How to Develop a Performance Management System

Did you know that Challenge Consulting can provide a half-day workshop is designed for team leaders, supervisors and new managers who would like to learn or enhance the skills required to manage performance effectively? Learn more about performance management and its objectives, the management tools to make up an effective performance management system and more. To find out more about the Managing Employee Performance Workshop, click here. 

Performance management involves more than simply providing an annual review for each employee. It is about working together with that employee to identify strengths and weaknesses in their performance and how to help them be a more productive and effective worker. Learn how to develop a performance management system so that you can help everyone in your organisation work to their full potential.

1. Evaluate your current performance appraisal process. Look at what type of feedback you are providing to your employees. Determine if there is anything you need to change or add to the evaluation itself. You may decide to build on what you already have or to develop a new system altogether.

2. Identify organisational goals. Performance management systems help rally staff members around your organisation’s goals because they help staff know how they are to be involved in reaching that goal. Take the time to clarify what your goals are for the next year as a company.
– Identify processes or procedures that could be simplified or done more effectively.
– Declare your sales goals for the next year or new products you would like to develop.
– Share your hope for better communication between departments and staff members.
3. Set performance expectations. As you sit down with each employee, clearly lay out your expectations for them.
– Acknowledge what they are already doing well. Use this to encourage them.

– Share some weaknesses that you have observed in them and in their work habits, and how overcoming those would help their performance in the company.

– Identify specific things you would like them to accomplish over the next year, or whatever time frame works best for you. Prioritise these so the staff member knows which is most important and make sure to give them a deadline for each task.

4. Monitor and develop their performance throughout the year. As employees begin to work on their performance, keep an eye on how they are doing. If they appear to be struggling to meet performance expectations, talk with them and see if you can offer any support or coaching.

5. Evaluate their performance. At each performance review, let the employee know how they are doing. It is often helpful to assign a numeric value on a scale, rating the employee from “not meeting expectations” to “meets expectations” to “exceeds expectations.”

– Provide feedback on their performance. Be as specific as possible, noting key examples of when they demonstrated a certain quality.

– Talk about the consequences or rewards of their performance. Let them know if they are on probation, are getting a raise in pay, changes in vacation days, or any other relevant action.

– Discuss any problems they may be having. Listen to their concerns or worries as you talk through potential solutions.

6. Set new performance expectations for the next year. Some items may be the same. However, since these are also based on organisational goals, you will need to re-examine your goals for the upcoming year.


– Reward and celebrate often. If a team exceeds expectations in meeting a specific deadline, take them out to lunch. If an individual is regularly staying late to make sure things get completed, find a way to thank them for their effort.

– Put your performance plans in writing. This provides a record that both the organisation and the employee can return to. It also verifies that both parties saw and agreed to the plan (via their signatures).

– Tell your employees about the new performance management system. Explain why this change needed to take place and how it will help them as a staff member and the organisation as a whole.