How Good Performance Management System Contributes To the Bottom Line

Employees are the most crucial resource for any organization. Hence, it is essential for the organization to manage the performance and efficiency of each employee and the team, as a whole. This, in turn, helps to measure the performance of the organization and its processes. In addition, performance management system helps the organization to induce a cordial work atmosphere, motivating and driving each employee to perform better. Though the process and other functionalities differ, the role of performance management system is similar everywhere. A good performance management system focuses on improving the overall performance of the organization. In fact, it helps the organization to reach its goals by –

  • Creating a harmonious and cordial relationship between line managers and individual employees. A good performance management system ensures that it harmonious relationship is based on mutual trust and empowerment.
  • Ensuring employees understand the role they play in obtaining organizational objectives and goals.
  • Aligning employees with organizational objectives through effective communication
  • Helping employees to understand the organization’s expectation from them. Also, employees’ performance management system helps in assessing and ascertaining the required skills of the people of the organization for fulfilling such expectations.
  • Aligning workforce with the organizations goals


The role of performance management systems

Based on the aforementioned roles, it can be said that a strategic performance management system helps the employees to understand the ultimate organizational objectives; thus, guiding the workforce towards the bigger goal. Though performance management and appraisal goes hand in hand, this management strategy plays a greater role.

Articulating organizational expectations: Strategic performance management systems help to articulate organization’s expectations from each employee. It has been noticed that employees are not always aware of what is expected from them. Employees’ performance management systems help to explain the roles of individual employees, providing them the key performance indicators in order to connect them with the objectives and goals of the organization. It also focuses on the concerns of each employee and displays genuine understanding of the situation.

Measuring performance: Employees performance management is incomplete without being measured. Key performance indicator mentioned by the organization should be measurable. In addition, the organization needs to create a culture of measuring performance on a regular basis.

Assessing employee skills: The role of performance management systems does not end with reviewing employee performance rather it begins there. Apart from helping the employees to understand their roles, strategic performance management assesses skills required by employees. It articulate and monitors such skill-sets on a regular basis to address the gaps, if any. Based on this assessment, the organization incorporates various learning measures to help employees update themselves.

Thus, a strategic performance management system helps the organization to measure and upgrade employee skills in order to retain high-performance as well as to boost organizational profitability.

Benefits of employees’ performance management

Advantages of performance management systems are manifold. Organizations can be benefitted in the following ways:

Result oriented performance: Strategic performance management focuses on end-result, rather than concentrating on activities and employee behaviors. In fact, many line managers fail to understand the difference between employee behaviors and activities and end-results. Often, it has been seen that employees appearing extremely busy are hardly contributing towards the organizational goals. Again, many believe that committed employees work very hard and deserve to be rewarded with high performance rating. However, both the situations can be misleading. Strategic performance management, on the other hand, focuses on result-oriented performance; thus, creating a better and motivated workforce.

Cultivating a system-based approach: A good performance management system follows a system-based approach. Its prime focus is on outcomes and drivers; thus, creating a long-term view for the organization. For example, in absence of a strategic performance management system, a business while facing financial crisis is more likely to lay off people for cost cutting purposes. Though it will produce short-term profits, the company is more likely to experience reduced productivity in near future. This is more devastating as it may result in long-term loss for the business.

Meaningful measurements: Strategic performance management not only helps in measuring performances, but also ensures those measurements has useful applications. They help in benchmarking and setting standards by comparing the organization’s best practices with other companies. Even during internal change efforts, performance management systems are used for comparison. They also help the organization to measure its improvement efforts including management development, employee training, and quality programs. Based on performance, this management practice ensures equitable and fair treatment to all the employees.

The industry today and performance management system

These days, strategic performance management system is an essential part of HR management. Companies are gradually realizing the importance of employees’ performance management system and its impact over their revenue structure. A report published by Forrester indicated that HR management service is the largest segment of the total HCM/ HR market at $4.3 billion. The growing rate of HR management is 8.2%. The workforce management segment has an annual growth rate of 5.4% at $1.5 billion. It accounts for 17% of HR management. Recruitment applications are nearly $1 billion, which is 11% of HCM and has an annual growth rate of 8%. However, talent management is the hottest segment of HRM. Its revenue is $640 million and the annual growth rate is 16.5%. Thus, the new age HR management requires more than traditional administrative functions of managing employees.

We streamline HR management processes based on the challenges faced by the workforce in achieving organizational objectives. At Kranium, we identify the key performance indicators for the company in terms of organizational structure, area of business, revenue, and growth plan. We help organizations to recognize the crucial roles contributing in their profitability through effective and strategic performance management systems.