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What is Performance Management?

Last updated on 3rd May 2023

The Office for National Statistics (ONS) reports that larger businesses are typically better managed that smaller firms. This is because larger businesses generally have wider teams and a greater capacity to place a stronger focus on performance management. However, performance reviews aren’t always popular with employees. A YouGov survey found that out of 874 workers in the UK, just 26% found their performance reviews useful. This could be down to a number of reasons relating to the method by which performance management is conducted. This article will delve into performance management in more detail to uncover how performance is measured, the performance management cycle, and how to make performance management effective to improve work culture.

What is performance management?

Performance management is a tool used by employers to monitor and support their employees in their working roles to help achieve the overarching business goals. It helps employers track how well their employees are doing in their teams, and places accountability on staff so that teams are motivated to produce their best work.

The most structured and detailed performance management systems are found in the corporate world of work (such as the Civil Service). However, all businesses can have their own versions of performance management to ensure that employees can work to the best of their abilities and have a fair space to communicate any concerns or difficulties that may arise in their working duties.

Performance management will look at the performance of each employee individually. This means that each person can have a tailored plan to work towards that helps them achieve their best work. When each employee has this individually, it helps employers to get the most out of their employees, creating a more motivated workforce. Employers will review an employee’s performance as part of the wider business objectives, and then work with employees on how they can best meet those targets (as well as their own individual workplace goals).

Over the years performance management has become more of a two-way process. As well as the employee showcasing their contribution to the business, it has also become a safe space for employees to express how the business can meet their needs to enable them to produce their best work. When a business aims to have some flexibility with their employees, it shows that as an employer you are supportive, which can help keep employees engaged with their work. As a society, people’s lifestyles have become increasingly busy which has created a shift in working flexibly. In the Gartner 2021 Digital Worker Experience Survey, 43% of respondents said that flexible working hours helped them to achieve more productivity, and 30% of those surveyed said that less time commuting allowed them to be more productive.

Measuring Performance

How is performance measured?

Each workplace may have its own method of measuring the performance of its employees, but generally, it will use tools or programmes to help visually track progress. These tools are often based around targets as a goal to work towards. Then the performance can be measured periodically to check how their work is progressing, and also resolve any problems that arise as early as possible.

Some popular tools used for performance management are:

  • Appraisals.
  • SMART targets.
  • One-to-One meetings.
  • Personal Development Plans.
  • Wellbeing schemes.

A manager will usually complete performance management meetings with their employees using a range of tools to support the conversation. This helps employees to talk openly with their manager. Improving communication and openness in the working relationship between the manager and the employee can also boost productivity. Performance management meetings are a time when managers can get to know their employees which will therefore improve the working relationship. When an employee can communicate with their manager, it often signifies a strong workplace culture where everybody’s views are respected, and management are supportive of their staff.

What are the stages of the performance management cycle?

The performance management cycle is a way to structure performance management with employees so that it can be easily monitored and revisited. It is a model that a manager can use to base employees’ development on, which can be linked to the key business goals. It is a four-step process that is ongoing (which is why is it described as a cycle).

The four stages of the performance management cycle are:


This stage is where employers will have open discussions with each employee to plan what goals to set for the worker. These goals can be both personal to the employee’s work aspirations, as well as link to the worker’s job description and the business’s overarching aims. The SMART goal-setting tool is often used here so that any goals set can be measured and reachable.


The monitoring part of the cycle is where the employee may have regular meetings with their manager to track how well they are doing in their job and how well they are working towards their targets. Frequent monitoring works well for businesses because it allows any problems to be identified early so that resolutions can be put in place.


During the planning stage, a time frame is usually set for the employee’s targets to be reviewed. It is this reviewing stage where the evaluation of the employee’s performance against the goals set takes place. This can often take place in a yearly appraisal, or at the end of a probation period for example.


At this stage, employers have the chance to reward their employees for the positive results they may have achieved against their own goals and the wider business goals. Then the process can re-start with new higher goals to be set in the planning stage (1).

Manager speaking to employee about performance

Whose role is performance management?

It is a manager’s role to take the lead in performance management because it is their role to guide their employees. It is in the best interests of an organisation to manage their employees’ performance because it will give them the best chance of maximising each employee’s potential for them to work towards their business goals. This is a skilled role of managers because it is important to get the correct balance of allowing employees freedom in their work whilst managing their performance and behaviours in line with business objectives.

Particularly when an employee has additional targets to work towards, it can be easy to micromanage people; where a manager looks closely at all the employee’s work tasks to take greater control of their work and efforts. Micromanagement is often viewed as a negative work environment because it shows a lack of freedom and trust rather than a supportive working relationship.

