A performance management system is a set of activities you can use in your company to effectively achieve business goals and objectives. Performance management systems are designed to identify, eliminate and improve performance problems. The benefits your company will see after implementing a performance management system include increased profits, a motivated workforce and improved management. Businesses that use performance management systems are more competitive and profitable. While areas targeted in performance management systems are individual to businesses and industries, there are some main features common to any system of performance management.


Performance management begins with goals. Set your corporate goals and objectives and clearly communicate them for performance expectations to be met. Effective goals must be clear and achievable, written in specific terms, measurable and timely, aligned with your corporate strategy and appropriately supported. For your goals to be effective, pair them with performance metrics such as historical and current data on sales, production and service quality. Performance metrics provide a framework for measuring progress toward goals and performance.

Motivation and Coaching

Employees are motivated by intrinsic and extrinsic rewards--how they feel when they accomplish something and how they feel when they are rewarded for their accomplishments. Motivating your work force is not always as clear cut as it might seem. Use incentives and rewards to motivate your employees and to prompt achievement and performance improvement. If motivation doesn’t get desired results and there are performance problems, coaching is the next step. Regular coaching and developing employees is part of performance management when other incentives don't work.

Monitoring Performance

Monitoring your work force's performance as part of performance management requires observation, information gathering, discussion, active listening and measuring progress toward goal achievement. If you observe and identify problems discuss it with the employee to find out why and provide motivation and resources if necessary. Verify sources of performance problems and discuss solutions to get the employee back on track. If necessary, use on-the-spot coaching when appropriate or develop an action plan for improvement.

The Role of Leaders

Ultimately, leaders are responsible for creating and communicating expectations. Performance management systems are the framework to develop and manage those expectations to achieve goals. Without a system to manage performance, your business may not be as competitive, profitable, effective and efficient as it could be.