By CARLA TARDI  Updated September 20, 2021Reviewed by DAVID KINDNESS

What Is Performance Management?

Performance management is a corporate management tool that helps managers monitor and evaluates employees’ work. Performance management’s goal is to create an environment where people can perform to the best of their abilities and produce the highest-quality work most efficiently and effectively.

KEY TAKEAWAYS

• Performance management tools help people to perform to the best of their abilities and produce the highest-quality work most efficiently and effectively.
• The precept of performance management is to view individuals in the context of the broader workplace system. 
• Performance management focuses on accountability and transparency and fosters a clear understanding of expectations.

Understanding Performance Management

A formal performance-management program helps managers and employees see eye-to-eye about expectations, goals, and career progress, including how an individual’s work aligns with the company’s overall vision. Generally speaking, performance management views individuals in the context of the broader workplace system. In theory, you seek the absolute performance standard, though that is considered unattainable.

Performance-management programs use traditional tools such as creating and measuring goals, objectives, and milestones. They also aim to define what effective performance looks like and develop processes to measure performance. However, instead of using the traditional paradigm of year-end reviews, performance management turns every interaction with an employee into an occasion to learn.

Managers can use performance management tools to adjust workflow, recommend new courses of action, and make other decisions that will help employees achieve their objectives. In turn, this helps the company reach its goals and perform optimally. For example, the manager of a sales department gives staff target revenue volumes that they must reach within a set period. In a performance management system, along with the numbers, the manager would offer guidance gauged to help the salespeople succeed.