Performance Management System (PMS) Meaning, Definitions, Objectives

5th April 2021 3 By indiafreenotes

Performance Management System is the systematic approach to measure the performance of employees. It is a process through which the organization aligns their mission, goals and objectives with available resources (e.g. Manpower, material etc), systems and set the priorities.

The execution administration framework is a constant procedure of characterizing and conveying the activity parts and duties, execution desires, goals and set their needs between boss (administrator) and subordinates (workers). It incorporates association, office and representative shared objective and targets which are lined up with frameworks and assets. It is the channel of providing clarity about goals and also to improve the business processes through various methods and mechanism.

Performance management can be defined as the development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organization which supports and encourages their achievement.

Michael Armstrong have defined performance management is a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.

Performance assessment has a long history based on comparative judgements of human worth. In the early part of the 19th century, for example, Robert Owen used colored wooden cubes, hung above work stations, to indicate the performance of individual employees at his New Lanark cotton mills in Scotland. Various merit ratings were represented by different colored cubes which were changed to indicate improvement or decline in employee performance.

According to Michael Armstrong and Angela Baron: ‘Performance management is a process which contributes to the effective management of individual and teams in order to achieve high levels of organisational performance.’

According to Dr. T. V. Rao: ‘Performance management involves thinking through various facets of performance, identifying critical dimensions of performance, planning, reviewing and developing and enhancing performance and related competencies.’

According to Manuel Mendonca and R. N. Kanungo: ‘Performance management refers to the process of setting and communicating performance targets, defining evaluative criteria to be employed at different levels of performance, monitoring performance, reviewing performance, providing feedback and taking corrective measures to remove performance snags.’

According to Ronnie Malcom: ‘Performance management may be defined as a planned and systematic approach to managing the performance of individuals ensuring their personal development and contributing towards organisational goals.’

According to John Storey: ‘Performance management includes the whole cycle of agreeing goals and objectives (which may vary in their degree of specificity), providing feedback, offering coaching and advice and motivating staff to perform at a high level.’


  • To identify systematically the need and requirements of some learning and training aspects;
  • To promote better and high work culture in the organisation;
  • To focus more on systems approach to perform appraisals rather than to make any formalities;
  • To foster a positive relationship between managers and employees through a two-way communication process;
  • To appreciate, recognise and to give reward and compensate employees for achievement of performance objectives successfully in a more objective, transparent and justified way.
  • To emphasise on career planning and future growth opportunities for employees;
  • It is ensuring to raise the efficiency and productivity of employees;
  • To encourage belongingness, team spirit and devotions among employees with the job;
  • To provide feedback about HR planning and potentialities to implement the planning facts.


Performance Management in Self-Managed Teams:

Performance management in self-managed work team is managed by the team itself. This empowerment varies from organization to organization, or even from department to department, and also depends upon the readiness of the team members to assume those responsibilities.

A fully empowered mature self-managed team would decide their own jobs, set performance standards, give feedback to members about work progress, performance and team skills, appraise their own performance, and identify and support the training and development needs of the members. The organization, particularly the HR department, in this set up will provide guidelines and a framework for that performance management in terms of organizational policies and compliance regulations.

Traditional Performance Management:

Performance management in natural work groups usually operates according to the traditional performance management model in which the focus is on the work performance of an individual and his or her contributions to the mission of the organization, as observed and assessed by the evaluating manager.

While the evaluating manager may solicit the input and involvement of the employee in each step in the process, authority and ultimate responsibility remains with the HR manager or the HR head of the organization.

Performance Management in Cross Functional Teams:

A cross-functional team typically operates without formal supervision, though it may have a team leader. Members usually report to evaluating managers in their concerned departments.

These managers are often not present or be aware of what and when the team members are participating in the work of the team and may only know about the results of the team’s work and the team member’s performance through the reports of others, evidence of the team’s products, or via customer feedback. Hence performance evaluation in this case definitely is a complexes process.


Business Culture:

At the national level, culture affects performance management through sociopolitical traditions and attitudes which determine whether performance assessment is acceptable, and to what degree. Cultural norms dictate ‘acceptable’ standards of performance and the management methods by which they are assured.


In today’s globalized economy, the employment relationship between workers and employing organizations is seen as a contractual matter. This relationship is expressed in formal or legalistic statements of obligation between the two, such as written employment contracts, job descriptions and performance objectives.

Employers taking HR and administrative decisions on the basis of performance assessment have to be mindful of possible legal action on the following grounds:

  1. Validity or accuracy of assessment ratings as predictors of future performance and promotion potential.
  2. Validity or accuracy of ratings as measures of past behaviour.
  3. Statutory norms laid down by the Government and Government authorities.

General Economic Conditions:

Prevailing attitudes towards employees and, in turn, their response to performance assessment are considerably affected by issues such as unemployment and economic conditions of the nation. Growth and shrinkage in the job market which are influenced by changes in the economic scenario of a nation is conventionally believed to be followed by changes in the behaviour of workers and employers.

At times of high unemployment, workers are thought to be concerned about losing their jobs and hence more conscientious and tolerant of strict management. When suitable employees are scarce, managers must be cautious  unflattering assessments can trigger an employee’s move to another organization leading to high attrition.

Industry Sector:

Methods of performance management vary considerably between different industrial sectors, partly as a matter of the nature of the work involved, tradition and fashion. Sales and service dominated industries, such as retail business and financial services, tend to have clear individual or team objectives which can be translated readily into performance targets.

Performance-related pay (PRP) is common in this sector. In other sectors like manufacturing sector performance objectives are more diffuse and difficult to measure so that PRP is not easily justified.

Technological Change:

Technological change, particularly changes in information technology has a dramatic effect on the nature of supervision, and hence performance assessment. Work can be done at a distance by traveling executives, overseas affiliates or telecommuters working from home. This raises intriguing issues for performance management.

Further, technology has the capability to provide extensive information and statistics regarding an individual’s performance that is being recorded on a real time basis into the information system. This information not only provides a meaningful measure of job performance but also provides a clear cut picture on the areas of performance improvement and skill development.

Flexibility and Diversification:

In the new business environment, the traditional nature of the employment relationship has considerably changed, moving the balance of power firmly in favour of employers. Organizations in today’s highly competitive era have seen job descriptions have disappeared or, at least, have been diluted, so that employees can be asked to do virtually anything required by the organization.

Conversely, performance criteria have been more tightly defined, typically expressed in the form of demanding objectives; forever-moving goalposts. Performance assessment has become the crucial means of monitoring this relationship.

Employee Relations:

Performance management is a means of enhancing managerial control, particularly through individual performance-related pay schemes. Individualization of pay (performance based pay systems) diminishes or neutralizes the role of collective bargaining. The purpose and influence of trade unions is thereby getting day by day diluted, reducing both their effectiveness and attractiveness as an alternative focus for employee involvement.

Workforce Composition:

One important function of performance assessment is the identification of individual strengths and weaknesses of the employees. Strengths may indicate a potential star performer, worthy of a management career route and promotion. Assessment employed to determine development needs ultimately serves to increase a nation’s human capital. This helps the organization to identify and streamline the composition of their workforce with people who are the most competent in terms of their talents and abilities.