Why Performance Management?

Why Performance Management?


Performance management can focus an organization and bring discipline to company-wide planning. It can help leaders and teammates communicate accurately and consistently about what is important. It can also establish indicators for how company success is measured. When only 13% of employees worldwide admit to being engaged at work and others are spending nearly half of their time focused on unimportant tasks, now is the right time to advance performance management processes. There are 3 main benefits to having a structured and consistent performance management system:


  1. Employee Engagement

“A mere 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals,” according to Harvard professors Robert Kaplan and David Norton. Businesses that implement a strong culture of performance management and goal setting can keep everyone working well together by making sure goals are not established in isolation. Moreover, clear alignment of employees’ goals and objectives creates a shared sense of ownership, which also increases employee’s involvement, commitment and engagement in the business.

In addition, increased employee engagement not only benefits the employees, but it also allows business owners to quickly identify under performers and proactively find ways to help them achieve their full potential. Organizations without a performance management strategy waste up to 34 days each year dealing with under performers. Not only do they have difficulties in identifying under performers, managers spend 13% of their time managing those poor performers and 14% correcting their mistakes. Performance Management Tools allow companies to provide frequent, measurable, visual and graphical feedback, which, in turn, helps shape behavior to make more consistent progress toward goals.

  1. Employee Retention

Employee engagement is directly correlated with employee retention. Researchers Teresa Amabile and Steven J. Kramer found that, “Of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work.” When, employees understand their contribution to the company and see themselves achieving targets, they are more likely to stay for the long haul, which has massive financial implications. Data from Cornell University and Hewitt Associates suggests that losing staff costs 30-150% of annual salary in downtime and replacement costs.

Performance management also allows companies to correctly identify and promote the best performers ensures that they continue to retain the best talent. High performers only compose 5% of one’s workforce but produce 26% of one’s output. Replacing them is incredibly expensive, to the tune of up to 3.5 times their salary. By correctly and effectively distributing compensation based on productivity, companies can save cost by awarding high performers accordingly and thus reduce turnover rate.


  1. Increased Profits

With a strong performance management culture and the tools to support it comes improved business operational excellence through a combination of employee engagement, retaining the best talent and the associated cost savings which, in turn, leads to increased profits. According to a Harvard Business School study, holding all other factors equal, organizations without a performance management culture increased net income by only 1% over 11 years, while those with one saw a 756% increase over the same time period. Performance management is a necessary foundation for businesses of all sizes that strive to perform at maximum pace and productivity.


Why Performance Management?
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Why Performance Management?
Here are 3 main benefits to having a structured and consistent performance management system.
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