Designing A Performance Management System

Your performance management system should be:



have measurable standards

Perhaps the most important design consideration is to develop a process that is practical and easy to understand and use. The focus should be on the results of the performance management process - effective and motivated staff - not the steps of the process.

When developing a new performance management process, use a committee made up of employees and managers. A collaborative approach will increase employee buy-in, understanding and support of the process.

Once the process has been developed, communicate with all staff about the purpose and the steps in the performance management process.

You should be prepared to make adjustments to your new system as necessary.

Different Types of Performance Management Systems

There are a variety of ways to measure performance including:

Self Appraisal: the employee is asked to evaluate his/her own work

Peer Appraisal: staff of equal rank within the organization are asked to evaluate the employee

Team Appraisal: similar to peer appraisals; employees who work as part of a team are asked to evaluate the team's work

Assessment Centre: the employee is assessed by professional assessors using several types of evaluation such as work simulations and actual activities

360-Degree or Full Circle Appraisal: the employee's work is reviewed by gathering input from representatives of all the groups the employee interacts with such as supervisor, peers, subordinates and clients.

Management-by-Objectives: the employee's achievement of work objectives that are set in collaboration with his/her supervisor are assessed.

Combination of Methods: Some organizations combine different methods into their performance management process. In particular some organizations include an evaluation of competencies - the knowledge, skills and abilities that distinguish superior performance. Establishing competencies for performance management in an organization requires careful thought. Without careful preparation, evaluating competencies can be very subjective.

In the voluntary sector, 360-degree appraisals are sometimes used for evaluating the Executive Director. Management-by-objectives is an effective approach to performance management for all other employees.

Because it's the most practical system for most non-profit organizations, we will be focusing in this section of the website on Management-by-Objectives.


Performance management using a management-by-objectives (results-based) approach has three phases:

Phase 1 - Planning

a work plan for the next year is developed;

measures for assessing progress are established.

Phase 2 - Monitoring

progress toward the goals identified in the work plan is monitored;

the plan is adjusted if required;

corrective action is taken if necessary.

Phase 3 - Reviewing

at the end of the performance management cycle the manager and employee meet to document the work of the past year;

accomplishments and shortfalls relative to the work plan are summarized using a performance management form;

a new performance management cycle begins.

Each of these phases is discussed in detail in the section below.


Certified Crosby College TQM Instructor; Management & HR Development Senior Consultant to a number of Egyptian & Arab enterprises across the Middle East. - Rated by The Society for Human Resources Management (SHRM) as Senior HR Professional due to his significant contributions to prominent Multinationals in the US, The Gulf, and Egypt. - Had held senior Management, HR, and Training positions in SOM, Johnson Wax, General Motors, and Bristol Myers Squibb. - Currently teaching Management, HR, Strat...

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