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Guiding Basic Principles to Maintain an Effective Performance Management System

Updated: Jun 7, 2022

If you're managing a team of employees, you know how important it is to have an effective performance management system in place. But what are the basic principles that should guide your performance management system? Here's a quick rundown of some critical elements to consider.

Establish clear performance goals and objectives

One of the most critical aspects of performance management is setting clear performance goals and objectives. This ensures that everyone involved in the process understands what is expected of them, and it helps to ensure that the organization's resources are being used effectively.

There are several factors to consider when setting performance goals and objectives. The first step is to identify what needs to be accomplished to achieve the organization's strategic objectives. Then, specific performance goals and objectives can be developed for each area of responsibility. It's essential to keep these goals and objectives as SMART as possible - that is, they should be Specific, Measurable, Achievable, Relevant, and Time-bound.

Once performance goals and objectives have been established, it's crucial to track and measure progress towards them. This can be done using performance metrics tailored to meet the organization's specific needs. Supervisors and the HR department should provide feedback to employees regularly to continue improving their performance. If needed, the goals should be modified or changed if they are no longer relevant.

By establishing clear performance goals and objectives, an organization can ensure that its employees work towards common objectives and use its resources effectively.

Communicate regularly and effectively

Regular communication is key to an effective performance management system. Employees need to be informed of their progress towards meeting performance goals and system updates. Managers also need to be available to answer any questions or concerns employees may have.

Regular communication also helps build a positive working relationship between employees and managers. Employees who feel appreciated and supported are more likely to be productive and motivated. A performance management system that encourages regular communication can help to create a positive work environment and improve employee performance.

Managers and employees must understand the performance management systems and the metrics, and the human resource department should support them by providing them with training or consultation.

Provide feedback and coaching

Employees need timely feedback on their performance to make necessary adjustments. Feedback should be specific and actionable and help employees understand how to improve their performance. Coaching can also be a valuable tool to help employees reach their performance goals.

Supervisors should provide feedback and coaching during the performance management process to help employees improve their performance. Feedback should be given regularly and tailored to the individual employee's needs. Coaching can help employees learn new skills and develop strategies for meeting performance goals.

Supervisors should also be sure to give positive reinforcement such as a simple "Thank You" or 'Well done" when employees meet or exceed expectations.

To provide feedback and coaching effectively, you need to be aware of your biases and assumptions. Make sure that you are giving feedback in a constructive and helpful way.

Avoid criticism that is vague or unsubstantiated. When giving feedback, always aim to be positive, specific, and actionable. For example, rather than saying "you're not meeting expectations," try, "I noticed that you didn't meet this goal by the deadline I set. Can you tell me why that was the case?"

When coaching employees, ask them questions about their goals and how they plan to achieve them. Help them identify any potential roadblocks and provide ideas on how to overcome them. Be sure to check in with employees regularly to see how they are doing and offer additional help or advice if necessary.

Performance management can be a very effective tool for improving employee performance. By providing feedback and coaching during the process, you can help employees reach their full potential.

Use performance metrics effectively

Performance metrics are an essential part of performance management. Metrics can help you track employee progress and identify areas where improvement is needed. However, it's vital to use performance metrics wisely - don't overload employees with too much data and make sure the metrics are relevant to the goals of the performance management system.

There are a variety of performance metrics that you can use. Some common ones include:

  • Productivity metrics track how much work an employee can produce in a given period. These metrics can be used to measure an employee's individual performance or a team's performance.

  • Quality metrics track the quality of the work produced and identify areas where employees need improvement.

  • Time metrics track how long it takes employees to complete tasks or projects and help you identify bottlenecks in the workflow.

  • Cost metrics track how much money is being spent on projects or tasks and help you to identify areas where cost savings could be made.

When using performance metrics, it's essential to keep the following in mind: The metrics should be

  • Relevant to the goals of the performance management system.

  • Achievable and measurable.

  • Easy to understand.

  • Updated regularly.

Performance metrics can be a valuable tool for performance management. By using them effectively, you can track employee progress and identify areas where improvement is needed.

Reward good performance

Your organization should have a program where employees are rewarded for meeting or exceeding performance goals in various forms such as financial compensation, awards, or other recognition (or even just a simple appreciation card). A well-designed reward system can encourage employees to strive for excellence.

Many companies use performance-based pay schemes to reward employees. Under this type of system, employees are paid based on their individual performance or their team's performance. This type of pay can be very motivating, as employees feel directly rewarded for their efforts.

Other types of rewards can also be effective in motivating employees. Some companies offer awards such as Employee of the Month or Employee of the Year. These awards can be given to individuals or teams, and they often come with a cash prize or other recognition.

Some companies also recognize good performance with special privileges. For example, an employee who meets all their performance goals might be allowed to work from home one day a week. Or an employee who goes above and beyond might be given a plaque or other award.

A well-designed reward system can encourage employees to achieve their performance goals. Financial compensation, awards, and other recognition can be very motivating, and they can help employees feel that they are directly rewarded for their efforts. Special privileges, such as working from home one day a week, can motivate employees. When designing a reward system, it is essential to consider the individual needs of your employees. By rewarding good performance, you can help your employees achieve their goals and improve performance overall.

Address poor performance

When an employee's performance falls below expectations, it's vital to take corrective action. This may involve providing feedback and coaching, placing them in a growth plan, and even taking drastic disciplinary action or termination measures. It's critical to handle poor performance in a timely and effective manner. Addressing performance issues earlier can prevent them from becoming more significant problems and help the employee improve their performance.

There are several things you can do to address poor performance:

  • Talk to the employee about their performance and give them specific feedback. Most performance problems could be resolved simply by providing them with individual counseling.

  • Coach the employee on how to improve their performance. Assigning a mentor from one of their peers might help develop necessary skills.

  • Place them in a formal growth plan. Put everything in writing. Clearly articulate what behavior changes you'd like to see. Meet regularly if the employee improves.

  • Take disciplinary action if the poor performance continues. Consider issuing a formal written warning.

  • Terminate the employee if they cannot or will not improve their performance.

No matter what course of action you take, it's crucial to be fair and consistent. Make sure you document all your interactions with the employee and keep records of their performance. This will help protect you in the event of any future legal disputes.

Addressing poor performance can be difficult, but it's essential to take action to ensure that the employee is meeting your expectations. You can help employees improve their performance and keep your business running smoothly by following previously mentioned steps.


Performance management is a critical part of any organization, and the principles that guide it are essential for ensuring that your team is productive and meeting goals. By keeping these fundamental principles in mind, you can create or improve an effective performance management system that works for your team.


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