication of organizational goals, expectations, feedback, and coaching.
  4. Defining the goals and setting the goals for the employees
  5.  Setting the right expectations for the employees that they need to deliver, within a time frame.
  6. To facilitate effective communication between the HODs and their respective teams.
  7. Setting the Performance standards.
  8. Determining and organizing Training and Development Programs, as and when required to improve the performance of the employees.
  9. Facilitating to the achievement of the assigned goals that should be aligned with the organizational goals.
  10. Enhancing the skills and the personal development of the employees through the manager’s support.
  11.  Encouraging, and motivating the work that helps in fulfilling the business goals. 


  • Boost the energy levels of employees.
  • Motivates employees to perform better so that the employees can become competent.
  • Saves time and energy waste accordingly.
  • Helps organizations to get fit into this competitive world. 


  • Designing KRA and KPI – Goal Setting.
  • Communicating about the KRA and The KPI to the employees at the beginning of the year.
  • Recording performance throughout the year.
  • Announcement of PMS date, time, and process.
  • Self-Appraisal by the employee
  • One-to-one discussion with the manager.
  • Performance Feedback and rating by the manager.
  • Finalization of Rating with the HR Approval
  • Announcement of Final Rating and Reward


  • 1.First Phase: The origin of performance management can be traced to the early 1960s when performance appraisal systems were in practice. During this period, Annual Confidential Reports (ACRs) which were also known as Employee service Records were maintained for controlling the behaviors of the employees, and these reports provided substantial information on the performance of the employees.
  • 2. Second Phase: This phase continued from the late 1960s till the early 1970s, and the key hallmark of this phase was that whatever adverse remarks were incorporated in the performance reports were communicated to the employees so that they could take corrective actions for overcoming such deficiencies. 
  • 3. Third Phase: Permission was given to the employees to explain their accomplishments in the self-appraisal form. With the assistance of certain components, the organization can measure the productivity, and efficiency of the employees, in terms of the target achieved. 
  • 4. Fourth Phase: In the entire process, the appraise (employee) and the reporting officer mutually decided upon the key result areas at the beginning of a year and reviewed it after every six months. In the review period, various issues such as factors affecting the performance, training needs of an employee, newer targets, and also the ratings were discussed with the appraise in a collaborative environment.
  • 5. Fifth Phase: This phase was characterized by maturity in the approach to handling people’s issues. It was more performance driven and the emphasis was on development, planning, and improvement.


1 Performance Planning: Performance planning is the first crucial component of any performance management process which forms the basis of performance appraisals.

Performance Planning is jointly done by the Appraiser and the Appraise. During this period, the employee decides upon the given targets and the key performance areas which can be performed in a year within the time specification. 

2. Performance Appraisal and Reviewing: The appraisals are normally performed twice a year in an organization in the form of mid-reviews and annual reviews which are held at the end of the financial year.

The entire process of review seeks the active participation of both the employee and the appraiser in analyzing the reason for loopholes in the performance and how they can be overcome and improved.

3. Feedback on the Performance followed by personal counseling and performance facilitation: Feedback and counseling are given a lot of importance in the performance management process.

This is the stage in which the employee acquires awareness from the appraiser about the areas of improvement and also information on whether the employee is contributing as per the assigned goals.

The employee receives open and very transparent feedback and accordingly the training and development needs of the employee are also identified.

The appraiser adopts all the possible steps to ensure that the employee meets the expected work outcomes, and the desired goals for an organization through effective personal counseling and guidance, mentoring, and training programs which can improve the skills, efficiency, and productivity of the employees and can make the employees more competent.

4.  Rewarding good performance: This is a very vital component as it will determine the work motivation of an employee. During this stage, an employee is publicly recognized and rewarded, and acknowledged for good performance.

 Rewarding the employees will make the employees more focused, more encouraged, more dedicated, and more motivated for the fulfillment of the organizational goals.

