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2024 Ultimate Guide to Performance Management

October 5, 2021
9 Min Read
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Table of Contents:

Definition of performance management

Performance management is the process of assessing performance through performance reviews, providing constructive feedback to employees on performance goals, reviewing performance goals, making changes, and providing recognition for performance achievements. It also ensures that employees are meeting their performance objectives/goals.

Performance reviews will help employers know if their employees are performing to the standards and whether they need training or development.

Why is performance management important?

By performance management strategy, employers are able to know if their employees are performing or not. It helps in effective performance management to create performance goals and check whether employees are achieving them.

The annual performance review process would help the employers to know what their employees need improvement on and how they can do so. Moreover, continuous performance management helps employers track the performance of every employee. Below are some of the importance of performance management.

  • It helps organizations make informed decisions about salaries/wages, promotions, terminations, bonus payouts etc.
  • Embeds a continuous learning culture throughout the organization by making constant feedback a part of everyday work
  • Points out personal strengths and areas for development
  • Provide a common language and understanding that is shared by all employees

Business performance management also results in increased productivity, better customer service, employee retention, enhanced employee experience and more effective use of human resources.

What is the goal of performance management?

The performance reviews are there to ensure that employees are performing well, doing their work to the best of their abilities and that they have met performance objectives. The performance reviews help with motivation for employees through performance-based recognition and continuous feedback on performance activities. Individual performance reviews should be used as an opportunity to provide recognition, feedback and development suggestions with the aim being to improve performance. It also helps companies by making sure all staff are hitting their performance targets, so operation runs smoothly.

The ultimate goal of employee performance management is for employers to know how their employees are performing. Performance management also ensures that employees perform well in terms of meeting performance targets and goals as set out by the company. Failing to meet these goals may result in disciplinary actions such as termination or demotion depending on what was agreed upon between both parties (employees and employers).

When performance reviews are conducted effectively, it can lead to higher productivity which ultimately benefits both the employer and the employee. On the other hand, when performance reviews are ineffective, it can result in under-performance or performance that does not meet the standard expected, leading to a performance gap.

Performance management aims to achieve performance excellence by reviewing performance throughout the year and maintaining a record that can be used for evaluations.

Performance management seeks to support businesses in achieving their desired business results by maintaining a high-performance culture. The performance review assists individuals in understanding what they do well and where they can improve while working towards achieving personal goals. Performance reviews are conducted annually or more often if necessary.

Performance management is a process of performance evaluation, performance planning and performance feedback. At the end of performance management activities, an individual or a group has a performance record in terms of performance appraisal that can be used for making decisions in the future.

13 benefits of performance management

“A strong performance management system not only helps in getting everyone aligned on the over-organization mission and goals but also goes a long way in building a culture of trust and meritocracy.”

By performance management, managers will be able to compare both creative and process-oriented employees to increase overall productivity and creative productivity. Performance appraisal will also help managers enhance work quality by giving feedback on areas where they require improvement. This will also employees understand what they should improve upon. 

The benefits of performance reviews include:

  1. Improved staff satisfaction because workers will know where they stand in terms of their job responsibilities
  2. Performance management provides accurate performance data that can be reviewed regularly by senior managers
  3. Performance management helps employers differentiate between high and low performance and rewards those who perform well
  4. It allows employees to focus on individual objectives, which will increase motivation and help them achieve organizational goals, improve overall productivity and profitability, and meet organizational concerns like cost-cutting, need for new skills, etc.
  5. Performance management process solves problems, such as poor performance issues
  6. Performance reviews ensure that employees are meeting performance targets; this can be helpful for managers who don't usually monitor employee performance because now
  7. Increased performance from individuals through performance feedback given by managers
  8. Improved employee engagement, which leads to increased performance
  9. Identifies training needs for employees/improves development plans
  10. Reduced staff turnover rates due to performance reviews providing opportunities for high performers in recognition 
  11. Performance management leads to better performance by employees
  12. Performance management creates a performance culture where people are held accountable for performance and provides an opportunity for managers to communicate clear expectations
  13. Performance management promotes organizational objectives.

