Importance of Performance Management in an Organization

By Danni White - Last Updated on June 21, 2021
Importance of Performance Management

In some ways, performance appraisals and evaluations have just become something that we either look forward to or dread, usually once a year. They have long been accepted as something that is done in business, but many people have no idea why. The importance of performance management goes beyond evaluations, raises, and promotions. It has the propensity to make or break an organization.

Importance of Performance Management

Below are some of the reasons that ongoing performance management is so important to every organization.

1. It Provides a Look into the Future

By consistently monitoring and managing workplace performance, leaders can see potential future problems. Like with any type of issue, early detection is key. The earlier problems are confronted the less effect that they will likely have.

For instance, if the company notices that a certain employee is not a team player, they can either move that employee to a position that does not require teamwork, provide training to that employee revolving around teamwork, or let that employee go before it becomes a problem. By acting before the potential problem becomes an actual problem, the organization can prevent unnecessary trouble.

2. Helps Create Development and Training Strategies

As mentioned above, the earlier a problem is detected, the better. One of these problems could be that employees do not know how to perform certain processes correctly. If this continues, the organization might fall apart due to oversight. However, with performance management, this would probably be detected. The organization could then create training programs to change the issue into an opportunity for improvement.

3. Provides Clarity in the Organization

It is a common problem that many employees are unsure of what exactly their role entails, what is expected of them, and who they are to report to. Through performance management, the company can make all of this very clear. A lack of understanding often leads to a lack of productivity. Therefore, by providing clarity for employees, the result will often be increased productivity and confidence.

4. Provides the Opportunity for Exchanging Feedback

A lack of communication in a relationship is grounds for trouble, and this includes working relationships. Quite often, management speaks to employees about their performance, but employees do not very often get a chance to voice concerns or frustrations. Effective performance management provides an avenue through which both the employer and the employee exchange feedback. In addition to gaining insight, employees often feel much more valued when they can voice their thoughts.

5. Increases Employee Retention

Performance management also encourages organizations to reward and recognize their employees. Lack of recognition is a big reason some employees leave a job and look for another. They want to be appreciated for their hard work. In addition to the clarity, the ability to share feedback, and the additional training when needed, rewards and recognition can play an important role in employee retention.

6. Boosts Employee Engagement

Performance management, when it truly involves employees, will boost employee engagement. When there is a disconnect between management and employees, it is almost as though employees are just going through the motions of the day. Their position becomes merely a job as opposed to a rewarding career. However, performance management has the capability of engaging employees fully and making them feel invested in the company. This leads to job satisfaction and employee loyalty, all of which increase productivity.

It is imperative that you and the other leaders in your organization acknowledge the importance of performance management. By avoiding it, you are setting yourself up for disaster. Meet with your human resources department and other leaders to put a performance management plan in place. You might consider asking employees for feedback on what they feel should be addressed. Though it may take some time to put together, investing your resources into developing an effective performance management strategy will be well worth the effort.

7. It encourages employee recognition and reward

Most businesses tend to neglect the importance of recognizing and rewarding their employees. Doing that can be greatly disastrous to your organization. According to a survey carried out by American Express, a third of top businesses believe that recognition and reward lead to higher staff retention, with half also attributing better motivation to giving incentives.

Effective recognition and reward systems can only work in organizations where there is a visible and accurate process of discussions and performance feedback. With continuous performance management, the management can identify efforts and activities worthy of encouragement and reward. Consequently, this drives a development mindset among members of your team.

Managers can use a continuous performance system to identify employees that go above and beyond for the company. It makes it easier for them to track progress in terms of personal development and business goals and execute informed decisions concerning additional incentives, like bonuses or pay-rises. Good reward systems are highly important for staff satisfaction and happiness.

Below are a few essential statistics you may want to consider:

  • Companies that implement meaningful reward systems enjoy as much as a 50% increase in their employee engagement.
  • 68% of employees will put in more effort if they’re aware that their input is appreciated and valued.
  • 84% of workers working in organizations with great recognition and reward systems say they are satisfied with their position.

8. It helps in boosting employee productivity and engagement

One remarkable benefit of an engaged workforce is that they stay longer, actively contribute to the company, and deliver better results. Enhancing levels of staff engagement are paramount to maximizing ROI and boosting productivity. Excellent performance management is a great tool for having an engaged workforce. The burning question, however, is how to utilize performance management to increase levels of staff engagement?

Performance management typically creates an ongoing interaction and an atmosphere of encouragement, support, and trust. It also assists in developing a relationship between the company and its employees. If members of the staff know that their employer and the organization cares about their efforts and is committed to assisting them in doing more and advance their career – the odds are very high that they will want to engage better with the business.

Let us consider an organization where the manager only discusses with the workers once a year concerning their progress. The result would be that the staff are not in tune with the direction of the team or organization as a whole. But on other hand, when a business has an ongoing engagement with the staff, encouraging them to advance in their career, and setting targets that help them grow and develop, there is a sincere commitment and higher chances of genuine efforts towards the growth of the business.

9. Helps to enforce goal setting and achievement

A good performance management system helps employees to understand the goals of the company and what they are expected to do to achieve these goals. This means they understand how their contributions affect the overall growth of the business.

Thus, performance management will help in business and executive goal setting. Aligning the whole of your teams with higher organizational goals sets conspicuous priorities and direction, ensuring that individuals have a beneficial sense of ownership in the business via personal objectives.

10. It offers mentoring for increasing performance

The ultimate aim of performance management is to improve performance. It will help managers to devise ways through which they can increase performance while providing the opportunity to talk about career prospects and direction. In all, it will help the executive manager and/or HR manager to provide additional mentoring and training which will be useful in developing criteria for promotions.

Final Thoughts

So, there you have it: 10 reasons why performance management is important. A good performance management system will proactively engage your employees in the organization’s goal-setting process. It will also make sure that all goals are in correlation with the organization’s overall target.

It is imperative that you and the other leaders in your organization acknowledge the importance of performance management. By avoiding it, you are setting yourself up for disaster. Meet with your human resources department and other leaders to put a performance management plan in place. You might consider asking employees for feedback on what they feel should be addressed. Though it may take some time to put together, investing your resources into developing an effective performance management strategy will be well worth the effort.

Danni White

Danni White | Danni White is the Director of Content Strategy and Development at Bython Media and the Editor-In-Chief at TechFunnel.com, a top B2B digital destination for C-Level executives, technologists, and marketers. Bython Media is also the parent company of OnlineWhitepapers.com, BusinessWorldIT.com, List.Events, and TheDailyPlanIOT.com.

Danni White

Danni White | Danni White is the Director of Content Strategy and Development at Bython Media and the Editor-In-Chief at TechFunnel.com, a top B2B digital destin...

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