What is Performance Management? Objectives, Concept, Principles

  • Post last modified:18 March 2021
  • Reading time:6 mins read

What is Performance Management?

Performance management is a system designed to identify the ways to achieve organizational goals through constant assessment and feedback leading to improvement of employee performance.

The basic goal of performance management is to promote and improve employee effectiveness in every perspective.

The power of any organization is increasingly linked to its intellectual capital rather than its physical assets because the people in organizations are now the drivers of corporate performance and competitiveness.

Therefore, it deals with improving organizational performance by improving employee performance and essentially, the cost of competitiveness involves efficiency and productivity.

What is Performance?

Performance is behavior and should be distinguished from the outcomes because they can be contaminated by systems factors”.

Concept of Performance Management

Performance management is a continuous process where managers and employees work together to plan, monitor and review an employee’s work objectives or goals and his or her overall contribution to the organization.

Unlike the performance appraisal process, performance management is an ongoing assessment of employees in a manner geared to match their goals to the organizational goals and it also makes strong use of goal-setting and metrics to identify progress and areas of individual strengths.

The concept of performance management may be categorized into two types:

  • The first one deals with the performance of an organization as a whole and evaluates the effectiveness of its managers whereas;

  • the second one deals with the system of evaluating employees in order to enable them to achieve reasonable goals and thus ensure that the organization performs better.

The performance management helps organizations in managing consistent performance in a manner which holds employees and managers accountable for supporting its objectives and strategy, successfully fulfilling assigned job responsibilities, and accomplishing individual performance goals, this would require the following pre-requisites:

  • The business processes are as simple as possible
  • The lines of leadership and management are clear
  • The employees are empowered, which is an important driver of innovation
  • A distinct organizational culture
  • The workplace interactions are based on honesty, integrity, and trust
  • An openness to change

Characteristics of Performance Management

The key characteristics of performance management can be understood by following points which are given below:

  1. Important organizational tool in order to clarify performance objectives, standards, critical dimensions, and competencies required to enhance individual performance.

  2. Works best in the situation when an employee’s work is planned properly and goals for achievement are communicated to them very clearly.

  3. Emphasizes the development of capability and capacity of employees to perform consistently.

  4. It is a ‘systematic’ and ‘holistic’ approach to identify critical dimensions of performance so that organizational objectives can be achieved.

  5. Performance management helps in integrating the whole process with other critical organizational systems including leadership development, succession planning, and talent management efforts.

  6. Performance management is a multidimensional concept and includes inputs, processes, outputs and outcomes.

  7. It transforms organizational objectives and strategy into a measurable action plan by getting the right information, people, time, format for the accomplishment of organizational objectives.

Objectives of Performance Management

The major objectives of performance management are mentioned below:

  1. The main objective is to enable the employees towards the achievement of superior standards of work performance.

  2. To help the employees in identifying the knowledge and skills required for performing the job efficiently.

    Because after identifying KSA required, this would drive their focus towards performing the right task in the right way.

  3. To boost the performance of the employees by encouraging employee empowerment, motivation and implementation of an effective reward mechanism in an organization.

  4. To promote a two-way system of communication between the supervisors and the employees in the organization for clarifying expectations about the roles, accountabilities, communicating, feedback for improving employee performance and continuous coaching.

  5. To identify the barriers to effective performance in an organization and resolving those barriers through constant monitoring, coaching and development of interventions.

  6. To create a basis for several administrative decisions viz., strategic planning, succession planning, promotions and performance-based payment.

  7. To promote personal growth and advancement in the career of the employees by helping them in acquiring the desired knowledge and skills.

Principles of Performance Management

Some of the major principles of performance management are as follows:

  1. Performance management is considered as a process, not as an event because it follows good management practice in which continual coaching, feedback and communication are integral to success.

  2. It is primarily used as a communication tool to ensure mutual understanding of work responsibilities, priorities and performance expectations among both the partners in the organization.

  3. The elements for discussion and evaluation should be job specific – not generalized personality traits and the major duties and responsibilities of the specific job should be defined and communicated as the first step in the process.

  4. The performance standards for each major duty/responsibility should be defined very clearly and communicated for fulfilling the expectation.

  5. Employee involvement is encouraged at every level in identifying major duties and defining performance standards.

  6. The purpose is to establish a history such that evaluations are fair and meaningful.

  7. The documentation of the performance management process is necessary as often as needed to record the continuum of dialogue between supervisor and employee.

  8. If an organization includes formal rating, they should reflect the incumbent’s actual performance in relation to the performance standard for accomplishing the objectives.

  9. The evaluation of supervisor is a must on the successful administration of the plan and ongoing performance management responsibilities.

Challenges to Performance Management

Some of the key challenges to performance management are as follows:

  1. It is concerned with the output (the results achieved), outcomes, processes required for reaching the results and also the inputs (knowledge, skills and attitudes).

  2. It is also concerned with measurement of results and review of progress in the achievement of set targets.

  3. It dealt with defining business plans in advance for shaping a successful future.

  4. It is striving for continuous improvement and continuous development by creating a learning culture and an open system.

  5. It deals with establishing a culture of trust and mutual understanding that fosters free flow of communication at all levels in matters such as clarification of expectations and sharing of information on the core values of an organization which binds the team together.

  6. It involves procedural fairness and transparency in the process of decision making.


  1. Aubrey C. Daniels, Bringing out the Best in People, 2nd edition, McGraw-Hill, 1999.
  2. BD Singh, Performance Management Systems, Excel Books, New Delhi
  3. Tapomoy Deb, Performance Appraisal and Management, Excel Books, New Delhi.

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