Performance management is fast becoming the norm for companies looking to streamline their business process. It is a step up from the earlier system of Performance Appraisal which was the traditional method for evaluating and rewarding employees.

To understand the difference between the two systems, let’s first look at what the old system of appraisal entails. This will help frame our discussion. Performance appraisal:

• Looks at performance historically
• Key Result Areas are set for the individual
• Is a record keeping exercise which looks at immediate i.e last quarter exercise
• Is primarily an HR department exercise
• Is the basis of their increment

Performance Appraisal has been defined as, “An annual review of an employee’s overall contributions to the company by his/her manager. Performance appraisals, also called annual reviews, evaluate an employee’s skills, achievements and growth, or lack thereof. Companies use performance appraisals to give employees big-picture feedback on their work and to justify pay increases and bonuses, as well as termination decisions.”

The Performance Management System on the other hand:

• Plans what is to be done there are periodical reviews to improve performance and channel strengths and assess weaknesses
• Sets Key Result Areas  as well
• Aligns with business planning and the processes of the organisation
• Is a strategy achievement initiative where the role of the employee is defined in the context of the direction the leaders of the company wish to take
• Provides input for rewards, compensation, development and growth of the individual.

According to the HR Council, “Performance management is a process by which managers and employees work together to plan, monitor and review an employee’s work objectives and overall contribution to the organisation." More than just an annual performance review, performance management is the continuous process of setting objectives, assessing progress and providing on-going coaching and feedback to ensure that employees are meeting their objectives and career goals.

It can be seen that while the old system of Performance Appraisal has merits, the Performance Management System is far more comprehensive in its approach. Employees are given goals and direction based on the company’s business plan and strategic objectives and their holistic development is taken care off. The management is also involved in the nurturing of employees along with the HR creating better outcomes that the Performance Appraisal system which just becomes an HR exercise.

Employ a Perfomance Management System for your SME for a more integrated and value-creating approach to doing business.

To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.