How does Performance Management Work?

What is Performance Management?

Performance management is a communication-based process between a supervisor and an employee occurring throughout the year, to plan, monitor and review the employee's performance, objectives, goals, and overall contribution to the organization. Essentially, performance management is what organizations undertake to increase their success and maintain a competitive edge.

Performance management is often categorized into two types; they are as follows −

  • Corporate Performance Management

  • Human Performance Management.

Corporate Performance Management

Corporate Performance Management (CPM) is defines the methods, metrics, and processes used to monitor and manage the business performance of an organization. CPM strategically focuses on information to operational plans in order to receive aggregated results. It does not concern about human performance unlike Human Performance Management.

Corporate Performance Management (CPM) uses intelligent business tools to formulate organizational strategies through data analysis, processing, and reporting to monitor and manage the performance of an organization. In other words, it helps corporations to improve their business management through various proven and tested business methods.

Human Performance Management

Human Performance Management (HPM) refers to employees’ productivity along with their operational capabilities. HPM focuses on psychological processes that contribute to employees’ performances at the workplace, on both individual and team level.

HPM aims to ensure the level of satisfaction of the employees at the workplace, thereby helping organizational strategies in achieving fruitful results in the most rewarding and efficient way possible.

HPM tries to find out the best ways to enhance human performance at the workplace. It focuses on how to manage humans or employee behaviors towards goal accomplishment rather than the controlling their performances.

Performance Management is primarily concerned with the following issues −

  • Outputs, Process, And Inputs
  • Planning
  • Measurement and Review
  • Continuous Improvement
  • Continuous Development
  • Communication
  • Stakeholders
  • Transparency

The main aim of performance management is to foster an environment in which people and teams take ownership of their development and that of their companies. Specifically, performance management is concerned with accomplishing individual goals under corporate settings and ensuring that each employee works toward these.

What are the Characteristics of Performance Management?

The primary characteristics of performance management are as follows −

Reward and Encouragement

Performance Management focuses on empowering, encouraging, and rewarding employees to achieve their highest level of work efficiency for company's benefits.

Performance Aligning with Company’s Moto

It aims to concentrate on the employee’s performance and aspirations aligning with the organization’s moto. Monitoring performance and assigning tasks for constant action as necessary.

Data Analysis and Reporting

Performance management involves Data analysis and regular reporting of projects progress as well the employee performances in various departments, thereby identifying areas for improvements.

Continuous Adaptable Process

Performance management is a constant and adaptable process involving managers and those they supervise collaborating within a framework that outlines how they may work most effectively to accomplish the desired objectives. This implies to constant and effective communications between the managers and the employees.

Based on Agreement and Collaboration Principles

It is founded on the notion of contract- and agreement-based management rather than command-and-control management. It is based on agreement and collaboration rather than on compulsion or control.

Concentrates on Planning and Enhancement of Future Performance

Performance management is concerned with planning and enhancing future performance rather than with Retrospective Performance Review. As mentioned previously, it is a continuous and evolving process in which performance improves over time. It is the foundation for providing regular and frequent trainings, guidance, and resources on several requirements.

Transparency in Monitoring Own Performance

The most interesting part in performance management program is that the employees can monitor their own individual achievements and progresses to know how they are contributing to the overall accomplishments of the company.

One can use software to track these goals and monitor the performances. This makes it easier to highlight and reward the exceptional performers in the team. This would also make the hard-working employees feel valued for their efforts.


Every company wants to guarantee that its personnel expenditures are reasonable. When performance management is performed successfully, it is easy to analyze workforce's daily productivity and find areas where they are not doing as well. This may assist in increasing the efficiency of the employee’s personal development, unlocking his or her latent potential, and ensuring that employees are worth every rupee.