What is a Performance Management System

What is a Performance Management System?

by Dr. Rick Goodman on August 19, 2019

It’s in the interest of every team leader to implement a performance management system. Maybe that’s something you’re well-acquainted with, or maybe this is the first you’re hearing about it. Either way, there’s some merit in pausing to review what a performance management system is, and how effective performance management can be implemented.

Let’s start at the beginning, covering a basic definition before moving into some specific action items that leaders can put into practice.

What is Effective Performance Management?


When we talk about a performance management system, we’re talking about the kind of environment you create in your workplace. Specifically, you want to create an environment that empowers everyone to do the best job possible; to perform to the highest standards of quality and precision. This encompasses your own, personal performance as well as the performance of your team members.

There are a number of core components to an effective performance management system, including:What is Effective Performance Management?

  • Establishing clear job descriptions. What is each team member supposed to be doing? What are the responsibilities associated with each role?
  • Developing some procedures for new employee orientation. How can you ensure that newcomers to your team have a foundation for success?
  • Implementing a system for providing employees with ongoing teaching, coaching, feedback, and professional development.
  • Ensuring that there are some formal career development opportunities in place for the members of your team.
  • Verifying that your compensation systems are sufficiently rewarding the people who make a meaningful contribution to the team and to the bottom line.

These are some of the big-picture items to think about as you ask, what is effective performance management? Crucially, though, an effective performance management system doesn’t just have the right pieces. It also puts those pieces together in a way that’s holistic and systematic. (Indeed, that’s why we call it a performance management system!)

What are the Benefits of a Performance Management System?


Putting an effective performance management process into place may seem like a daunting task but let me assure you that it comes with significant benefits. Here are just some of the advantages your team can anticipate when you adopt a performance management system.

  • Consistency with the way you choose employees to take on new projects, to be transferred, to be promoted, or to be terminated. A more formalized performance management process helps you apply a consistent standard to all your staffing decisions, ensuring that you always have the right person in each role.
  • Motivation for all of your team members. When you implement an effective performance management process, you create objective standards for employee appraisal and review. This can be incredibly motivating; team members have a clearer sense of what they need to do and how they’ll be measured if they want to advance.
  • Increased morale and employee retention. With improved motivation comes higher morale and better retention of your top talents… all of which makes your team more productive and more efficient.
  • Positive impact on the organization. Here’s where we get into some of the really fun stuff! Organizational psychology has proven again and Benefits of a Performance Management Systemagain that employees who recognize clear standards of accountability will ultimately become more responsible. And when employees become more responsible, they tend to have a more positive impact on the business, including a more positive financial impact!
  • Recognition of training needs. Another important benefit of a performance management system is that it helps you identify the areas where your employees would most benefit from formal training. In other words, it empowers you to make prudent decisions about if and when to bring in an executive consultant or coach!
  • Minimization of firing risks. Finally, note that terminating employees can be a risky thing. Even when a team member is underperforming, you may question whether you can safely terminate their employment without the risk of legal action. When you have an employee performance system in place, however, it means there are formal standards of accountability, so you can document and prove that the employee in question is falling short. This can help shield you from legal risk.

As you think about putting a performance management system process into place, these are just some of the benefits you should have on your radar.

How to Get Started


Now we come to the action items. If your business doesn’t have a performance management system process in place, how can you start one? Here are some very brief suggestions that I’d recommend.

  • Evaluate your current processes for appraising and instructing employees. Do you have formal standards in place? What kind of feedback do you provide, and at what intervals?
  • Identify your organizational goals. What would you like to see your team accomplish? How might a performance management system help you progress toward these goals?
  • Draft some formal performance expectations and ensure that you share them with all of your employees. Clarify the level at which you expect employees to perform.
  • Institute a system for providing feedback to employees, whether that’s annually, bi-monthly, or even weekly.
  • Make sure you’re evaluating your own processes, too! Take stock of what’s working and what isn’t with your performance management system and make adjustments as needed.Get Started with a Performance Management System

This is meant as a very simple outline, but I hope you’ll find it valuable as you work toward a performance management system of your own.

And if you’d like to get deeper into the details, I hope you’ll give me a call! I’d love to chat with you further about what a performance management system might mean for your business. You can contact me at www.rickgoodman.com or call 888-267-6098. And don’t forget to buy my book, The Solutions Oriented Leader, for step-by-step advice on transforming your life, your business, and your team.

Dr. Rick GoodmanWhat is a Performance Management System?