Human Resources

Understanding the terms ‘Performance Management’

What is Performance Management?

Employee Performance Management is a process for establishing a shared workforce understanding about what is to be achieved at an organization level. It is about aligning the organizational objectives with the employees' agreed measures, skills, competency requirements, development plans and the delivery of results. The emphasis is on improvement, learning and development in order to achieve the overall business strategy and to create a high performance workforce.

If Performance Management is implemented correctly with specific objectives tied to the strategic and operational plan, organizational performance outcomes will likely increase very quickly. For example, if the CEO asked for a 3% increase in gross margin, this objective would be cascaded down to every department, team and individual who can influence the increase in gross margin.

Those who are successful at achieving this objective will get a favorable review, those that could not, will get an unfavorable performance evaluation in the absence of extenuating circumstances. The process of Performance Management therefore drives organizational performance outcomes. Employees that achieve the organizational goals are rewarded with favorable reviews and bonuses in line with their performance and contribution to the organization.

What is a Performance Appraisal (PA)?

A performance appraisal is a systematic and periodic process that assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives. 

Other aspects of individual employees are considered as well, such as organizational citizenship behavior, accomplishments, potential for future improvement, strengths and weaknesses, etc. 

To collect PA data, there are three main methods: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most...