What Is Performance Management?

Performance management is a corporate management tool that helps managers monitor and evaluate employees’ work. Performance management’s goal is to create an environment where people can perform to the best of their abilities to produce the highest-quality work most efficiently and effectively.
A formal performance-management program helps managers and employees see eye-to-eye about expectations, goals, and career progress, including how individuals’ work aligns with the company’s overall vision.

How Performance Management Works

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 her 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.

Why Performance Management Matters

Focusing on continuous accountability creates a healthier, more transparent work environment, and emphasis on regular meetings can improve overall communications. Because performance management establishes concrete rules, everyone has a clearer understanding of the expectations. When expectations are clear, the workplace is less stressful. Employees are not trying to impress a manager by doing some random task, and managers aren’t worried about how to tell employees that they are not performing well. If the system is working, they probably know it already.


  • Performance management tools help people to perform to the best of their abilities to 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, transparency, and fosters a clear understanding of expectations.

Types of Performance-Management Programs

Although performance-management software packages exist, templates are generally customized for a specific company. Effective performance-management programs, however, contain certain universal elements, such as the following:
Software is differentiated from hardware as the set of rules that allow services to be conducted on the physical device. The software industry is really only a small part of the overall computer programming activity that takes place, as it relates to software traded between software producers and software consumers

Creating measurable performance-based expectations

 Employees should give input into how success is measured. Expectations include results—the goods and services an employee produces; actions—the processes an employee uses to make a product or perform a service; and behaviors—the demeanor and values an employee demonstrates at work.

Aligning employees' activities with the company's mission and goals

Employees should understand how their goals contribute to the company’s overall achievements.

Developing specific job-performance outcomes. What goods or services does my job produce? What effect should my work have on the company? How should I interact with clients, colleagues, and supervisors? What procedures does my job entail?