6 real-world examples of performance management

“To win in the marketplace you must first win in the workplace.” - Douglas Conant

Some organizations give bonuses to employees who get good reviews, while others only use the review scores themselves as a motivation tool, but what matters is that there should be some kind of reward or positive reinforcement following a performance review in order to encourage improvement. Below are some real-world examples of performance management strategies employed by different companies.

1. Performance Management Process at Bank of America

At Bank of America, performance management is organized through the performance and development review (PDR) process that runs annually. The performance review process consists of four performance levels: performance development, performance management, panel review, and rating.

They also do performance management by conducting performance conversations and performance feedback.

2. Performance Management Process at Columbia Sportswear Company

At Columbia Sportswear Company, performance reviews are conducted in six steps designed to create a dialog between managers and employees by working through the performance plan step by step. These six steps include:

  • Conducting performance planning one-on-one with each employee
  • Reviewing the performance plan
  • Receiving manager's feedback on completed activities
  • Evaluating overall progress based on evaluation criteria
  • Discussing this information in a team setting (typically at monthly meetings), and finally
  • Follow up to ensure that the agreed-upon were achieved and expectations met

3. Performance Management Process at Starbucks

Starbucks has performance management strategies such as performance feedback and performance development at least once a year. They also conduct midyear check-ins to discuss how the performance management cycle works for both managers and employees, followed by a mid-year performance review in which managers and employees assess and plan the rest of the year's work activities. 

A separate quarterly performance evaluation meeting takes place where responsibility for next quarter's performance goals is set with support from HR Business Partners, Compensation Market Managers or other members of AVPs or SVPs (senior vice presidents) 

4. Performance Management Process at Procter & Gamble

At Procter & Gamble, performance management is done through a performance scorecard at the end of every fiscal quarter and performance planning where managers and employees sit down and agree on performance objectives for the coming quarter. They also have performance feedback that occurs throughout the year to track actions taken against performance goals set during quarterly reviews and discuss progress towards those goals with any changes that need to be made towards achieving them. 

All managers also hold regular one-on-one meetings with their direct reports as part of their ongoing performance conversation where they assess how work activities are going so far within a given time frame, what needs to be addressed moving forward, etc. Compensation Market Managers or other members of senior vice presidents (SVP) Performance

5. Performance Management Process at Jack-Henry & Associates

The performance management process at Jack Henry has two main stages - performance planning and performance review, which occur annually. Alongside these two performance management processes, several other sub-processes contribute to the overall goals of the performance management system, such as performance development, performance effectiveness & compensation review, promotion/demotion decision etc. Performance planning begins by setting measurable organizational goals for each role in order to set clear expectations for employees to meet during the following year. 

The next step is providing training or additional support to employees who need it to successfully complete performance objectives. The performance review is divided into three parts-the performance development project, which focuses on performance feedback & coaching. 

The second part is the performance effectiveness, where managers discuss performance metrics with their team members and make adjustments if needed com-lastly, the compensation & performance review where employees discuss their salary increase for the year.

6. Performance Management Process at Wells Fargo

The performance management process at Wells Fargo begins with the performance planning stage, where performance metrics are set for every job role in the bank. Employees have a one-on-one meeting with their managers during the performance development stage, who provide feedback and suggestions regarding performance review and professional development. Managers meet each employee during the performance assessment stage to discuss performance and rank them based on previously established performance standards. 

The final step is performance review which includes a discussion between manager and team member about changes needed to be made for them to improve their performance and complete all assigned tasks successfully. 

The performance review contains three stages: 

  • A performance development project that focuses on performance feedback and coaching
  • Performance effectiveness: managers discuss performance management metrics with their team members and make adjustments if needed, and compensation
  • Lastly, performance review where employees discuss their salary increase for the year

In addition to these processes, Wells Fargo provides performance incentives through annual merit increase allocation for employees who have completed objectives set by company-wide standards, along with quarterly incentive opportunities for those who have excelled in their field of work.

Performance management statistics

Performance management statistics show performance management improves performance. The time to manage performance is now!

According to the first performance management guide for performance management statistics, performance management tips and performance management techniques published by the Balanced Scorecard Institute.

