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Why Performance Management is Such an Important Part of Leadership

Performance Management is the process of ensuring that a set of activities and outputs meet an organization’s goals in an effective and efficient manner. It is a strategic tool in sustaining improved performance in employees and effectiveness of companies.

Performance management is not yearly performance reviews and a merit-based yearly bonus. It is a much more dynamic process with goals, metrics, and milestones resulting in better outcomes. Yearly performance reviews do not offer a concise way to track and evaluate employee performance against the company goals and objectives. Often it can fall behind in employee feedback whereas an employee may hear for the first time that they are not meeting perform

ance goals in their performance review. Or the employee is not clear on how they can meet performance goals throughout the year. created this informative chart showing the difference between Performance Management and Performance Appraisals.[1]

Performance Management

Performance Appraisal



Forward looking

Backwards looking

Led by supervisors and management

Led by HR with some management input






Once a year

Does not use ratings or rankings

Uses ratings or rankings

Some companies use a formal performance management tool. Some leaders prefer to manage performance using continuous accountability monitoring. Formal tools can provider managers with metrics, objectives and milestones, but is

not completely necessary for effective performance management.

One thing is for sure, you can’t have a performance management system without leadership.

Why is Performance Management Important?

Think of the points of contention that arise from high turnover. These areas are the very areas that performance management focuses on.

When a company has high turnover, they are usually struggling with keeping their employees motivated and engaged, seeking out and retaining talented individuals, and developing leaders within their organization.

Without a system in place that helps employees define their role, understand how their role contributes to the overall goals of the company, seek out feedback and receive rewards for meeting goals or milestones, it becomes very difficult for those employees to be effectively led.

What is a Performance Management Program?

According to[2], there are 5 elements to an effective performance management program:

  1. Aligning employees' activities with the company's mission and goals.

  2. Developing specific job-performance outcomes.

  3. Creating measurable performance-based expectations.

  4. Defining job-development plans.

  5. Meeting regularly.

Incorporating these elements will be the key to success in y

our program.

Did you know that nearly 70 percent of companies still cling to an annual or bi-annual performance review schedule, more than half of office professionals say that’s not nearly enough–they want performance check-ins at least once a month. Even more (94 percent) actually would prefer their manager address mistakes and development opportunities in real-time, which enables more agility through coaching and behavior changes to address skills gaps and shifting strategies.[3]

Performance Management Benefits

  • Frequent and consistent feedback, support and encouragement from managers leads to higher employee engagement.

  • Higher employee engagement leads to higher customer engagement which affects the sustainability of the company.

  • Performance management can help make onboarding more effective and efficient since employee roles and responsibilities are so clearly defined.

  • Frequent and consistent milestone and goal review keep clear expectations for employees.

  • Clear expectations = less confusion. You are setting your employees up for success.

  • Giving your employees the opportunity to grow and develop themselves makes them feel valued and can have very positive effects on productivity.

  • Growing the leadership skills in your employees creates an internal leadership pool full of highly motivated people.

  • Adding a reward program into your performance management system leads to higher engagement and lower turnover.

Performance management is woven into the content of our Leadership Institute. Performance management is part of knowing how to lead your people.

[2] Tardi, Carla. “Performance Management.”, 26 April, 2022 [3]New Study Uncovers Major Gap in Employee and Employer Expectations for Performance Management and Growth.” Reflektive, 4 April, 2018.

1 Comment

Donald Warren
Donald Warren
Jan 09, 2023

Thanks for the article! The software of our company will help you find the right impulses for building productive working relationships within the company.The software of our company will help you find the right impulses for building productive working relationships within the company.

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