How to Develop a Performance Management System

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  • 0:03 Performance Management Systems
  • 0:50 Basic Definitions
  • 1:17 Designing
  • 3:06 Considerations
  • 3:35 Setbacks and/or Problems
  • 4:06 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we'll learn about performance management systems. We'll define the term and then look specifically at how a company might develop its own performance management system.

Performance Management Systems

Have you ever worked for a company where your input simply did not matter? Was it frustrating? I'm sure it felt that no matter how hard you worked, you were not a valuable asset to the company. Now, suppose you work for a company that values your opinions and your hard work. Imagine that the company wants to involve you in helping to make them stronger and reach their organizational goals. How would that feel? I'm guessing that the second working environment is the one most everyone would choose as it makes employees feel a part of the company, a part of the team.

In this lesson we will learn about performance management systems and how they incorporate employees to help reach the company's goals. In particular, we will look at how a company might design their own performance management system.

Basic Definitions

Before we begin the process of learning how to design a performance management system, let's define a crucial term. Performance management is the process that involves employees and management alike to help enhance and strengthen the progress of reaching the company's goals and objectives. Performance management looks at how well employees are performing and evaluates them. It also offers development to strengthen employees' skill sets and recognizes quality work.


In this section, we will walk through some of the more common steps a company might take to construct a performance management system. Because these systems give all employees an opportunity to play an important role in the success of a company, it is important to understand the process.

1. Consider Stockholders

If a management system is going to work, everyone that has a stake in the company needs to be involved. This means not only including the employees and the management, but also stockholders and investors. Because everyone has to work as a team, if one person does not agree with the system, he or she will essentially be working against the company, causing a hurdle to reach the organization's goals.

2. Know and Outline Goals

If employees do not know what is expected of them, then they will not be able to contribute effectively towards the company's goals. This means that a good performance management system needs to outline the following:

  • Job duties, responsibilities, and tasks - what does the employee need to do?
  • Job goals - what tasks will be measured and how will they be measured?
  • Explain importance - employees need to know which tasks are the most important, which tasks should they focus on, and which tasks will help contribute to the goals of the company.

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