Effective Performance Management Systems

Effective performance management is something every organization wants. Without driven employees who are performing well,  businesses cannot achieve their full potential. Existing performance management systems usually require setting annual performance goals, a lengthy and labor intensive review process that may result in disengaged employees. This process isn’t effective – since it sets annual goals that become stale quickly, and a retroactive review that leaves little place for employees to course-correct.

Today, performance management is changing into a real-time way of communicating with employees and aligning them with performance. It’s a result of a better understanding of how to motivate employees and the insight that traditional performance management is broken (click here to read why). Here are 5 elements to ensure your performance management is effective and modern:

5 Keys to Effective Performance Management

Goal Setting (the Right Way)

Many systems to date are geared towards annual (and sometimess biannual) goals. These goals tend to age and therefore become irrelevant by the time performance is assessed. Paired with forced rankings, they can create a toxic outcome.

This is why many leading companies (such as Google, LinkedIn, Intel and others) have transformed their goal setting by successfully adopting the OKR (Objectives and Key Results) technique. OKRs work on the team, organizational, and individual level whereby each level states ambitious objectives and sets key results each quarter. Key results are quantifiable measurable milestones for achieving goals. Everyone’s objectives and key results are visible to others. This creates a new degree of transparency, impartiality, and clarity as employees can realize areas they are supposed to focus on and how they will contribute to the overall corporate targets. After creating goals and results employees and units are measured on their ability to deliver. As objectives are generally ambitious, everyone needs to try hard.

An important thing to note is that goals are personalized – goals fit each employee’s roles and capabilities and not a generalized idea of what employees are supposed to do.

Collaboration & Communication

On the topic of fairness, remember that competition does not motivate everyone. Effective performance management systems foster communication and collaboration instead of just focusing on competition. They motivate employees to share information, they assist in highlighting activities that make certain individuals successful and using them as a reference to the rest of the workforce, they measure activities that breed success instead of measuring success retroactively and the engage employees in communicating with their peers and managers to train, learn and get support.


As mentioned above, giving employees feedback through annual performance management reviews can be a daunting experience, since goals have managed to age over the year, making the dialogue both threatening and irrelevant.

Instead, new performance management tries to give feedback in real time, so it is relevant and gives employees an opportunity to correct. These new systems measure KPIs in real-time, based on data harvested from the company’s operating systems and utilizing this data to empower meaningful regular feedback, like a fitness tracker for work.


An effective performance management system should be tied into recognition. Never underestimate how much people care about recognition – and how important it is to create a positive sense of achievement at work, even lessening turnover.


Besides performance management that is more agile, personalized, and firmly focused on powering ongoing performance, systems must encourage employee development by offering continuous learning opportunities and new ways of gathering reliable, work relevant information. An effective system must be linked to learning and allow employees to enhance their capabilities and improve their performance through access to knowledge and experience.

In Short

In order for a performance management system to be truly effective, it needs to achieve the following:

  • Be engaging and omnipresent enough to ensure buy-in from those using it
  • Allow employees to constantly monitor their performance and managers to run the system continuously and not periodically, like a fitness tracker for work
  • Be considered fair and objective
  • Be connected to or provide in itself recognition (more on recognition and rewards programs in this link)
  • Allow employees to develop and learn

An effective system is no replacement for good managers who know how to communicate goals and performance. A good system however, with the right tools set in place, will help good managers make the most of their employees and help drive employees’ business results instead of just keeping employees’ busy.

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