Performance Management can be defined as the management of individuals, teams and departments to attain the strategic objectives and goals of an organization. It also involves coordination of the efforts at the individual and the departmental level towards the direction of the company’s long term vision.

Performance management should integrate all the components of an organization such as resources, efforts, rewarding mechanism etc. Besides, it should be strategic in nature and concern itself with long term goals in line with the organization’s vision.

Performance management as a tool when used effectively greatly enables managers to manage their teams and departments. An effective performance system enables the following:- 

- Employees understand the organization’s expectations and know what they need to do 
- They are equipped with the skills and competencies to fulfill their duties and attain their targets. 
- They are assisted by the organization in developing the skills necessary to discharge their duties 
- The employees are given periodic feedback on their performance 
- Employees are provided with a platform to discuss and identify suitable methods of improving individual, team and departmental outputs in line with the company’s goals.

Performance Management is a continuous process. Besides providing employees with skills necessary for their day to day activities, it is also involved in providing the employees with a working atmosphere that is friendly and conducive to a good performance. Productivity will be greatly aided by strong interpersonal relationships. It is about employees being aware about what is expected of them and a clear relationship between good performance and reward. In other words, the performance management system should be broad and all-pervasive in nature.

For Performance Management to be successful in an organization, it needs a framework of supportive structures. As we saw earlier, the performance management cannot function in isolation. It is inseparably linked to many other aspects of an organization’s functioning. Some of them are:

Training and Development: Performance management system involves providing employees with the skills both technical and behavioral to improve organizational performance. Each employee must be provided with a unique plan that helps him develop skills which may be required in the organization presently or in the future. This assessment is usually done during performance review. Once, the needs have been identified, there should be a mechanism in place that ensures that the employee is given opportunities to develop those skills.

Coaching: Coaching is training at a more personal level. The performance management system identifies the specific skills an employee requires and identifies a coach who may be able to help the employee develop those skills and provide feedback on the individual’s progress.

Targets and standards: Since performance is related to attaining a target or adhering to a particular standard, clarity is necessary in the process of setting targets. The process must be transparent and fair and the employees should be convinced that the goals are attainable.

Measurement: One of the most important components of the performance measurement system is measurement. Measurement involves measuring the performance of the individual and the team. It is important that measurement is found to be fair and measures aspects of the performance that is indicative of a good performance. If the procedure is not found to be transparent, the system loses its credibility.

Pay: Pay is usually linked to performance. However, some experts are of the opinion that since the measurement of performance is subjective. performance cannot be a fair basis for pay. Some have suggested a pay that is based on the level of competence that the individual has achieved. Other alternatives would be team based pay where the payment is based on the team’s achievement rather than on the individual’s performance.

360 degree feedback: This system of measuring performance involves measurement of the individual’s performance by more than one person. Usually, it involves measurement of performance by people who are above the individual, by people who are colleagues and by subordinates.

Performance Management as an exercise is holistic in nature and involves all aspects of the organization. It involves everybody and is successful when there is clarity about the organization’s long term vision and strategy.