Types Of Performance Management System And Their Purpose

Types Of Performance Management System And Their Purpose

If your organization is growing rapidly, hiring a good team is essential. There are multiple types of PMS in HR  (performance management systems) that can help you manage your employees and have the best team in place to drive your business forward.

What is a Performance Management System ?

A performance management system is designed to support and develop employees in order to maximize their contributions to the organization and its goals. The system supports all employees at all levels of the organization, from front line staff to executive management.

It focuses on supporting people in their work roles and businesses will sometimes use more than one system for this purpose.

A Performance Management System has 8 main purposes :

Managing employee’s performance is the key objective of establishing systematic Performance Management system in an organization. These process servers’ eight main purposes in the company:

1. Strategic

It is a tool which should be aligned with overall organization goals followed through department goals and individual goals.

2. Administrative

It is also the deciding factor of an employee’s promotion, demotion, salary increment, transfer and terminations. It enables the identification of performers, non-performers or under performer employees in an organization.

3. Communication

It is an effective communication channel to inform employees about their goals, job responsibilities, key deliverables and performance standards. Further, it is also a structure method to indicate the key areas of improvement required by the employee in order to improvise his performance.

4. Developmental

It is the structured method of communicating the positive feedback, improvement areas, and development plans. The idea behind a development focus is that employees don’t need to be forced to perform, they want to perform well and develop both personally and professionally.

5. Organizational Maintenance

The yardstick of measuring employee, department and organization achievements and evaluating the performance gaps through various tools and techniques. Hence, it maintains the health of the organization and its performance standards.

6. Documentation

The performance management reviews, feedback and forms should be documented and maintained periodically by every organization. It would enable them to look forward, set new targets, design developmental needs, design training and learning programmes, and career progression of employees across departments

7. Recognition

Recognize employee performance and behaviors consistent with organizational goals. Employ­ees should feel val­ued and appre­ci­at­ed for the work they do and the effort they put in.

8. Reevaluation

Reevaluate employee performance in light of changes in the business environment or organizational structure. Giving regular feedback will help the employees to perform better and be consistent.

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The Top 5 Types of Performance Appraisal Systems :

There are five main types of performance management systems that are used by businesses today:

1. Forced distribution

The ratings of employees in a particular group are dispersed along a bell curve, with the supervisor allocating a certain percentage of the ratings within the group to each performance level on the scale.

2. 360-degree feedback

This process collects information from the employee’s supervisor, colleagues and subordinates about an individual’s work-related behavior and its impact.

3. Competency-based

This type of system focuses on performance as measured against specified competencies (as opposed to specific tasks or behaviors) that are identified for each position.

4. Management by objectives

Management by objectives (MBO) is a type of performance management process through which goals are set collaboratively for the organization, various departments and each individual member.

5. Graphic rating scales

Graphic rating scale (GRS) appraisals list several factors, including general behaviors and characteristics on which a supervisor rates an employee. The rating is usually based on a scale of three to five gradations. This type of system allows the rater to determine the performance of an employee along a continuum.

The majority of performance management system make these six mistakes :

Organizations that want to improve the performance of their employees follow a performance management system. There are many different types of performance management systems, and each has its own unique way to implement it. The performance management system type you choose depends on your organization and its goals.

Troublesome factors in most performance management systems are their structure, planning process and implementation. These factors often cause the system to be ineffective and thus lead to poor results. These are the three most common mistakes made by different performance management systems:

1. Focus on goals rather than outcomes

Focusing on insignificant activities instead of on the end result could end up hurting the organization. There is a thin line which makes a huge difference. When one shifts the attention from goals to outcomes, it will help them grow.

2. Little or no consideration for personal growth

Taking care of the employees entails more than just hosting pleasant happy hours or providing weekly lunches. Everyone wants to feel really cared for, regardless of their position or where they choose to work. A commitment to employee development is a powerful method to do this. Employee development is a long-term strategy with immediate advantages such as enhanced loyalty, improved performance, and higher engagement.

3. No clear communication of expectations

As a leader, one drives their team’s motivation and progress. It is critical for them to be able to communicate to all team members not only what their collective goals are, but also what they expect of each of them in their roles to help meet those goals.

4. Halo/horns effect

The “halo” and “horns” effects occur when an employee is highly competent or incompetent in one area, respectively, and the supervisor rates the employee correspondingly high or low in all areas.

5. Personal bias/favoritism

Some managers may allow their impressions of employees or their personal feelings about them to dominate the performance rating process.

5. Inaccurate information/preparation

Managers sometimes fail to take the time to solicit relevant information about the employee’s actual performance from those who work most directly with the employee, resulting in an inaccurate assessment.

The successful uses of a performance management system

Performance management systems have evolved from a basic set of performance measurement tools to a comprehensive system with critical input from the employee, immediate supervisor and manager.

Performance management is a systematic approach to providing feedback and coaching to employees in order to improve their job performance. It provides a framework for planning, monitoring and adjusting behavior through the use of the following:

Employee self-assessment:

Performed by the employee, it documents the employee’s view of his or her strengths and weaknesses, achievements and development needs.

Manager assessment:

Performed by the immediate supervisor, it documents how well the employee is meeting established expectations in areas such as achievement of goals, teamwork and attitude toward work.

Manager observation:

The manager observes the employee’s actual performance to validate or give clarity to what was reported by the employee and/or supervisor.

Individual development plan (IDP):

 An action plan that links development needs to goals, objectives, competencies and career aspirations.


There seems to be an abundance of different types of performance management systems. It depends on your organization or team size and the purpose you are aspiring to accomplish. So the choice is completely up to utilization on whether the performance management system will be applicable for your company or organization to achieve certain goals and improve employee performance.

Design flexible and transparent Performance Management Systems that are tailor-made to your organisational goals, job types, performance standards. Get started now!

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