Performance Management System: What, How & Why?

Performance Management System (PMS) is one such medium which helps to develop and plan goals, break them down, monitor and control performance, evaluate the performance of the employees, analyze the performance gap, identify training and development needs, and give and take performance feedback as per the requirements and need of the employees and the organization.

DeCenzo and Robbins (2007) states that Performance Management Systems (PMS) are an integral part of most organizations and if it properly developed and implemented performance management processes can help an organization achieve its goals by developing productive employees. Therefore, PMS is essential for the organization to create and develop high performing employees and departments.

Performance Management System is a cycle that has many components in it and is used by the organizations to achieve continuous improvement of employees’ performance. The components of PMS is depicted in the following diagram:


Figure: Components of Performance Management System

PMS is important for any organization that seeks to enhance the performance of the employees and seeks to develop and grow them. It is also important for those employees who want to performance and deliver at their best level. According to MTD Training, the benefits of PMS can be categorize as follows:

  1. Benefits for the Employers
  • When roles and responsibilities are clear, motivation is increased. If your team members know what they are supposed to be doing, there is no loss of motion due to confusion or uncertainty. Instead, a motivated individual will be in action, and a team full of motivated individuals will feed off of each other and help keep that motivation going.
  • When expectations are clear, employees are more likely to take ownership of their work and to be committed to the expected outcomes. They will be more likely to be willing to take risks, to put in extra effort, and to view their own role as that of a partnership with you and with the rest of the team.
  • When goals are clear and being pursued, your team members each will be able to contribute to team effectiveness. Without performance management, a team can’t be expected to be effective. Without it, they can be expected to flounder.
  • Performance management also helps you to develop your team members. You can use it to stretch their capabilities, to challenge them to step outside of their comfort zone. Doing so will provide opportunities for individual growth, which in turn will help to fuel their enthusiasm for their job.
  • Helping them to grow and develop will help you to progress the individuals through the company. You can be building on strengths that the company needs – both in your division and in other areas.
  • A solid, well-formed performance management process gives you a powerful tool for addressing poor performance issues, should they arise. If you and your employee have agreed upon what their duties and responsibilities are, then you have something to refer to when they are not holding up their end of the agreement.
  1. Benefits for the Employees
  • Security in knowing they are doing the job they way you want it done.
  • A clear understanding of what you expect and what the corresponding rewards or consequences will be.
  • A framework for gauging their own performance.
  • A continuing conversation with you regarding how to improve their skills and performance.
  • Knowing that they have the ability to determine their own success by following the performance plan you have set in place.


  1. DeCenzo, D. A., & Robbins, S. P. (2007). Fundamentals of human resource management (8th). India: Wiley.
  2. MTD Training (2010). Performance management (1st). Retrieved from http://