What Is a Performance Management System? Essential Strategies & Examples

A performance management system is a process used by organizations to set goals, track progress, provide feedback, and evaluate employee performance in order to improve individual and organizational results.

If you’ve ever done one yourself, you might already know most people dread performance reviews. But did you know that companies that focus on performance management are 4.2X more likely to outperform the competition?

The right performance management cycle can help you build a team culture you can be proud of, while putting you miles ahead of the competition. In this guide, we’ll cover the why and how of performance management systems that foster a culture of learning and growth.

The essential elements of a performance management system

No matter which performance management philosophy your organization subscribes to, the following elements are essential.

1. Clear goals

The first step in any performance management cycle is to plan clear and measurable goals at the company, department, and individual levels. The following best practices will help you kickstart your goal-setting process:

• Set clear goals: This is the time to make sure everyone knows what they’re working toward – kind of like setting up the finish line at the start of a race. This might be quarterly SMART goals around client retention or hitting a certain portfolio size.
• Define roles and competencies: Next it’s about defining the skills that each role needs to knock it out of the park. Think customer service skills for hospitality or efficiency in handling bookings. 
• Pick the right metrics: Here’s where you decide what actually counts. In retail, this could be sales numbers, customer satisfaction ratings, or even inventory turnover. The right performance management tool will help set relevant metrics and keep track of progress without the guesswork. 

⭐ Key resource: Use these sample employee goals to increase team performance.

Use performance management software that makes goal-setting easy. In Breezy Perform, it’s simple for employees to set their own personal goals and decide whether they want them to be visible for everyone or just their manager. Managers can set individual goals for direct reports and easily search and view goals for a specific group or person.

2. Continuous feedback

Gallup estimates that low employee engagement costs the global economy $8.9 trillion. A problem that large can’t be solved with a one-off review at the end of the year. Once your organizational goals are aligned with individual employee development goals, it’s time to create an environment where everyone feels comfortable sharing their progress toward those objectives.

Here are three proven ways to evaluate progress on a consistent basis:

• Regular check-ins: Think of these as mini-huddles. Schedule regular catch-ups to discuss progress and roadblocks. For example, in hospitality, a manager might check in weekly with the front desk team to see how they’re handling guest feedback. Performance management software can help make these check-ins easier by providing structured templates that keep conversations focused and productive.
• Establish clear metrics: Whether you use objectives and key results (OKRs) or key performance indicators (KPIs), regularly reviewing your performance metrics for each role can help you quickly identify which team members are on track and which ones may need extra support. 
• Provide continuous feedback: Don’t wait for the end of the year to share feedback. In tech, this could mean establishing a schedule of regular debriefs after each product sprint so developers can optimize their work before the big launch.

⭐ Key resource: Every element of your performance management cycle should be present and accounted for in your employee feedback system. Get the complete breakdown in this free guide.

Perform helps managers give and get feedback when it matters by empowering them to request, provide, and publicly share feedback outside of standard review cycles. Not sure what to say? Let the comment generator get you started with standard statements you don’t have to write from scratch.

3. Regular performance reviews

Love ‘em or hate ‘em, every performance appraisal is a chance to celebrate wins, learn from the past, and plan for an even brighter future. Here are a few key steps to keep it enjoyable and effective:

• Conduct regular reviews: If you haven’t done so already, create a regular schedule for performance reviews beyond the year-end annual appraisal. For example, in finance, this could mean sitting down with analysts to discuss company objectives, quarterly performance, and future goals.
• Gather feedback from multiple sources: A 360-degree feedback approach allows everyone to gain different perspectives and insights, making the review process more rewarding for the whole team. But if it doesn’t make sense for your team or company, consider collecting feedback from both employees and managers for a balanced perspective on your performance questions.
• Set new goals: Collaborative goal-setting not only motivates team members, it also ensures everyone is aligned and excited about company goals and future objectives.

⭐ Key resource: No need to consult human resources. Keep the conversation constructive with positive performance review phrases for every scenario.

Get an email or notification whenever a review cycle launches. With Perform, employees and managers can easily access and submit performance reviews. And with all past review reports in one central place, there’s no need to go back and check your notes.

4. Multiple ways to recognize a job well done

Companies with a focus on performance management have shown 30% higher revenue growth and 5% lower attrition. And yet, nearly 36% of employers say they rely on informal recognition, such as a Slack channel for kudos. With more businesses competing for the same pool of talent, you can’t afford to let employees wonder if they’re doing a good job. You need multiple ways to recognize their work in real-time.

