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Performance management best practices

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At a glance

  • Performance management includes setting goals, monitoring progress toward them and establishing regular feedback.
  • A few possible benefits of performance management include increased job satisfaction, employee retention and a more transparent workplace.
  • An effective performance management strategy means setting realistic goals for employees and building a reward structure.
  • Learn more about concepts like performance management through one of University of Phoenix’s online business programs!

Businesses looking to optimize their performance may turn to developing and implementing effective performance management processes.

Performance management involves setting goals, monitoring progress and establishing feedback loops for employees. As a complement to resource management, it’s a methodology that helps a business’s HR team maintain focus on improving employee performance and providing support when needed. When done well, it can become the basis for providing real-time feedback, tracking results and setting realistic goals.

Become a leader in the workplace. Explore the Bachelor of Science in Management degree at University of Phoenix. 


The role of middle managers continues to evolve in the context of performance management. Middle managers are often responsible for driving employee performance, providing feedback and coaching employees to ensure they reach their goals. They are also responsible for ensuring that a business is meeting its objectives and progressing toward long-term goals.

When performance management is implemented well, it can directly impact employee morale and engagement, as well as organizational goals. Moreover, performance management helps create a culture of employee productivity through accountability and high standards in which employees are encouraged to achieve their goals.

Why is performance management important to a business?

Performance management is vital in helping businesses achieve organizational goals and objectives. It allows businesses to monitor organizational and employee progress, identify areas for improvement and motivate employees.

By tracking performance data, companies can measure the impact of their initiatives and make more informed decisions. For example, employee productivity can be tracked through various means and, depending on that data, solutions can be implemented where management may find weaknesses or improvements.

Additionally, performance management fosters a culture of trust and accountability by encouraging employees to take responsibility for their work.

How does performance management work?

Performance management typically involves three key elements:

  • Setting performance goals for employees
  • Monitoring progress
  • Providing feedback

At the beginning of each period (e.g., quarterly or annually), key decision-makers, managers and employees set performance goals. These goals should be future-focused, strategic objectives that are measurable and attainable with clear direction. Between the time a goal is set, and a review is scheduled, progress is monitored, and employees receive feedback. At the end of the period, a review is conducted to assess what has been accomplished and what needs to change or improve.

A strong understanding of business management can be beneficial when implementing performance management systems. For example, taking courses in systems thinking and performance measurement or earning a master’s in business can provide knowledge and skills for effective performance management.

Additionally, a business degree or similar education can give professionals the tools and insight to better understand what drives performance and motivates employees. Skills such as financial analysis, problem-solving and communication are essential for this role.

Benefits of performance management

Here are a few examples of the potential benefits of setting up your business for successful performance management.

Increased job satisfaction

A study found that when performance management was implemented effectively, team members were more likely to feel appreciated and valued for their contributions. This can lead to increased job satisfaction and motivation as employees strive to reach the goals set by their manager. As a result, employees become more high-performing and engaged in the workplace.

Research by Gallup suggests that feedback fuels performance and workplace satisfaction. According to the study, managers who provide regular feedback and recognition are more likely to retain their employees. Employees who reported that they received feedback in the past week were almost four times more likely to be engaged than those who didn’t receive feedback.

Therefore, performance management is an integral part of any organization’s success as it gives managers and employees a chance to connect, reflect, strategize and celebrate what has been accomplished.

Better understanding of employee strengths

Performance management allows managers to better understand what their employees are capable of. By tracking performance data, managers can identify where an individual excels and what skills or talents may need improvement. This feedback can be valuable for providing recognition and guidance on how to best use the team’s resources.

For example, suppose a manager discovers that an employee is exceptionally skilled at customer service. In that case, the manager can provide that worker with more opportunities to demonstrate this strength and help ensure that the team’s customer service operations are running as smoothly as possible.

Performance management also provides valuable insights into how well employees perform in relation to their peers. This allows managers to make performance-based decisions about who should be rewarded, promoted or given additional responsibilities.

More transparent workplace

Implementing performance management helps make a workplace more transparent by clearly demonstrating expectations and constructive feedback.

When employees and managers have clear lines of communication and open dialogue about progress, it allows for a better understanding of how each individual contributes to the organization’s goals. This can go a long way toward creating an environment where everyone understands what is expected of them and is held accountable.

Performance management’s transparency also helps build trust between managers and employees. When expectations are clear, employees feel empowered to ask questions and share ideas without fear of repercussions. It gives employees a platform to provide honest feedback on their experiences in the workplace, which can help organizations improve.

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How to develop a successful performance management strategy

A successful performance management strategy requires careful planning and dedication from both managers and employees.

Set realistic performance goals

When setting goals, it’s crucial to create achievable company objectives tailored to the individual strengths of team members. The key performance indicators should be inspired by the company goals, overall mission and vision, and should always be SMART (specific, measurable, achievable, relevant and timely).

Establishing realistic expectations is key as it helps employees progress without feeling overwhelmed or discouraged. To do so, it’s essential to break down larger goals into smaller tasks and set deadlines for each step. Here are some further suggestions:

  • Provide continuous feedback — Observations should be ongoing, consistent, honest and constructive.
  • Set aside regular time for check-ins —This is essential for tracking progress and catching issues that may arise.
  • Provide detailed updates on progress — Regular updates help managers and employees stay connected and serve as a reference for future conversations.
  • Emphasize the importance of ongoing learning — Encourage employees to participate in training or workshops to further their development.

Consider rewards

Rewarding employees for meeting their goals is a great way to motivate and recognize them for their hard work. This could come in the form of:

  • Bonuses
  • Promotions
  • New job opportunities

Depending on your company’s budget, rewards can range from tangible items such as gift cards, tickets or prizes to experiences like vacations or special events. The key is ensuring the rewards align with company values and reward employees for their efforts.

Ultimately, performance management is a powerful tool that can help organizations reach their goals and create a more transparent workplace. Given there is research that indicates performance management leads to a higher rate of job satisfaction and in turn spurs the longevity of employees, it’s a vital component for a thriving business to maintain.

Earn a business degree from University of Phoenix

If you’re looking to learn about online business programs that prepare students with skills for a variety of career paths, consider a program at University of Phoenix.

  • Associate of Arts with a concentration in Business Fundamentals From management to accounting, skills learned in this program are essential for anyone looking to advance in their business education. 
  • Bachelor of Science in Business Knowledge of the ins and outs of running a business can spell the difference between success and failure in a competitive business world. 
  • Master of Business Administration Prepare for higher leadership roles in an organization. This degree program can prepare graduates for careers as business managers, operations directors and more.
  • Master of Management Take your understanding of business organization and management to an advanced level. This degree program is perfect for those with experience in the workforce who are looking to take on greater leadership roles.
  • Doctor of Business Administration Expand your understanding of organizations, work environments and industry. This program invites participants to delve into cutting-edge research in the field of business and develop skills for solving complex organizational problems. 


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