Employee Performance Management: Why It Is Important?

Stephen R Covey, a renowned American educator and the founder of Franklin Covey, says,

Always treat your employees exactly as you want them to treat your best customers.

This statement holds true – especially in today’s employee-centric culture, where organizations are striving to enhance employee experience more than ever before. After all, human resources form the backbone of any organization. Their talent, efforts, and innovation drive organizational success. Thus, due emphasis should be given to their performance management.

Effective performance management strategy helps a company cater to an employee’s career goals while leveraging their caliber for organizational success.

This article elaborates on the concept of employee performance management, its importance, and ways to streamline it.

What Is Employee Performance Management?

It comprises conveying expectations, setting goals, reviewing progress, deciding compensation and rewards, and more. The aim of employee performance management is to leverage every employee’s potential and align their efforts with organizational goals.

Unlike the traditional appraisal, performance management doesn’t require employers to compile the year-round performance data and prepare it for the annual review meeting. Instead, it entails real-time tracking of performance, regular review meetings, discussions around areas of improvement and performance bottlenecks, and so on.

The following sections covers its benefits in detail,

How Does Employee Performance Management Benefit Employees and Organization?

Here is how it benefits the employees and the organization.

For employees 

Regular performance reviews provide a fair chance to employees to understand their performance backlogs, setbacks, areas of improvement in time to realign their work with the company’s expectations. Moreover, with the review meetings being a two-way conversation, employees get a chance to express their concerns freely. Additionally, well-defined key responsibility areas and performance indicators help them self-track their progress and take corrective action ahead of time in case of any hiccups.

Continuous performance management also consists of timely appreciation and acknowledgment, motivating and driving employees to work with more commitment.  It also fosters a sense of belonging and purpose in them, thereby paving the way for better focus and career growth.

The integration of performance management software streamlines the entire process, making it more efficient and transparent. By automating tasks such as goal setting, progress tracking, and feedback collection, the software reduces administrative burdens and enables managers to provide timely and meaningful guidance to their teams.

For organizations

Continuous performance management helps identify high-performing individuals and consider them for succession and promotion. It also helps find areas of improvement in every employee and initiate suitable training and upskilling programs. When employees upscale their competencies, it naturally leads to better outcomes in terms of quality, thus enhancing the organization’s reputation. Moreover, timely rewards and recognitions inspire the individuals to push for excellence, exhibit commitment, become more productive, thus improving overall efficiency.

Given the benefits, it’s now time to form an action plan and streamline performance management. The following section explains the proven practices,

Effective Employee Performance Management Practices to Follow

  1. Ensure timely and inclusive feedback

Timely feedback is the key to strengthening performance management. Therefore, a manager should ensure to discuss their employees’ performance regularly, convey strengths, highlight areas of concern, and give suggestions to fix them.

They can leverage the 360-degree feedback method to collect reviews from peers and leads across different functions and departments. It will help make the review more inclusive and unbiased.

  1. Convey key responsibility areas at the outset

Establishing key responsibility areas for individual employees is crucial. It gives them clear visibility into what to do and reduces ambiguities around responsibilities and expectations. Additionally, defining metrics will enable them to understand the parameters against which the management will measure their performance.

This will help them keep their work in line with expectations. Also, understanding how one’s work contributes to the ultimate goal naturally increases individual accountability and productivity.

  1. Recognize and reward good work

When an organization rewards and acknowledges one’s excellence, it makes them feel valued and appreciated. It also fosters a sense of purpose and belonging as they realize that their efforts and contributions are noticed and recognized. They, thus, become more confident, and it enhances their engagement and motivation.

Hence, the onus lies on the manager to organize timely reward and recognition programs to celebrate exceptional performance. Rewards can be monetary like bonuses, salary increments, or non-monetary like small gifts, shopping vouchers, gym memberships, etc.

  1. Use the right tools and technology to measure performance

Advanced technology solutions have fast-tracked almost every business process. Therefore, managers can use some tools to their advantage and strengthen their performance management strategy. To procure real-time data on resource metrics, they can implement robust resource management software

  1. Implement training and upskilling programs

Performance management not only includes evaluation but  Formulating an effective learning and development (L&D) program can help the management achieve that. Furthermore, every individual in an organization has different skills, competencies, attributes, etc.

Therefore, it is essential to consider employees’ proficiency levels, roles, responsibilities, preferences, hierarchical levels to personalize upskilling programs. Suitable training and development aid in career growth and pave the way for improved organizational performance.


Performance management is crucial to tapping into employees’ potential and building a high-performance culture. Therefore, it is high time that every enterprise formulated a customized employee performance management system that aligns with their organizational needs and goals.

Author’s Bio

Mahendra Gupta is PMP certified with 20+ years of expertise in resource management & Planning. Presently he is working as Project Consultant at Saviom Software, where his experience has enabled multinational businesses around the globe to diversify their project portfolio. Follow his work here.