The research showed that 91% of performance management systems companies said they achieved higher performance levels. Only 9% said that performance was not improved with a performance improvement system. This proves that there is a direct link between having a system in place and productivity rise. It's just what you need to know about performance management - so why wouldn't you want it?

A plurality of respondents (44%) indicated their company has an annual review process, and 37 percent cite other processes such as providing feedback weekly or at least once per month. A performance management statistics article published on performance review concluded that performance could be improved through performance feedback.

19% responded that they had no performance management system in place. This demonstrates that many companies could increase performance but don't have a performance improvement plan in place. Performance management is thus an opportunity for businesses to gain performance improvement statistics by implementing the correct measurement and feedback system for employees. 

A performance management guide suggests that key performance indicators (KPIs) are one way to report on employees, teams, or even whole organizations. Based on this statistic, firms without some sort of process in place would greatly benefit from reviewing their current practices and implement some form of metrics-driven approach.

Performance management benefits might include increased profitability or productivity or perhaps both. 85% believe that having good performers improves business results more than improving poor performers would be beneficial at the same time as the overall success of the company increases revenue by 5%. These figures show customers are willing to pay a premium for a performance management system in place.

Performance metrics are important performance management tools and should be implemented so performance can improve today. A performance management customer satisfaction survey can provide insight into performance management system performance.

How to improve performance management

The most important aspect is to set clear goals for employees to know what they are supposed to accomplish during the performance review period. It also makes sense that performance plans should be individualized since no two team members have the same responsibilities or abilities & providing support where needed is also a critical step. Managing workforce performance nowadays takes a lot of effort and has become very complicated due to diversity within organizations which means providing training and ensuring the performance management process is working.

There needs to be a reformation of the traditional performance review system based upon more modern models that emphasize transparency, open communication, career planning/advancement, and regular feedback from managers on employee growth areas. Instead of the traditional performance review system, using a performance management software tool might be beneficial to making performance reviews more streamlined and efficient.

Performance reviews can be improved by:

  • Keeping performance reviews short and sweet (e.g., 30 minutes)
  • Defining performance metrics upfront and throughout the year preventing surprises during the review process
  • Aligning performance goals with company goals and strategy -- clear understanding of how individual role contributes towards achieving organizational goals is key to set performance expectations and development plans for employees

Performance management tips

“Performance Management should focus on strengths & help employees develop these, rather than weaknesses.”

The following performance management best practices are based upon lessons learned from a performance management survey conducted by The Performance Management Group:

  • Prioritize performance conversations - you can't cover everything in one meeting, so prioritize your time
  • Create a culture of accountability
  • Structure your performance conversations around the "Three C's" - Communication, Collaboration & Cooperation
  • Know your people
  • Keep it simple
  • Hold formal monthly meetings where everyone can rub about current problems and how to solve them
  • Develop an effective evaluation process
  • Measure your progress

23% say performance development plans are required in their organization, while 32% simply have performance goals outlined for their employees without tracking performance throughout the year

Performance management software

Several performance management software tools can help organizations better track performance throughout the year and set achievable performance improvement goals for their employees. Some performance management tool includes:

  • Cornerstone OnDemand's performance management solution provides real-time feedback via mobile app, enables managers to monitor progress against performance goals, helps prepare for performance reviews and increase manager participation with features such as "Pre-populate" functionality where managers can populate content before they meet with their employees.
  • iMeet Central is an online meeting solution designed specifically for performance reviews that allow managers to record video feedback for employees during performance review meetings, so everyone participates in the performance conversation.
  • BambooHR performance management solutions combine performance planning and performance reviews in one efficient platform. Employees set goals, managers provide feedback regularly throughout the performance review period, and performance development plans are created to provide clear next steps for employees.

The performance management software tools listed above are just some performance management solutions available on the market. 13% of organizations offer performance bonuses to their employees for outstanding performance

At Matter, we help you assess employee performance and ensure that employees attain their performance goals through our free Slack app. Our app is designed to help you make informed decisions and sound judgments based on quality feedback about employees’ performance. With Matter, communication, collaboration and cooperation can be achieved seamlessly.

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