Why do we need Performance Management System?

You all know that all established companies give high emphasis on an Employee Performance Management System. In this article I am focusing on the most elementary question – Why do we need Performance Management System? And why should even the small companies invest in implementation of an Employee Performance Management System (PMS).

To understand the real need of Performance Management System, we should first understand – “What is a Performance Management System”.

What is Performance Management System (PMS)?

A Performance management system is a system to define, identify, measure, promote and reward the Performance of Employees, Teams & Organization.

Now, let me explain it to you.

You do not want your employees to do just random activities which they feel is performance. You need to clearly define for them what will be considered as performance in their role. Then you need to set standards of the performance expected from them. you need to measure their performance after 6 months or 1 year, and if they really performed and helped your business to grow, you need to reward them and reinforce that behaviour. If they don’t perform you have to ensure that they improve.

A performance management system helps you to do all the above.

The success of a business depends on the performance of its employees. The PMS ensures the good performance of employees thus resulting in the good performance of your business.

Performance Appraisal System vs. Performance Management System

Performance appraisal is just one part of Performance Management System.

Performance appraisal or employee performance appraisal or employee appraisal, is mostly related to the measurement of employee’s performance. While the entire PMS takes care of not only the appraisal but also an ongoing process to improve performance in various possible ways.

Why do we need Performance Management System

  1. We need PMS to set performance standards and performance goals for the employees.

Only after setting the performance goals, the employees know about what they have to achieve and hence what should be their day to day activities in the direction of achievement of desired goals.

Following are examples of some performance goals –

  • Generate sales revenue of $10000 by  December 31st 
  • Add 4 new customers every month.
  1. Because of the goal setting, the PMS gives excellent clarity to the employees about the expectations from them.

For eg. After the goal setting, a sales employee clearly knows that he is expected to contribute through sales of $10000.

  1. PMS helps to drive employee Performance towards organizational goals

The organization has some goals which it wants to achieve. For eg. – Increase Profit by 20%. PMS helps to align employee performance towards these goals. For eg. – To increase profit by 20%, the employees will have to increase the sales and cut costs. PMS helps to align employee’s performance towards these goals.

  1. PMS helps to differentiate top performers from the poor performers

It is very important to differentiate good performers and poor performers. Performance Management system helps us to measure and identify good and poor performance.

  1. Rewarding the top performers

Top performers are the reason behind success of any organization. Every organization must reward its top performers. A good PMS helps to reward the top performers.

  1. To reinforce superior performance

When you reward the good performance, the employee is further motivated to repeat his good performance in future also.

  1. To retain the top performers

We have already told that PMS helps you to identify your top performers and value them. Now… when you value your top performers, they stay with the company and continue to contribute towards its success.

  1. To improve the performance of poor performers

We said that PMS helps to identify good performance.

Now… at the same time it also helps to identify poor performance. PMS gives you the opportunity to identify the Poor performance, poor performers and the reasons of non-performance. And thus it provides an opportunity to work on the areas of concern and improve the performance of such employees.

  1. To Promote the culture of performance

When you reward the top performers and focus on improving the poor performance, you are working towards the creation of a performance-oriented culture. A performance-oriented culture will ensure the continued success of the organization in the business.

I am sure you have understood the need of Performance Management System and the various benefits it provides.

Does your business need a performance management system (PMS)

As we have already explained Why do we need Performance Management System, it is a breeze to answer whether your business needs a Performance Management System. If your business employs even a single employee, you need a Performance Management System.

We at HR Laptop can help you to implement a robust and effective PMS.

We study your business, its needs, its current stage, its challenges and suggest the right Performance Management System for you. Write to us to know more about our end to end service for implementation of Performance Management System.

Feel free to contact us about any other Human Resources related help you need from us.

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