Top 7 Benefits of Performance Management for Employees

Top 7 Benefits of Performance Management

Every company in the world aspires to have the most effective employees in their organization. Your company needs a system or a process that can help in creating a work environment which consistently encourages your employees to perform at their best. Thus, comes the need of Performance Management.

What this article covers:

What is Performance Management ?

Performance Management is an essential system or process for managing people using continuous communication and feedback between the employees and their managers. Organisations use Performance Management softwares to improve their business performance by determining an employee’s effectiveness.

The aim of performance management is not to improve all the skills. Instead, a good performance management system aims at improving those skills of your employees that can help them to do a better job. In other words, it is about making a strategic alignment of your employee’s work to the goals of the organization.


Performance management is thus considered as a formal and strategic process since it focuses on aligning individual employee goals with that of the organizational goal. A company’s decision to pay bonuses, promotions, as well as removal of individual employees are all linked to this process.

“Always treat your employees exactly as you want them to treat your best customers.” – Stephen R. Covey

Performance Management

Why is Performance Management important?

Performance management system ensures the overall organizational goals are achieved while aligning them with the goals of employees as well. Effective performance mangement is important for businesses as it helps in handling the top three challenges for companies like goal-setting, employee development and data analytics. These systems act as a dashboard by providing early warning of any potential problems, thus allowing managers to make necessary adjustments in advance to keep business on track.

Performance Management Benefits

Armed with the above knowledge, let’s now examine the top 7 advantages of performance management.

Boosts Employee Morale

Every employee likes to hear that they are doing a great job regardless of whether they are really doing it good or not. Performance reviews are a perfect way to identify those who are outstanding and deserve the praise. Reviews should not be considered as means to set targets for the next quarter. Instead, it should be seen as a platform for immediate managers to recognize real contributors in the team.

For your employees to be productive, it is essential to ensure that they are kept happy. According to a survey, it was revealed that 69% of the employees are ready to work harder if only their efforts are recognized. Thus, the timely pay checks are not enough to recognize your employees. Regular feedback and performance reviews contribute to a greater extent in keeping the morale of the employees high.


Timely and Actionable Feedback

Most of the companies do an annual performance review giving feedback only once a year. You can almost guarantee that such kind of feedback is mostly irrelevant and vague by the time your employees start taking action. Stacking up of year worth of evaluation doesn’t really help to boost the morale of the employees. Instead, it often hurts productivity and engagement.

If you want to see your employees performing at their best, then you need to provide them with timely feedback as soon as a situation occurs. Delivering a timely and actionable feedback, be it correction, appreciation or even coaching is one of the biggest benefits of performance management system as it helps to improve your employee’s engagement levels and growth.

Development planning for employees

While your employees work towards the goal of the organization, it is equally important for the companies to think about their employee’s professional development. This can be achieved by providing timely and quality feedback using performance reviews on their work along with any scope of improvement.

The employees are generally aware of the purpose of performance management. They know how it can help in their development and career progression. Thus, through the performance reviews when they are able to identify their gaps, they get clear insight on the skills they need to develop in order to progress in their career.


Helps in identifying the right employees for promotion

According to a research performed among the HR managers by the research firm CEB (Corporate Executive Board), it was found that the traditional process of review doesn’t give a clear picture of the employee performance.

Performance management processes like the 360-degree feedback allows data to be collected and is available throughout the year. These gives the managers a much more comprehensive clarity related to the employee’s actual performance.

As the managers can correctly evaluate their employees using the same performance review process, they are in better position to identify which employee is most eligible for promotion, salary hike or even transfer.

Performance Management

Increases employee retention

Various researches on employee retention has found that organizations that implement regular employee feedback have lower turnover rates compared with those companies that do not give any feedbacks. Companies having high staff turnovers will have to spend lots of time and money to replace the talents being lost.

Performance management systems helps to ensure the objectives and expectations of the employees are kept clear and reviewed regularly. The availability of regular feedback and reviews allows resolution of any issues faced by the employees quickly.

A good performance review strategy helps to prioritize employee recognition as well as encourage learning and development.


Employees enjoy greater autonomy

It is a good practice to make your employees aware of the wider business objectives and also how their contributions affect those. A proper performance management system enables your employees to make their own choices while understand their responsibilities towards the organization. This makes them happier, more productive and more committed towards the work.

The manager gets assured of the employee’s progress based on the agreed objectives, through regular feedbacks sessions and discussions. This helps to create an atmosphere of trust among the employees. Such culture which allows free flow of ideas and creativity will only benefit your business in the long term.

Firing risks

In this case, both the employees and the mangers can use the performance management software features to reduce the risks of firing. Employees can reduce the possibility of being fired from their companies by clearly understanding the goals and duties they need to perform using the performance management feedback.

Similarly, the mangers can take benefits of performance management system to avoid any legal confrontations in the future. These systems can be used to ensure that the employees were well aware of their responsibilities and in case they fail to meet the requirements, the company has the right to take appropriate steps to address the situations.



In conclusion, Performance Management makes it easier to identify small problems and correct them before it turns out to be big. As the focus is on year-round communication and goal-setting, companies can achieve better productivity and spend less time on crisis management using the various benefits of performance management.

Employees experience greater sense of engagement and feel empowered when they understand that performance management is there to help them in their work development and give them greater control in their career progress.

Merin is an HR professional with an MBA in Human Resource. She likes doing a lot of research and study in the field of Human Resource and can't help but share her knowledge on the same in this platform. She is also a great cook and during her free times she keeps experimenting with new dishes. Know more about Merin by clicking here.
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