Here are three steps to help make recognition routine:

• Celebrate small wins: Don’t wait for the big milestones to throw confetti. A quick shout-out in a team meeting or newsletter can help reduce turnover by boosting morale across the entire team.
• ‍Encourage peer recognition: For a big boost in team spirit, encourage employees to recognize each other’s efforts. This could involve creating a “kudos wall” where staff can leave notes of appreciation for coworkers, or even a digital recognition wall that everyone can see when they sign into your daily performance management platform.‍
• Make rewards meaningful: Sharing words of praise is one thing, but with the right performance system, you can easily track achievements without having to shuffle through your inbox or team files to remind yourself who did what and when.

⭐ Key resource: Looking for ways to attract and retain top talent, but can’t afford large-scale pay raises? Revamp your compensation package and attract high-performance talent with these five strategies.

Deliver seamless shoutouts. Use Perform’s recognition templates to select from a range of prepared comments and tweak your message to say just the right thing.

5 Performance Management Examples Every Employer Should Know

Sometimes, the best way to prepare for a future of strong performance is to look to the past. The following companies are just a handful of inspiring employer brands that have set the bar in performance management.

1. GE - pivoting from past to current performance management

Known for their brutal “rank-and-yank” approach to performance reviews – and the sky-high employee turnover that came with it – General Electrics (GE) decided to radically rewrite their performance management playbook by switching to a performance app back in 2016 to meet the demands of a Millennial workforce. This is arguably the key moment when performance evaluations began to take a more growth-oriented (and less punitive) approach.

2. Adobe - emphasizing continuous improvement

Adobe radically transformed its performance management by replacing its clunky annual review process with a check-in system featuring regular informal meetings between managers and employees focused on setting expectations and providing ongoing feedback. This change marked an increase in employee engagement and normalized the idea of a feedback-rich culture as business as usual.

3. Deloitte - integrating feedback into routine workflows

In 2015, Deloitte moved away from traditional performance reviews to focus on continuous performance management and a more fluid employee feedback system. The new approach helps teams understand their strengths and weaknesses in real time, significantly reducing the annual time burden of prepping for appraisals. 

4. Microsoft - changing feedback methodologies from static to dynamic

Microsoft completely revamped its performance management strategy and boosted employee satisfaction to the tune of an impressive 85% by ditching rigid annual reviews. The new system allows year-round assessment and fosters a work environment of open communication and growth, rather than focusing solely on performance ratings​.

5. Netflix - uniting teams around key organizational objectives

Known for its one-of-a-kind culture, Netflix uses a 360-degree feedback system that prioritizes transparency and frequent informal reviews. Employees receive candid feedback from peers, which encourages a culture of accountability over strategic goals. The result? Netflix consistently ranks high in employee satisfaction, with a 4.2 out of 5 on Glassdoor.

Benefits of a performance management system

Launching your performance management system may feel like a lot of work, but once you start consistently hitting your performance goals, you’ll know it’s worth it. Let’s recap some of the biggest benefits of a healthy performance management strategy.

Create a culture of feedback

Implementing a strong feedback culture can improve employee performance by up to nearly 15%. With a regular system for delivering and receiving feedback, you can keep performance expectations aligned, streamline your succession planning, and address issues through constructive feedback as things change.

Keep goals front and center

When shared ownership is high, 97% of employees say they plan to stay with their company. Use your performance management process to encourage shared ownership over progress, while nurturing a sense of autonomy and accountability at each level of the business with help from cascading goals.

Balance resources effectively

According to research, one in four employees report experiencing burnout symptoms, primarily due to ineffective workplace processes and systems​. A regular review process helps you identify bottlenecks and burnout before they become a problem. When an issue arises, managers can even use review opportunities as informal stay interviews to keep top-performers happy and loyal.

Identify skills gaps

At a moment when 70% of executives say their businesses are suffering financially because their workforces lack the right competencies, an effective performance management system can help you futureproof your workforce by arming it with the skill sets it needs to keep the business competitive. By identifying employee development opportunities that align with your strategic objectives, you can elevate organizational performance even as the playing field continues to change and shift.

Make effective performance management a reality with Perform ✨

According to our research at Breezy, over a third of companies are still using basic tools like Google Forms and Excel to manage their performance review process. Now is the time to uplevel.

With cascading goals, prebuilt review templates, and a handy manager comment generator, Perform makes it easy to achieve your best performance yet. And the best part? It’s completely free for up to 10 employees.

Ready for a performance management process that works for everyone? Sign up now to get started.