5. Performance Improvement Plans: In this stage, a new set of goals is established for an employee and a new deadline is provided for accomplishing those objectives.

The employee is clearly communicated about the areas in which the employee is expected to improve within a stipulated time period so that the employees.


  • To measure the performance of the employees accurately
  • To identify the gaps in the employee’s skills and to provide effective coaching, training, guidance, and assistance as and when required.
  • To increase employee morale and reduce employee turnover.
  • To recognize and show adequate appreciation for employees’ work.
  • To create a foundation of trust between employees and their managers
  • To create a path to success for all employees.


  1. To drive financial gain:  It needs to be ensured that the employees should be paid. Shareholders would be rewarded for their investment.
  2. Encouraging and Motivating employees via recognition and rewards: When the employees can achieve assigned goals, the employees must be rewarded, so that they employees should feel more motivated, dedicated, focused, encouraged, and dedicated towards their assigned job role. 
  3. Increase employee engagement and productivity: Engagement in this context refers to how much the employees interact with the company and its structures. Productivity defines in terms of increased outcomes and the return on investment (ROI) upon the employees. 
  4. Creates a platform for employee development: Employee development can take place with the support of training and development, mentoring and counseling, guidance and coaching, etc. Discussing the employee’s job role, past and present performance, current efforts, strengths, and weaknesses of the employees can give an accurate understanding of what the employees can do. Accordingly, the new goals can be accomplished. 
  5. Enables proper record keeping and documentation: The HR department maintains the documentation that can be stored and revised when needed. It means that the company has a record of each employee’s past performance in its database. 

    Promotions, increments, rewards, recognition, and punishments are scheduled based on employee performance.

KRA and KPI:

KRA and KPIs: KRA is the Key Responsibility Area, for which the employees are being hired. It specifies the job roles and responsibilities of the employees. KPI is the Key Performance Indicator. The conversion of KRA into numerical, percentages, is known as KPI.



  • Improving the performance of the sales executives.
  • Designing and implementing a strategic sales plan that expands the company’s customer base and ensures its strong presence.
  • Managing, recruiting, coaching, and performance monitoring of sales representatives.
  • Build and promote strong long-lasting customer relationships by partnering with them and understanding their needs.
  • Mentor and train sales team.


  • New Leads/ Opportunities
  • Client acquisition Rate
  • Sales Volume by location
  • Competitor Pricing
  • Existing Client Engagement
  • Employee satisfaction
  • Upsell/ Cross Sell Rates.


  • Helps to highlight an organization’s training need: The Performance management system involves continuous formal and informal reviews of employee performance. Accordingly, feedback can be obtained, on the areas where the employees will require training, coaching, mentoring, counseling, and development that can be utilized by the company to facilitate different types of training programs.
  • Gives Employees a clear idea about organizational goals and purposes: Through the implementation of Performance Management Practices, frequent meetings can take place between the employers and the employees, as a result of which, there can be discussion related to the daily work of the employments and the outcomes, as in the employees are able to meet up with their daily requirements. All such continuous and consistent discussions can reinforce the importance of the employees, and there can be an impact on the overall success, growth, and profitability of the organization.
  • Retains high-performing employees:   The organization should take every initiative to retain all those employees whose performance is brilliant all throughout the year. 
  • Boost Employee Morale:  When the employees receive frequent positive comments, through a feedback system, that boosts the morale of the employees, thereby leading to greater job satisfaction and improved productivity.
  • Helps to identify the right employees for promotion: When performance management typically involves evaluating the productivity, efficiency, and effectiveness of every employee within an organization, it can give managers a greater understanding of who the top performers are. This may enable companies to make more informed decisions about who is best suited for certain promotions.
  • Enable the workforce to be constantly engaged in the task allotted to them and keep them attached to the business all the time with the help of an employee performance tool.
  • Every individual or team will be able to understand their contribution to fulfilling the organization’s goals.
  • Automation helps to gain consistency in performance.
  • Manages cost by being cost efficient business performance management tool till the life of your business.
  • Performance management software for small businesses can help you gain a competitive advantage.


