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Performance management (PM) includes activities which ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many other areas.
PM is also known as a process by which organizations align their resources, systems and employees to strategic objectives and priorities.
This is used most often in the workplace, can apply wherever people interact — schools, churches, community meetings, sports teams, health setting, governmental agencies,social events and even political settings - anywhere in the world people interact with their environments to produce desired effects. Armstrong and Baron (1998) defined it as a “strategic and integrated approach to increase the effectiveness of companies by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.”
It may be possible to get all employees to reconcile personal goals with organizational goals and increase productivity and profitability of an organization using this process. It can be applied by organizations or a single department or section inside an organization, as well as an individual person. The performance process is appropriately named the self-propelled performance process (SPPP).
First, a commitment analysis must be done where a job mission statement is drawn up for each job. The job mission statement is a job definition in terms of purpose, customers, product and scope. The aim with this analysis is to determine the continuous key objectives and performance standards for each job position.
Following the commitment analysis is the work analysis of a particular job in terms of the reporting structure and job description. If a job description is not available, then a systems analysis can be done to draw up a job description. The aim with this analysis is to determine the continuous critical objectives and performance standards for each job.
Managing employee or system performance and aligning their objectives facilitates the effective delivery of strategic and operational goals. Some proponents argue that there is a clear and immediate correlation between using performance management programs or software and improved business and organizational results. In the public sector, the effects of performance management systems have differed from positive to negative, suggesting that differences in the characteristics of performance management systems and the contexts into which they are implemented play an important role to the success or failure of performance management.
For employee performance management, using integrated software, rather than a spreadsheet based recording system, may deliver a significant return on investment through a range of direct and indirect sales benefits, operational efficiency benefits and by unlocking the latent potential in every employees work day (i.e. the time they spend not actually doing their job). Benefits may include:
- Direct financial gain,
- Grow sales
- Reduce costs in the organization
- Stop project overruns
- Aligns the organization directly behind the CEO's goals
- Decreases the time it takes to create strategic or operational changes by communicating the changes through a new set of goals
- Motivated workforce
- Optimizes incentive plans to specific goals for over achievement, not just business as usual
- Improves employee engagement because everyone understands how they are directly contributing to the organizations high level goals
- Create transparency in achievement of goals
- High confidence in bonus payment process
- Professional development programs are better aligned directly to achieving business level goals
- Improved management control
- Flexible, responsive to management needs
- Displays data relationships
- Helps audit / comply with legislative requirement
- Simplifies communication of strategic goals scenario planning
- Provides well documented and communicated process documentation
In organizational development (OD), performance can be thought of as Actual Results vs Desired Results. Any discrepancy, where Actual is less than Desired, could constitute the performance improvement zone. Performance management and improvement can be thought of as a cycle:
- Performance planning where goals and objectives are established
- Performance coaching where a manager intervenes to give feedback and adjust performance
- Performance appraisal where individual performance is formally documented and feedback delivered
Other organizational development definitions are slightly different. The U.S. Office of Personnel Management (OPM) indicates that Performance Management consists of a system or process whereby:
- Work is planned and expectations are set
- Performance of work is monitored
- Staff ability to perform is developed and enhanced
- Performance is rated or measured and the ratings summarized
- Top performance is rewarded
Erica Olsen notes that "Many businesses, even those with well-made plans, fail to implement their strategy. Their problem lies in ineffectively managing their employees once their plan is in place. Sure, they've conducted surveys, collected data, gone on management retreats to decide on their organization's direction-- even purchased expensive software to manage their process-- but somewhere their plan fails." 
Performance management and performance appraisals have a significant overlap. In general, there are three type of performance management: long-cycle, short-cycle, and micro.
Long-cycle performance management
Long-cycle performance management is usually done on an annual, every 6 months, or quarterly basis. From implementations standpoint, this area is the one that has traditionally received the most attention. This is so for historical reasons, as most performance management techniques/styles predate use of computers.
Short-cycle performance management
Short-cycle performance management (which overlaps with principles of [Agile Software Development]) is usually done on a weekly, bi-weekly, or monthly basis. From the implementation standpoint, this sort of management is industry-specific.
Micro performance management
Micro performance management is generally done on a by-minute/hour/day basis.
- Olsen, Erica. "Performance management". M3 Planning.
- Zaffron, Logan, Steve, David (Feb 2009). Performance Management: The Three Laws of Performance: Rewriting the Future of Your Organization and Your Life (1st ed.).
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- A Handbook for Measuring Employee Performance, by the US Office of Personnel Management
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