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The performance management system – Overview

Define and discuss the purpose of a performance management system. What are some of the benefits and challenges of a performance management system? Next, discuss how you have seen a performance management system working at a current or former employer or research a company online, noting the impact on employee behavior.

Performance management system refers to the continuous methodical process by which the performance of employees is measured. It provides a completed and professional management process by which organizations use to evaluate the performance of employees and organizations (Ying, 2012). Its crucial role is on continuous improvement of performance. All employee have potential in certain areas, but utilization and conversion of such potential into deliverable performances is often impeded by several factors. Performance management serves as a way of converting this potential into performance by eliminating such barriers and motivating human resource. It is an ongoing process or rather partnership, between the employee and supervisor, that involves establishing an understanding on how the two will work together to sustain and improve current employee performance while identifying and removing barriers to performance. The main purpose of performance management system according to Ying, is that: the work performed by employees accomplished company’s work, employees have clear understanding of the quality and quantity of work expected, performance that does not meet the required standards is addressed, and opportunities for their development are identified. The benefits of performance management system include;

  1. Enhanced work engagement: Effective performance management enhances employees work engagement. Employees find themselves comfortable at work and more inclined toward better performance (Awan et al., 2020).
  2. Highlights training needs: Frequent reviews on employee performance helps to better understand their skills and identify training needs before they impact productivity.
  3. Helps identify right employees for promotion.
  4. Helps define career paths and support workforce planning.
  5. Increases employee retention because their expectations and objectives are clear and regularly reviewed.

Challenges of performance management system

  1. Lack of flexibility: Dominant features of some sectors comprise of rigid structure, control and uniformity (Kaupa & Olusegun Atiku, 2020).
  2. Poor communication: Often-times, employees are not cognizant with the set monthly or semi-annual performance targets expected from them.
  3. Poor training of the implementing officers.
  4. Absence of integration.
  5. Lack of leadership commitment.
  6. Ignoring change management in system implementation.

Microsoft is a perfect example of companies that have used performance management system to improve productivity and impact employees’ behavior. During year 2006, the company started implementing a reward system for its employees. The new system allowed employees to get more merit pay, annual bonuses and restricted stock unit. Later in 2011, the company implemented another system in which employees would receive one rating based on the manager’s assessment. As a result of this system, pay satisfaction among employees rose. Employees and managers report that discussions about performance have improved since then. As a company, attraction and retention of top talents has been high.


Awan, S. H., Habib, N., Shoaib Akhtar, C., & Naveed, S. (2020). Effectiveness of performance management system for employee performance through engagement. SAGE Open10(4), 215824402096938. https://doi.org/10.1177/2158244020969383

Kaupa, S., & Olusegun Atiku, S. (2020). Challenges in the implementation of performance management system in namibian public sector. International Journal of Innovation and Economic Development6(2), 25-34. https://doi.org/10.18775/ijied.1849-7551-7020.2015.62.2003

Ying, Z. Y. (2012). The Impact of Performance Management System on Employee performance.

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