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Performance Management Systems

Lalwani (2020) defines performance management as regular communication and feedback between managers and employees to achieve company goals. Many firms utilize annual evaluations to manage employee performance. These discussions between the management and employee might include performance, goals, career pathways, problems, and development space. These systems use metrics to measure everything. Participants can present and receive comments to resolve concerns before the next meeting.

Importance of performance management systems

Organizations rely heavily on performance management systems that facilitate two-way communication between workers and upper management. Additionally, Lotich (2014) emphasized the significance of performance management systems by noting that they demonstrate to employees that their supervisors are concerned about their work, goals, and any problems they may have. The improved lines of communication that result from this assistance make it easier for employees and managers to take criticism in a positive light. A performance management system’s value lies in providing employees with hope for future advancement in terms of salary and status (Lotich, 2014).

Considerations for Choosing the Best System

Performance management depends on several factors. Choosing a system takes time. If the company has many employees and the manager wishes to evaluate each one, management should allow enough time (Lotich, 2014). By not providing employees fair chances, managers risk alienating them. The manager should ensure the performance management method fits their and other employees’ schedules. Management must maintain platform homogeneity. Always utilize the system’s measured value.

Ratings and outcomes vary dependent on employees’ personal beliefs and opinions. If an employee or manager commits a mistake, consistency will be interrupted. Management needs grading training to avoid disparities (Lotich, 2014). Ensuring homogeneity can avoid errors like employees receiving negative and positive comments. Legal issues must be considered while adopting a performance management system. Employers “should take all required protections, depending on counsel, to ensure that their performance management systems do not violate EEOC statutes and regulations” (Managing Employee Performance, 2019). Companies discuss HR and legal before deploying a new performance management system to avoid discrimination and other legal issues. Managers must learn the new system to prevent bias.

Benefits/Drawbacks of Performance Management Systems

  1. Annual performance appraisal

The annual performance review is when performance management system research begins. Annually, management and employees meet to discuss the previous year’s successes concerning specified goals.

The system’s key benefit is hearing employees’ thoughts on company matters. According to Lotich (2014), performance evaluation data can be utilized to hire the best candidates, enhance current workers’ abilities through coaching and mentoring, and maintain productivity through fair remuneration for hard work. Performance reviews may motivate and engage employees. Employees will work harder if they know their performance is being tracked and may be rewarded with promotions and salary raises (Lotich, 2014). Recognition boosts employees’ self-esteem.

This performance evaluation approach has drawbacks as well. The “spillover effect” occurs when management uses a prior year’s positive review to justify a high grade this year (Lotich, 2014). Negative worker feedback can drive supervisors to be more generous with positive ratings. To keep the peace, they offer employees higher ratings than they deserve (. Individual prejudice may also hinder performance management. An envious or fearful manager may negatively evaluate an employee (Lotich, 2014).

  1. 360-degree feedback

Next, we will study the 360-degree feedback system. Managers, clients, peers, and subordinates provide employee performance feedback (Peng & Zeng, 2016). 360-degree feedback provides a more thorough assessment. When feedback comes from various sources, the assessment is more likely to be accurate and pick up recurring themes and patterns (Peng & Zeng, 2016). Staff members are more likely to assume it is accurate if it comes from trusted colleagues. The strategy also promotes worker cooperation. Workers whose performance evaluations depend on others are more prone to put up an excellent front (Peng & Zeng, 2016). Some people may be picked out and ostracized by 360-degree feedback. If coworkers dislike an employee for nonwork-related reasons, it may affect performance (Peng & Zeng, 2016). This system may also cause worker anxiety. Poor reviews could hurt morale due to the emphasis on team input (Peng & Zeng, 2016). A worker who has gotten bad feedback from coworkers may become unpleasant. Office politics can create dishonest appraisals. No one may offer constructive criticism in a small group for fear of retaliation. If a team member is disliked, the others may offer constructive criticism (Peng & Zeng, 2016). Time is another issue because receiving feedback from multiple sources can take longer than intended.

  1. Management by the objective system

This essay examines management by objectives as our final performance management option. Managers and employees define goals for a specific evaluation period and check in occasionally to examine progress. This is “objective management” (Verboncu & Cochina, 2020). The system’s key advantage is that goals may be discussed periodically. If meetings were quarterly, employees’ performance during the quarter would be examined (Verboncu & Cochina, 2020). Those who do well may obtain increases or promotions, while those who do not may get more support or be moved to a different team. The ongoing flow of information about goals also allows management to aid those who still need to meet them by offering extra training for the next quarter.

Objective management needs top-down endorsement and institutionalization. Management must ingrain the importance of evaluations in the firm’s culture to minimize negative repercussions, such as a fall in employee self-worth if an evaluation is missed. This method values production, not innovation (Verboncu & Cochina, 2020). Since employee performance may have been affected by outside variables, evaluating unmeasured goals may take time and effort.

Organizations to Benefit

Any company would benefit from yearly performance reviews. Open lines of communication should be maintained throughout the year, but staff should also meet with their supervisors to discuss last year’s performance. Managers should utilize this chance to demonstrate to staff where they stand in attendance, teamwork, sales, and more. This allows workers to tell their bosses what is working and what needs improvement. Businesses would profit from more outstanding production and morale. Businesses can monitor employees who are not performing well and reward those who are. Organizations that emphasize teamwork and collaboration to achieve goals should use 360-degree feedback. 360-feedback performance management is effective for medical practices, open office spaces, healthcare facilities, food service organizations, and cooperatively designed businesses (Lotich, 2014). Since people in these fields communicate and help each other, feedback would be beneficial. Hearing from team members and coworkers would help and encourage improvement. These businesses rely primarily on client pleasure. Therefore it is important to hear directly from them about any complaints. Every organization, big or small, may benefit from objective performance measurements. Because of the system’s design is excellent for measuring upper-level management’s efficiency and effectiveness. This would benefit any organization by improving staff-to-management communication. Employees and management develop goals for the forthcoming appraisal period and check in to ensure expectations are reached. Keeping the lines of communication open between employees and managers is vital to any business’s success.


Organizations can only function with performance management systems, which keep the lines of communication open and increase morale. In order to help employees develop professionally through feedback and goal-setting, organizations need performance management systems to facilitate two-way communication between workers and supervisors. Selecting a performance management system requires consideration of the resources required, the reliability of the system, and the potential for legal complications. Annual performance reviews, 360-degree feedback, and goal-oriented management were the three systems to implement. Finally, annual performance reviews and management by objections are helpful in any organization. At the same time, 360-degree feedback is most effective in service industries (like restaurants and hospitals), where employees work closely with customers and coworkers and are, therefore, in a position to provide valuable insights.


Lotich, P. (2014). Advantages and disadvantages of performance appraisals. Retrieved February19, 2017.

McConnell, C. R. (2004). Managing employee performance. The health care manager23(3), 273-283.

Peng, A. C., & Zeng, W. (2017). Workplace ostracism and deviant and helping behaviors: The moderating role of 360 degree feedback. Journal of Organizational Behavior38(6), 833-855.

Ram Sing, R. D., & Vadivelu, S. (2019). An Observation on Employee Performance Appraisal System in Hospitals and their Clinical Sectors. Indian Journal of Public Health Research & Development10(11).

Verboncu, I., & Cochină, I. (2017). Reflections on some complex management methods: Management by objectives and management based on profit centres. Revista De Management Comparat International18(5), 491-502.


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