Performance Management

Performance management: what it is, importance and how to do it

Performance management is a very common expression in the business world. But do you know what it actually means and how it works?

Performance management is a tool to measure and improve the company’s results through the performance of its employees. The objective is to develop the skills and abilities of professionals, implement process improvements and, thus, achieve organizational goals. But it is not so easy to put performance management into practice, mainly because it requires strategic planning in line with business goals.

But don’t worry, as in this guide you will learn more about the following topics:

  • Advntages of performance management
  • What it is for and how it came about
  • Performance dimensions and cycle
  • Tips for good management
  • Tools and methodologies.

So, ready to implement performance management and take the company’s results to the next level?

What is performance management?

Performance management is a way to evaluate and improve the performance of employees to make the company more efficient and effective in all its processes. For RK Sahu, in the book Performance management system (Excel Books India, 2009), this type of management is a strategic and integrated process that establishes a culture of success for organizations.

This occurs through improving the performance of the people who work in the company and developing the skills of individuals and teams. “Performance management, in its broadest sense, is concerned with what people do (their work), how they do it (their behavior) and what they achieve (their results)”, says the author. But for this process to be effective, it needs to be continuous, mobilizing all sectors of the company and being incorporated into the routine of the HR sector.

How important is performance management?

Performance management is especially important for the company to achieve high performance and achieve organizational goals. It is a way to set expectations and align employees around the organization’s goals. Therefore, performance management must be linked to the company’s fundamental guidelines.

What are the benefits of performance management?

Better use of human capital

The performance management process allows employees to develop, be increasingly productive and improve aspects of production that need correction.

Training and hiring planning

If the company has a mapping of the team’s performance, it also gains a foundation to direct training to employees and make more assertive hiring, according to their needs.

Reduction of turnover

By doing this type of management, the company invests in improving the skills and competences of the professionals who already work within it.

The direct result is a reduction in turnover rates and, consequently, expenses related to selection processes.

Gain motivation in the team

In an article for the GovLoop website, Andrew Lessard points out that performance management sets goals with employees and gives regular feedback.

With this, employees gain motivation to improve their performance, as they understand what skills need to be worked on.

What is performance management for?

Performance management aims to improve performance through team performance and achieve the company’s goals. According to Elizabeth Pope, in the book HR how-to: performance management (CCH Incorporated, 2005), the objectives of performance management include:

Support business strategy

Improve communication

Provide training and development to employees.

For the author, management is the key to success, since it takes a joint effort by all employees for the company to achieve its goals. “Performance management encompasses all the interactions that supervisors have with employees, which help employees to become and stay aligned with the organization’s objectives,” he explains.

How did performance management come about?

The term performance management came up in the 1970s, when it was coined by Aubrey Daniels, an American clinical psychologist. As a research field, performance management emerged before, in the 1950s.

As David Grant points out, in the book Logistics and Supply Chain Management (Saraiva, 2017), it was at this time that academics and professionals became interested in the need to measure performance and the very consequences resulting from this measurement.

Before being disseminated, companies performed performance management disregarding employee behavior. In other words, the evaluation considered only objective aspects in the performance of employees. Over time, companies realized that this approach was not enough to actually manage performance, shaping the activity so that it became more complete.

What is the difference between performance evaluation and management?

While performance management is an ongoing process in the company, evaluation is one of its stages. As you will see below, management consists of setting expectations, measuring performance indicators and, finally, evaluating results.

And it is precisely this final analysis that allows us to understand which points need to be improved by each employee and by the company as a whole. In the performance evaluation, the manager usually responds to a questionnaire with relevant topics regarding the employee’s performance. Later, these data (when well systematized and stored) can serve as a basis for the manager’s decision making .

Why worry about this difference?

You must be concerned with this difference in order not to skip any steps. Evaluation is within management, and one does not rule out the need for the other. Performance management is useless if, at the end of the process, you do not carry out an evaluation and obtain relevant data to analyze the company’s performance.

How does coaching assist in performance management?

This methodology is focused on the individual’s attitudes , being directed towards the development of skills.

Coaching promotes self-knowledge and the identification of strengths and vulnerabilities that must be corrected. In performance management, this is very useful, since each employee will be able to reflect on their own professional growth and gaps to be developed.

In addition, throughout the process, the coachee receives support from the coach to follow the growth journey, facing all the challenges that arise and evaluating the performance at each meeting. In this sense, coaching can enter the performance management strategy as an important tool to apply with employees.

Employee development and performance management

Performance management allows the company to foster employee development. After all, it is based on performance analysis that it becomes possible to identify competencies to be developed.

Then, the company can direct employees to reinforce these points, offering training, growth opportunities and regular feedback .Development can include different aspects: level of productivity, responsibilities and quality of the activities carried out, for example.

Decision making and talent management

By doing talent management, which is precisely to give development opportunities to employees, the company gains a basis for decision making.

In practice, this is because it gathers important data on the performance of employees and their own commitment to growth. Therefore, this information can be analyzed whenever it is necessary to make important decisions, such as promotions, salary increases, dismissals, hiring and delegation of responsibilities.

What are the dimensions of performance?

There are two dimensions of performance that must be managed by the company: results and behaviors. Both are fundamental to performance management and, therefore, should receive attention throughout the process.


The results are what the employee produces. It is at this point that the manager assesses the responsibilities and activities delegated for each position and observes what has been achieved by the employee.


The behaviors concern how the employee arrived at the results obtained. In this case, it is possible to analyze the skills used throughout production, such as, for example, communication skills and strategic thinking.

The performance management cycle

As with any process, performance management must follow a cycle with different stages. You will see below that it starts with the establishment of expectations and goes through the indicators and goals and the development plan.

Performance expectations

At the beginning of the cycle, there is an alignment of expectations between the employee and the manager, according to the organizational objectives. At this point, it is important to prepare the job description, a document that describes tasks, responsibilities, skills and abilities for each position.

Indicators, goals, activities and projects

After setting expectations, it is time to establish the indicators, goals , activities and projects for the employee. Indicators are indexes used to measure the efficiency of the employee when performing tasks. Goals are the goals that each employee must achieve in a given time, guiding their performance in the company.


Another stage in the cycle is the development of the individual development plan (PDI), a human resources tool that defines a strategy for employee growth.

about author

Puchi Andrea

Andrea Puchi Love talking about Finance, He strives to provide the most accurate information on every topic related to personal finances.