Performance management systems are a tool used by companies in developing and training their employees. Information about company positions, goals and compensation are disclosed to individuals so they understand the importance to company operations. Companies also give employees the framework for achieving bonuses and pay increases from performance reviews.
Definition
A performance management system is a predetermined set of guidelines for individuals employed by a company. The system is used to describe the current position to the employee and lay out the expectations of company management for the employee. Describing in detail the required duties for a position also allows management to set rewards and bonuses for the position so the company gains the maximum potential of the employee. It also helps the employee to understand his responsibilities toward the company.
Job Description
A detailed job description is an important part of the system. It outlines the daily tasks an employee is expected to accomplish and to whom the employee reports. Other tasks and duties, perhaps monthly or quarterly, are listed as well. Additionally, legal requirements must be disclosed to the employee so he understands the physical and mental requirements of the position. Any special tasks are usually listed as ad hoc projects.
Employee Goals
Along with the employee job description, a set of goals is listed for each position in the company. Each set of goals is specific to the employment level--managers, supervisors, full-time and part-time positions. These goals help increase the productivity of the employee's department or improve the financial returns on goods or services. Some goals may carry a financial bonus or reward for the employee who helps accomplish each goal in the best way possible.
Employee Evaluation
Most companies review their employees on a quarterly or annual basis. The purpose of this evaluation is to ensure the employee is advancing in the requirements of his position and show the employee where improvements are needed. Some evaluations also show the employee how well he is meeting the requirements for bonuses or pay increases. Most pay increases are reviewed annually.
Compensation Rewards
Disclosing compensation rewards to an employee along with the job description encourages the employee to work as hard as possible in his position. Bonuses, merit pay and salary increases are outlined for the position, along with the requirements to achieve each goal. Some bonuses may be calculated toward the end of each year based on a department or company-wide performance.
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