Whilst managers take the lead in performance management because they are managers of people, the task should be viewed as a collaborative one; helping employees view the strengths in connecting their own personal work goals with the wider business targets. According to a survey conducted by Forbes, 74% of employees report that they feel more motivated at their jobs when they feel heard and listened to.

What are the principles of good performance management?

Performance management can look different to organisations of different sizes and sectors. This is because different businesses have different workplace structures and routines which work best for them. However, some common themes can be found across all performance management systems, such as:


Transparency is being free from hiding something. In the workplace, this is a key factor to build trust. Being open and honest during performance management can help employees to gain a true understanding of how their role impacts the wider business goals, and also supports performance management to be more meaningful. Transparency can be difficult to achieve for both employers and employees because it can create vulnerability. However, a PwC report found that employees in a high trust environment were a staggering 76% more engaged than employees from low trust environments.


Accountability is closely linked to transparency. It means to be held fully responsible for the work you do and the impact you make. In business, performance management instils accountability in its employees because the focus is solely on an individual’s performance (rather than being able to hide behind the work of other team members). Accountability makes teams fair by ensuring everybody takes responsibility for their work. You can often find that businesses with strong accountability are higher performing overall because everybody understands their role.


Motivation keeps people going. In performance management, the more motivated your employees are, the greater the work they will produce. Motivation can be strongly linked to work culture (which will be explained in detail further later in this article). Performance management systems should be used as a tool for motivation, with positive reinforcement given where good work has been achieved.


Performance management meetings should be a safe place for employees to receive support from their manager. If an employee isn’t performing as expected, managers should offer support and find out if there are any issues preventing their employee from not meeting their goals. This is opposed to a manager punishing an employee for not meeting their goals. Offering support instead of punishment helps to keep employees motivated to try harder to reach their goals.


Business strategy should be at the forefront of your mind as a manager when completing performance reviews. Goal setting should be linked to the wider business objectives of meeting workplace targets, customer satisfaction, financial gain, and brand awareness. When setting goals with employees, a map to success can be included relating to the employees’ roles in the workforce.

A continuous cycle

Performance management should always be a continuous cycle so that constant feedback can be given during the lifetime of the employee’s employment contract. This will ensure that goals move higher as targets are met, and employees remain motivated in their work.

Managing performance in the workplace

How to make performance management effective?

Managers can make the performance management process more effective by involving the employee in building their performance management plan as much as possible. Communication should be coherent and courteous so that even difficult subjects can be discussed respectfully. Addressing any issues early on in the process can ensure that your employees understand what is required of them so that they are able to contribute as much as possible.

Performance management plans are for the employee, so their opinion should be included throughout. This can increase their level of interest in the process and their willingness to work towards agreed goals. Goals should be easy to understand and agreed upon by the employee, as they are the ones having to work towards them. Not having clear goals can be frustrating to employees and demotivate them because they do not understand what is required of them. They should also be person centred. Each employee is an individual, so by keeping performance management person centred you can ensure that the process is matched to each person’s strengths and weaknesses.

Does performance management improve work culture?

Having effective performance management can be transformative in your business. Not only can it help your business reach new heights, but it can create a happier workforce. When employees feel empowered, it builds overall confidence and self-esteem, to enable people to be accountable for their work. When the business culture creates a welcoming and happy atmosphere, employees are more likely to engage because they will feel more aligned and connected to the organisation. It can also be linked to strong employee retention, with culture being one of the main reasons that people stay in their jobs.

Is performance management commonly used?

There is no legal requirement to complete a performance management process with your employees. However, there are strong links to effective performance management and higher business achievements. Performance management tools are mostly found in corporate jobs, due to the large size of the workforce requiring higher levels of management.

Since the coronavirus pandemic, there have been many changes to the way we work in the UK. There is more flexibility with working hours, work settings and remote working. However, performance management can often be neglected, getting lost in all of the recent changes. In the UK, there needs to be a renewed focus on performance management, using the techniques listed in this article to make it more engaging for employees. Advanced HR found that 65% of HR Directors had put performance management on the back burner in the past year. However, having those regular conversations with employees and prioritising dedicated time to talk about performance is the best way to keep productivity levels high and tackle preventable problems at work.

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About the author

Maria Reding

Maria Reding

Maria has a background in social work and marketing, and is now a professional content writer. Outside of work she enjoys being active outdoors and doing yoga. In her spare time she likes to cook, read and travel.

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