Essential components of a performance management system

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Performance management refers to the process by which managers and employees work together to plan, monitor and review an employee’s performance. A performance review is used to discuss an employee’s performance. It is also an opportunity to get to know the employee better and to discuss their feelings about the job. The aim of this review is to determine what the employee is doing right and what they are doing wrong.

There are certain components to a performance management system which need to be incorporated into a company in order to ensure the effective management of employees:

  1. It must create a shared understanding of what is to be achieved

Performance management should be used by managers and employees to create a shared understanding of what should be achieved, and also how it is to be achieved. Managers and supervisors must ensure that individuals and teams have a common understanding of how their jobs connect to the mission and goals of the business.

  1. Accountability for results must be clearly assigned and well-understood by everyone

Management must clearly identify what it takes to determine success and make sure that all managers and employees understand what they are responsible for in achieving the company’s goals. Accountability is a key success factor for any company.

  1. Compensation, rewards, and recognition should link to performance measures

A clear link between achieving a specified performance target and some form of meaningful compensation, reward or recognition should be used as a positive performance incentive. Managers and employees intuitively understand the importance of a performance measure when it is directly tied to financial remuneration or another form of meaningful reward or recognition.

  1. Employees must be trained on their performance

Employees must be clearly briefed on their responsibilities and they should be trained in the areas where they are lacking. It might be that employees are capable of performing, but that they are not sure of what is expected of them, or they have not performed a certain task before and need guidance.

  1. Both managers and employees must monitor and track performance

Both managers and employees need to monitor the employee’s situation in order to take action to keep performance and development on course or to change course if needed. Decisions about giving and receiving feedback and asking for training for improved performance relies on observing, tracking and recording performance information.

To ensure the effective monitoring of performance, regular progress reviews should be conducted with employees where their performance is compared to their performance measures.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)