Employee performance management: benefits and strategies

Picture a workplace where excellence is consistently recognized and rewarded, employees stay and grow long-term, and everyone is empowered to perform at their best.

Companies can build better work environments with employee performance management (EPM)—a strategic approach that encourages growth, closes performance gaps and boosts communication between teams.

In this guide, we’ll cover the EPM basics and share key practices for improving employee performance across your organization.

Employee performance management is the process by which managers, leadership, and organizations monitor and improve employees’ performance and productivity.

Key elements of performance management include:

Your EPM strategy should contribute to a motivated and collaborative workforce, strengthen communication channels, and support overall business goals. With a solid EPM program, company leadership and human resources (HR) professionals will be able to contribute meaningfully to employee development by providing clarity, direction, and engagement.

Ultimately, effective performance management drives both employee success and organizational growth.

An employee performance management system is a set of responsibilities and practices that facilitate continuous feedback, goal tracking, and rewards within an organization.

For example, a global retail company’s EPM system may include adjustable goals, frequent check-ins, and structured feedback across all departments.

Performance management software is a common element of EPM systems. You can use these tools to track and analyze employee performance, streamline data collection, and boost communication during performance evaluations.

Employee performance and feedback are the best indicators of an EPM system’s success. Collecting feedback with employee feedback surveys or regular feedback sessions gives system architects a bird’s-eye view of the system’s impact and can help close performance gaps.

Iterative work engagement or employee engagement surveys can also highlight issues before they snowball, further strengthening employee experience.

Performance management systems are crucial in establishing clear expectations for managers and employees. These programs enable organizations to align employee goals with broader business objectives, improving performance and productivity.

Performance management data can also provide valuable insights that help identify underperforming teams, outdated processes, and communication gaps between managers and their teams.

A well-designed performance management system ensures that leadership and employees work toward a shared vision. When employees focus on the same goals, morale and sales increase.

Constructive employee feedback on performance systems also allows companies to refine their engagement strategies and reach more employees.

Engaged employees are high-performing employees. According to Gallup research, businesses prioritizing engagement see a 23% boost in profitability and an 18% increase in productivity.

Continuous feedback and recognition systems encourage a positive workplace where employees feel valued and connected to their work, leading to lower turnover rates, better employee engagement and increased job satisfaction.

Regular performance feedback also allows employees to suggest improvements to team workflows and company culture.

Managing employee performance involves setting clear standards and creating a supportive framework that encourages employee development. Your EPM system can help each department allocate its resources effectively, keeping company objectives in mind.

A performance management system also helps employees understand how their efforts contribute to broader company goals. When employees understand their direct impact on the company’s success, they feel a sense of ownership and responsibility.

Measuring employee performance can help you identify and close skill gaps by providing relevant employee training and development opportunities. Employees will integrate their new skills and improvements into their daily roles, encouraging innovation and adaptability in each department.

An effective performance management system supports adaptability in critical times, ensuring businesses can pivot quickly when market conditions shift.

Building resilience into a company’s structure and processes helps leadership identify and prepare for potential risks and address operational inefficiencies quickly, leading to more informed decision-making.

Employee engagement and performance management have a symbiotic relationship. Effective performance management enhances engagement, and engaged employees contribute to better performance.

Poor engagement practices and performance management systems can harm each other. It’s important to seek employee feedback on your EPM system early and often to avoid issues. Continuous employee feedback:

The employee performance management process follows four steps: planning, monitoring, developing, and reviewing/rewarding. Let’s explore each stage.

Gallup research notes that only “about 50% of employees believe they know what is expected of them at work.” Setting clear objectives can help your employees understand how their roles contribute to the company's success.

The planning (or goal-setting) stage is where employees, leadership, and management set clear performance expectations. With leadership or HR's guidance, employees use a popular goal-setting method of the company’s choice (e.g., OKR, SMART, etc.) to set their quarterly or yearly goals.

Performance management programs establish clear expectations for both managers and employees. Ultimately, each employee's goals should support the company's business objectives and encourage your workforce to improve or develop their skills.

The seven-step planning process recommended by the U.S. Office of Personnel Management suggests that organizations:

Once performance goals are set, you'll use the monitoring phase to track performance progress.

In the monitoring stage, your EPM system will help you collect ongoing progress updates and assess whether your workforce is on track to meet the goals you set in the planning stage.

When building your EPM system, choose the performance monitoring methods that work best with your company's size and budget. Your EPM system may include:

Use the feedback and data you collect to identify performance gaps, evaluate current workflows and processes, and track employee development.

This stage addresses and closes gaps identified in the monitoring stage with training, mentorship, and developmental assignments. As goals progress, it’s common to switch between the monitoring and development stages.

Performance reviews are a great time to address performance gaps and create development plans. For example, during a yearly performance review, employees suggest development areas that align with their career goals with their manager. Together, the employee, management, and HR can develop a growth plan, gather resources, and schedule regular follow ups to track the employee's progress.

Harvard Business School found that positive feedback from key stakeholders at the right time and for the right reasons can significantly affect employee morale. As you refine your EPM system, opportunities for rewards and recognition will follow naturally.

Be sure to reward and celebrate exceptional performance regularly. If possible, offer a mix of monetary (e.g., bonuses) and physical (e.g., a better office, new equipment, a lunch out, etc.) rewards. Employee recognition can also supplement the reward process with ongoing feedback.

Use employee feedback to build the best recognition or reward programs for your team. Surveys, interviews, and suggestion boxes can help you better how to motivate and engage your employees better.

Train your managers and leadership on how to support your EPM system. Supplemental organization-wide and employee-specific training opportunities help your leadership and HR teams understand the benefits of employee performance management and align with employee performance goals.

To build a training program:

Enterprise-level performance management provides a strategic framework that aligns employee goals and contributions with a company’s broader objectives.

Enterprise performance management requires true feedback integration, advanced analytics, and standardized processes. It involves:

With an enterprise, effective performance management processes should be customizable, compliant with legal standards, and beneficial to employees at all levels of employment.

Companies should integrate enterprise solutions with platforms such as email, management performance software, and survey systems to collect feedback at scale.

Effective employee performance management relies on tracking key metrics that provide insights into productivity, goal achievement, and contributions:

Tailoring your EPM system to meet specific organizational needs and goals is crucial for effective results. Use performance management survey templates to collect ongoing feedback on the system and make continuous updates.

A well-structured performance management program can drive growth and development by providing continuous feedback and employee recognition. Use your EPM system to empower employees and create a dynamic culture that supports your employees and leadership.

Leverage SurveyMonkey employee feedback surveys to collect employee feedback on your EPM system. Get started today.