Introduction

Performance management is the activity and set of processes that aim to maintain and improve employee performance in line with an organisation's objectives. It’s strategic as well as operational, as its aim is to ensure that employees contribute positively to business objectives. Ideally, performance should be managed holistically, throughout the range of HR activities and processes.

This factsheet explores critical aspects to get right in performance management, as well as recent changes in thinking. It summarises some of the main tools used in performance management, including objective setting, performance ratings, performance appraisals and feedback, learning and development, and performance-related pay.

Key takeaways

  • Performance management requires a multifaceted approach linked to organisational strategy.
  • ‘SMART’ objectives work well in many contexts, but there are better alternatives for complex jobs.
  • Regular performance feedback is crucial for monitoring progress.
  • Employees’ voice and perceived fairness are critical elements in performance feedback. 
  • There are many biases to watch out for in performance ratings.

CIPD viewpoint

If people are the greatest creators of value in organisations, then good performance management is critical for organisational success. Employees must understand what’s expected of them, and to achieve those goals they need to be managed so that they’re motivated, have the necessary skills, resources and support, and are accountable.

Broadly, good performance management revolves around regular, effective feedback on progress towards objectives. It’s multifaceted, not a technique in itself, and there’s no single best approach. It should align with organisational strategy and suit the type of jobs in question.

People managers are instrumental in performance management. Ideally, they reinforce the links between organisational and individual objectives and give feedback that motivates employees, helps them improve, and holds them to account. Managers need to be suitably skilled and supported by processes that are fit for purpose. But much of how performance is discussed is shaped by cultural norms: senior leaders will set the precedent and line management relationships will in turn shape how colleagues discuss performance more widely. 

At the core of effective performance management are frank, yet supportive performance conversations that include ongoing feedback. Occasional processes, such as annual performance reviews and pay setting, can be useful, but shouldn’t be the main focus.

Changing trends in performance management

In this video, Jonny Gifford, Senior Adviser for Organisational Behaviour at the CIPD, explores the changing trends in performance management over recent years.
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Jonny Gifford, Senior Advisor for Organisational Behaviour, CIPD

This factsheet was last updated by Jonny Gifford.

Jonny Gifford

Jonny Gifford: Organisational Behaviour Adviser

Jonny is the CIPD’s Senior Research Adviser for Organisational Behaviour. He has had a varied career in researching employment and people management issues, working at the Institute for Employment Studies and Roffey Park Institute before joining the CIPD in 2012. A central focus in his work is applying behavioural science insights to core aspects of people management. Recently he has led programmes of work doing this in the areas of recruitment, reward and performance management. 

Jonny is also committed to helping HR practitioners make better use of evidence to make better decisions. He runs the CIPD Applied Research Conference, which exists to strengthen links between academic research and HR practice. 


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