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The Ideal of Performance Management

What is performance management, and how should it be applied in your organization?

Performance Management Defined

Performance management is the continuous process of improving performance by setting individual and team goals which are aligned to the strategic goals of the organization, planning performance to achieve the goals, reviewing and assessing progress, and developing the knowledge, skills and abilities of people. It usually, but not necessarily, involves the design and operation of a formal performance management system in the shape of a defined set of procedures for planning, monitoring and reviewing performance. This is the ideal version described in this article but it is flawed as revealed in the second article of this series (to be the first to read the second article, subscribe to the HR newsletter here).

Performance management is managing the business. Managing performance is what line managers do and performance management is supposed to help them do it. It should be a powerful means of ensuring that the organization’s strategic goals are achieved. It should contribute to the achievement of culture change and be integrated with other key HR activities, especially human capital management, talent management, learning and development and reward management. Thus performance management, if it works properly, helps to achieve horizontal integration and the ‘bundling’ of HR practices so that they are interrelated and therefore complement and reinforce each other. An effective system of performance management can play an important part in increasing levels of employee engagement

Ideally, the overall objective of performance management is to develop and improve the performance of individuals and teams and therefore organizations. When done well, it ensures that people are clear about what success looks like and the part they play in delivering this success. A strategic approach means that performance management processes such as setting objectives are explicitly designed to align individual objectives with the organization’s strategic objectives.

A definition of what performance management systems are there to do was provided by Lee (2005):

The real goals of any performance management system are threefold – to correct poor performance, to sustain good performance and to improve performance….All performance management systems should be designed to generate information and data exchange so that the individuals involved can properly dissect performance, discuss it, understand it, and agree on its character and quality.

How an ideal system of performance management works

Ideally, the system flows from the organization’s objectives and then operates as a continuous and self-renewing cycle as modelled below.


This model depicts an ideal system that consists of an apparently logical sequence of activities each of which contributes cumulatively to the achievement of the objective of improved performance. There is nothing wrong with the logic. But the success of the process depends on each stage being conducted properly. And this makes demands on the participants – managers and their team members – that are very hard to meet. Converting the ideal into reality can be very difficult as discussed in the next article in this series.


LeeC D (2005) Rethinking the goals of your performance management system, Employment Relations Today, 32 (3), pp 53-60

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