performance management system

Why Is A Performance Management System Important?

It is no secret that businesses today are facing more competition than ever before. To continue to meet customer demands it is important to have a Performance Management System in place. This helps an organisation track employee performance, ensuring that individual staff conduct aligns with the business’ larger goals. 

An effective Performance Management System helps companies identify issues early on, provide training and development opportunities, and improve overall productivity. This article explains why a Performance Management System is so important for organisations.

What is a Performance Management System?

Effective performance management is essential to business continuity, success, and growth. It helps a company develop structured processes to work towards its larger operational goals. It also ensures all employees understand their role and responsibilities, and identify and address potential problems. 

A Performance Management System is typically developed by senior management from the top-down, to strengthen performance management processes. A key benefit is that it helps companies clearly define their expectations of employees, and standards of behaviour. It also helps develop the larger operational goals, how performance issues will be addressed, and so on.

It is recommended that businesses implement a Performance Management System, as it helps them to better understand their own goals. It also assists employees in meeting their KPIs, clearly outlines what is expected of everyone, and covers incident handling protocol.

Developing an Effective Performance Management System

There is no all-in-one solution to what makes a successful Performance Management System. Factors such as business operational structure, its industry, and so on can all influence how the system should be designed. 

For it to work successfully all staff must commit to working within its unique framework and achieving high-performance standards. Non-compliance will severely impact its effectiveness.

Therefore, an integral component of a Performance Management System is clear communication. If staff clearly understand what is expected of them, businesses are more likely to meet and maintain their larger objectives.

What Makes a Great Performance Management System?

Broadly, five interrelated factors must be considered when developing a Performance Management System. They all promote employee development, and are as follows:


To maximise performance, staff must be aware of their performance expectations, conduct requirements, and KPI’s. This information must be conveyed clearly and regularly. By doing so, everyone will be on the ‘same page’, with everyone working towards the same goals;

Support and training

Employees should be supported to help them develop problem-solving skills, maintaining motivation strategies, achieving their KPI’s, and so on. This not only promotes professional development, it also heightens employee engagement, as staff will feel supported;

Performance reviews

Staff must know if their performance aligns with company expectations, and if not what can be done to improve it. Through regular performance reviews and the creation of performance improvement plans, there will be no ambiguity about staff performance;


Staff that feel appreciated are more likely to continue working to the same high standard. Good work should result in employee recognition, with the company developing a clear process of conveying positive reinforcement and feedback;

Disciplinary measures

A good Performance Management System ensures that nothing will come as a surprise. Structured processes must be developed to address problematic behaviour, and develop an action plan for overcoming it. If the behaviour continues despite these steps being taken, the company should have processes for managing poor performance. Finally, there must be a procedure for dismissing an employee whose behaviour continues to fall below expectations, despite multiple discussions. The business must develop a process for dismissing employees in a fair, empathetic, and legally defensible way.

DIsmissing an employee during probation

Most companies place new employees on a probation period between one to three months upon commencing their position. Their contract should clearly state the terms of their probation. It should also state the standard their performance must reach to remain in the role post-probation. If an employee’s performance consistently falls below expectations during probation the business may decide to dismiss them. When dismissing an employee during probation, management should meet with the staff member to unambiguously explain their decision. Management should have the probation employment contract on hand. This will help them explain how their decision to dismiss the employee is defensible, and in-line with the signed contract.

Workplace Wizards can Help You

A Performance Management System will only be as effective as its design allows. Workplace Wizards can help businesses design a Performance Management System that leads to improved performance, ensuring that nothing is overlooked.

For expert help, call Workplace Wizards today on 03 9087 6949 for a consultation about your businesses overall goals, or email at We can discuss how a Performance Management System can help it both realise its targets and maintain its competitive edge.

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