What are the Components of Performance Management?

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.

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.

A lot of components are necessary for successful performance management in any organization. If you are the one looking for the key components of a thorough performance management process, here is your halt. We have done all the legwork to make a list of important elements of a performance management system.

Components of Performance Management

Components of a successful performance management system are as follows −

Performance Planning

This is the first critical component of any performance management process. During this period, employees determine the objectives and major performance areas that can be accomplished within the confines of the performance budget over a year. The performance budget is established after a mutual agreement between the reporting officer and the employee.

Performance Appraisal and Reviewing

In most organizations, appraisals are conducted twice a year in mid-year reviews and annual reviews held after the fiscal year. The appraisee begins by providing self-completed evaluations on the self-assessment form and defines their accomplishments over time in quantitative terms.

The assessor provides final grades for the employee's quantifiable and measurable accomplishments following the self-assessment. The whole review process requires active engagement from both the employee and the appraiser to determine the root reasons for performance gaps and how they might be closed. This was mentioned in the section on performance comments.

Rewarding superior performance is critical since it determines an employee's work motivation. An employee's outstanding performance is publicly acknowledged and rewarded during this stage. It is a very sensitive time for an employee since it directly impacts self-esteem and success-oriented. Any contribution acknowledged by a company assists an employee in effectively overcoming setbacks and fulfils the demand for love.

Constant Performance Feedback

Performance Feedback, followed by personal counselling and performance facilitation − The performance management method places a high premium on feedback and counselling. This is when the appraiser informs the employee of areas for development and provides information on whether the employee is performing at the desired level of performance. The employee gets open and honest feedback and identifies the person's training and development requirements.

The appraiser takes all necessary means to ensure that the employee achieves the organization's desired goals via effective personal counselling and coaching, mentorship, and individual representation in training programs that build competencies and increase overall productivity.

Performance Improvement Plans

At this level, a new set of goals and a new deadline for achieving those goals are defined for an employee. The employee is informed explicitly of the areas in which they are expected to improve, and a specified date is also provided by which they must demonstrate their progress. This strategy is prepared and authorized jointly by the appraise and appraiser.

Potential Assessment

Potential appraisal lays the groundwork for lateral and vertical staff mobility. Evaluating potential employees gives critical information for succession planning and job rotation. Potential evaluation is accomplished via competence mapping and other assessment procedures.


Generally, performance reviews are mostly conducted annually due to which it become so dreadful and longer in duration. Hence, because of the nature of the performance management systems, such reviews are undertaken maybe on quarterly or even monthly.

These techniques on timings lead to situations where employees take the initiative to come to supervisors to discuss both issues and ideas more openly, and come up with resolutions sooner before it becomes a crisis.


Effective performance management may assist you in ensuring that all of your staff work together toward a common objective. Unfortunately, majority of the employees have a problem with the review and constant feedback system. However, with a clearly stated overarching purpose, employees will understand how their efforts contribute to the company's overall success. This contributes to improving individual, team, and organizational performance and productivity.

Updated on: 29-Apr-2022

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