Performance Management

Performance management is an integrated human resource process and system designed to enable employees to perform their work in a high-quality and efficient manner, to improve their skills and abilities, and work in direct support of the company's strategic goals and values. It is a continuous process that starts with performance planning and progresses through employee performance appraisal and development.

Performance management can best be described as a series of steps or activities that occur at different points in a performance management cycle (typically defined as a yearly interval during which the employee's performance goals are set and the employee is evaluated and given feedback). Steps to the performance management process include (a) performance planning, (b) observation and monitoring, (c) rating and appraisal, (d) feedback and communication, (e) reward and recognition, and (f) individual development. It is important to note that the ordering of the steps just listed does not imply a purely sequential process. In fact, one of the key features to performance management is that it is not a once-a-year, orderly process. Rather, managers may simultaneously be at multiple steps with different people. For example, rather than waiting until after an appraisal is made before giving feedback, proponents of performance management advocate managers provide regular and ongoing feedback throughout the process in order to manage and improve performance.

Many human resources professionals use the terms “performance appraisal” and “performance management” interchangeably. Indeed, the two are related. However, performance management takes performance appraisal to the next logical step. Performance management is a larger, more comprehensive practice that includes performance appraisal as one of its major steps or functions. Unlike performance appraisal's large focus on accuracy in evaluating an employee's performance, performance management is viewed as a vehicle for

• Increasing employee understanding of company and department goals and strategy
• Linking employee performance and objectives to company goals and values
• Increasing communications between managers and employees
• Helping employees broaden their strengths, expand their career opportunities, and develop their weaknesses through training and development
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• Reinforcing positive, value-added work efforts and motivating employees to progress in their careers
• Providing frequent and regular performance feedback to employees
• Translating capabilities and factors crucial for business success into individual goals and competencies
• Helping employees realize their full potential to contribute to the company's success

Managing employee performance has received growing attention in recent years due to several factors. There is greater domestic and international competition that has required companies to sharpen their strategic focus and to infiltrate their strategy, goals, values, and mission into employee everyday behavior. Companies recognize the critical role that employees play in helping them achieve strategic goals and, consequently, employees are being relied on to do more with less, reduce costs, and continuously improve operations. Further, growing recognition of the problems with performance appraisal in motivating employees and helping them develop their skills has resulted in a more integrated approach to performance management.