What Is Performance Management? (With Benefits and Tips)

By Indeed Editorial Team

Published November 24, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

As a team leader or supervisor, you're responsible for ensuring that your team members perform their duties effectively. While monitoring the activities of many employees can be tasking, a good system makes it straightforward. Understanding performance management can help you monitor your team's performance more effectively and increase productivity. In this article, we discuss what it means to manage performance, explore the benefits of doing so effectively, outline how to manage performance, and provide additional tips to aid you.

What is performance management?

Performance management is a tool that managers, supervisors, and team leaders use to monitor the performance of other employees. It involves setting goals, assigning responsibilities to employees, and monitoring how effectively they complete their tasks. The aim of managing performance is to create a more structured work environment, allowing for greater efficiency. It also allows managers and executives to monitor employees' effectiveness in the context of the company's work processes. Managing performance is essential for companies that intend to use their resources effectively.

Related: What Is a Performance Review? (Definition and Examples)

Benefits of managing performance effectively

Here are some of the benefits of managing performance effectively:

Enhances coordination

Managing performance effectively involves setting clear goals and responsibilities. Similarly, it involves developing clear work processes and structures of authority. As a result, employees know what their duties are and how to do them. They also know where to submit their tasks and who to approach if they have any complaints or encounter issues. This clearly defined work structure makes it easier to coordinate employees, even in different units or departments. Proper coordination promises effective collaboration, which can enhance productivity.

Improves employee morale

When employees know their tasks and how to approach them, they're more likely to enjoy their work and show dedication. Additionally, effective management also involves giving employees regular feedback about their efforts. This helps employees know that the organization recognizes their efforts, which can improve morale. Finally, effectively managing employee performance may also involve offering incentives to high-performing employees. Incentives are a proven and effective way to encourage healthy competition and dedication among employees.

Related: How to Motivate Employees

Promotes efficiency

Designing an effective system for managing performance involves developing effective work processes and creating a well-defined authority structure. As a result, employees understand their role in the organization. They also understand how their role interacts with others and contributes towards the organization's overall goals. As a result, employees can allocate their time and resources more effectively, leading to greater efficiency. Managing performance effectively also includes sophisticated work review processes, which minimize error and improve output quality.

Increases productivity

Clearly defined goals and work processes make employees more efficient, meaning they can spend less time and resources completing their tasks. As a result, employees can take on more tasks and complete them within the same timeframe. This can earn the employee a promotion or other rewards. Greater productivity among employees helps organizations meet their goals faster, giving them a competitive advantage.

Aids recruitment

When organizations define their work processes and assign responsibilities, it's easier to track each employee's role. By managing performance effectively, the human resources department can determine how each role interacts with the organization's overall goals. This makes it easier to write job descriptions when recruiting employees. It also informs the hiring manager of the kind of skills the role requires, which can help them select the ideal candidate. Beyond this, a clear work process also makes it easier to determine when a unit is under-staffed or over-staffed.

Facilitates decision-making

When organizations create structured work processes, it's easier to track the performance of various units. As a result, if there are any problems, the organization can find it easier to identify its source and resolve it. Having a defined work structure also makes it easier for organizations to allocate resources properly, as they can determine what each unit requires. It's also easier for organizations to expand their operations when they have a work structure they can reference. Ultimately, the feedback managers get from employees when monitoring their performance can inform corporate strategy.

Increases profits

The goal of managing performance is to make employees more effective with their tasks. This leads to greater productivity, which can help companies increase their profit margin. Properly managing performance also leads to greater efficiency, which means less wastage. As a result, companies can reduce their operational costs, which can also increase profits.

How to manage performance in an organization

Here are some of the steps you can follow to manage performance in an organization:

1. Define the goals

The first step to managing employee performance is to define the organization's goals. This is an opportunity to allow employees to connect with the organization's values and become passionate about its goals. Knowing the reason behind their tasks can make employees feel more involved, leading to greater dedication. Ensure you define the organization's goals clearly and explain the reason behind them so that employees can understand them. If possible, it helps to remind employees about the organization's goals. You can do that by displaying them somewhere public or discussing them during team meetings.

Related: How to Be a Succesful Team Lead: Roles and Responsibilities

2. Assign roles and responsibilities

After defining your goals, it's important you identify each employee's roles and responsibilities. Doing so can aid collaboration as it increases the chances of team members respecting each other's boundaries. Also, clearly defining employee roles ensures everyone carries their fair share of the workload without leaving anyone overburdened or idle. While assigning roles, consider each employee's skill set, temperament, and role in the company.

3. Set a timeline

Setting timelines makes it easier to measure the team's or organization's progress. It's also an effective way to motivate the team, as it places a healthy amount of pressure on them. When setting timelines, ensure they're reasonable and realistic. For the best results, you can set several reminders leading up to your major deadlines. That way, you can remind your team members of their tasks and increase the chances of timely completion.

4. Include key performance indicators

Key performance indicators are measures that managers or supervisors use to assess a team or employee's progress. Usually, KPIs work together with timelines. To set KPIs, a manager can specify parts of the project they expect employees to complete by a certain time. KPIs effectively divide large projects into smaller parts, making them easier to monitor and handle.

5. Monitor performance

After setting your KPIs and starting the project, the next step is monitoring performance. You can either monitor employees as individuals, a unit, or both. Doing so can help you ensure employees stay on track. Similarly, it allows you to identify potential problems in your work structure and resolve them. Effective monitoring involves collecting data about various business processes. To make this easier, organizations can consider incorporating automated data management systems.

6. Provide feedback

Providing regular feedback on the tasks of employees can increase their motivation. It also helps them develop their skills, which can make them more effective employees. Ensure you give feedback constructively, so the employee doesn't get defensive. Similarly, providing feedback in person may be better, as it allows you to interact with each employee and understand their challenges.

Related: 17 Performance Review Tips for Employees

7. Document results

Documenting performance results allows you to track the effectiveness of your plans. Such information may be useful when developing other plans in the future. As technology advances, there are various systems companies can use to collect, sort, and organize their data. Many of these systems also have data analysis tools, making it easier for professionals to detect patterns and deduce insights.

8. Incorporate improvements

It's important that organizations continue modifying their plans to ensure efficiency. After collecting data about previous plans, study it to note their shortcomings and the challenges you faced. With this knowledge, you can modify existing plans or develop more effective ones. You can also incorporate feedback or recommendations from employees. This can make them feel more respected and lead to more dedication and employee loyalty.

Tips for managing performance

Here are some additional tips you can follow to manage performance effectively:

  • Consider offering incentives. Incentives are a great way to promote healthy competition among employees and increase their dedication. They can include gift items, office benefits, promotions, or professional development opportunities.

  • Ensure your goal is clear. Having a clear goal makes it easier for employees to understand their tasks. If a goal remains unclear despite your efforts, consider breaking it into smaller goals or explaining it in different terms.

  • Involve team members in planning. Involving team members in your planning can make them feel trusted, improving their commitment to your tasks. Involving team members is likely to lead to better ideas, as you can benefit from different perspectives and skill sets.

  • Create an enabling work environment. Beyond a well-defined work structure, it's important employees work in a safe and conducive environment. You can create a safe environment by removing health hazards, encouraging open communication, and prohibiting all forms of harassment.

  • Offer guidance. An important part of monitoring employee performance is providing guidance when they need it. Doing so helps organizations reach their goals faster and strengthens the bond between employees and their managers.

  • Hold regular meetings. Holding regular meetings allows you to discuss your timelines and KPIs. That makes it a great approach for ensuring accountability and transparency.

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