The objective is to keep the maximum and equal percentages of employees in the low and high-performance zone and the maximum percentage of employees in the average-performance zone. The graphical representation of the PMS mandate is known as Bell Curve. 


  • Identify Top Performers through the Bell Curve Grading
  • Manage Lenient and Strict Ratings of Managers
  • Identify Suitability of Employees in a Job Position.
  • Manage Training Needs. 

PMS ERRORS (Performance Management System): 

  • HALO ERROR: Positive impression of an individual to treat someone more favorably. 
  • HORN ERROR: Negative impression of an individual to treat someone more negatively.
  • LENIENCY ERROR: Tendency of the team leader, either to rate positively or to rate negatively, that is to rate, either on the positive side of the scale or on the negative side of the scale. 
  • CENTRAL TENDENCY ERROR: Supervisor gives a moderate rating.
  • FIRST IMPRESSION ERROR: The first impression happens to be the last impression. Based on the first impression, the error can be positive or negative.
  • RECENCY ERROR: Error based upon the most recent incident that can be effective or ineffective. Past incidents are being ignored.
  • SIMILARITY ERRORS: Ratings are influenced by similarity in age, gender, race, interest, talents, and experience. 
  • CONTRAST ERRORS: The evaluation of the target person in the group is affected by the level of performance

Of others in the group.

  • HOLDING A GRUDGE: When the supervisor makes the evaluation based upon the grudge, in accordance with the feeling of hatred or disappointment.
  • SUNFLOWER EFFECT: The supervisor rates everyone highly, in order to make the team members’ impression 

                   Positively, regardless of performance. 

  •  SCORING ERROR: When the supervisor makes any mistake in the form of calculation.
  • INSUFFICIENT LISTENING: The supervisors share the rating before listening to the facts of concern of employees. The supervisor does not give the opportunity to hear out the problems of the employees. 

TALENT MANAGEMENT:  It deals with 4 parameters. 

  • Diversity: Sourcing: Recruitment Process
  • Engagement: Aligning KRA and KPI to work.
  • Competency: Learning and Development: Training and Development.
  • Retention: Retaining the employees through rewards and recognition.


  • Right Person in the right Job.
  • Retaining the top talent.
  • Better Hiring in the sense of better people for the position in the organization.
  • Understanding Employees Better.
  • Better professional development decisions.
  • Better work culture.
  • Controlling attrition means lesser expenditure on hiring.


  • Developing Leadership Pool.
  • Performance Management.
  • Recruitment assumes significance via creating a brand name in the market.
  • Skill-based Manpower Planning.
  • Proper Retention management.


A balanced scorecard is a performance metric used in strategic management to identify and improve various internal functions of a business and their resulting external outcomes. It is used to measure and provide feedback to organizations.


  • Financial measures: Traditional financial measures such as profit and loss, operating margins, utilization of capital, return on investment, and return on assets are needed to ensure that the organization manages its bottom line effectively.
  • Internal business processes: Product and service quality, efficiency and productivity, conformance with standards, and cycle times can be measured to ensure that the operation turns smoothly and efficiently
  •  Customer Retention:  In order to retain customers, we need to provide complete satisfaction to our customers. 
  • Learning and growth Activities: Providing every support related to training, development, mentoring, coaching, supervising, motivating, and encouraging to learn and to update in accordance with the fulfillment of the company goals.


  • Rating scale Method 
  • Grading Method 
  • Paired Comparison
  • Forced Distribution Method 
  • Forced Choice Method
  • Checklist Method
  • Critical Incident Method
  • Graphic Rating Scale Method
  • Essay Method
  • Field Review Method
  • Confidential Report
  • Management by Objectives
  • Behaviourally Anchored Rating Scale.
  • Assessment Centres.
  • 360 Degree Appraisal.

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