why performance management is Essential for HRM

 What is Performance Management

Performance management is a continuous, systematic process used by organizations to ensure that employees’ work aligns with business goals and that they perform effectively. It focuses on planning, monitoring, developing, and evaluating employee performance to improve individual and organizational outcomes.

                                       

Key Components of Performance Management

1. Goal Setting

   • Establishing clear, measurable, and achievable objectives (often using SMART goals).

2. Ongoing Feedback & Communication

   • Regular discussions between managers and employees to track progress, offer guidance, and adjust goals when needed.

3. Performance Appraisal

   • A formal review (monthly, quarterly, or annually) to evaluate achievements, strengths, and improvement areas.

4. Employee Development

   • Providing training, coaching, and learning opportunities to build skills and support career growth.

5. Recognition & Rewards

   • Acknowledging good performance through promotions, bonuses, incentives, or non-financial rewards.

6. Performance Improvement Plans (if needed)

   • Structured support for employees who may be struggling to meet expectations.

Why Performance Management Is Important in Sri lankan company

The Journey to Better Performance at CrystalTech Solutions

CrystalTech Solutions, a mid-sized IT company in Sri Lanka, was struggling with declining productivity and unclear employee expectations. The management realized that their traditional annual appraisal system was no longer effective. Employees felt anxious during evaluations, and managers found it difficult to give meaningful feedback.

One morning, the HR Manager, Nadeesha, presented a new idea at the leadership meeting.

“According to Armstrong (2014), performance management should be a continuous process—not just an annual event,” she explained. “If we shift to a system with regular feedback and clear goal-setting, we can improve both motivation and performance.”

The CEO agreed, and Nadeesha was given the responsibility to redesign the system.

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Implementing the New System

Nadeesha started by training managers on setting SMART goals, inspired by Aguinis’ (2019) emphasis on measurable and aligned objectives. Each employee began the year with clear expectations that directly supported CrystalTech’s strategic goals.

She also introduced monthly check-ins. Managers learned to coach employees rather than merely evaluate them. This idea was influenced by Pulakos (2009), who argued that ongoing communication drives better business results.

At first, the employees were skeptical. They were used to evaluations only once a year. But after a few months, things changed.

Kasun, a young software engineer, later shared:

“Before, I didn’t know if I was meeting expectations. Now my manager guides me every month. I feel more confident and motivated.”

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The Turning Point

Six months into the new system, the company conducted a performance review workshop. Nadeesha shared research from DeNisi & Murphy (2017), highlighting that performance management systems evolve over time and must focus on fairness and development, not punishment.

The managers realized that the new approach wasn’t only about evaluating employees—it was about growth, learning, and aligning work with organizational success.

With support from Dessler’s (2020) principles on linking performance to rewards, the company introduced a fair recognition program. High performers were celebrated, while those struggling received structured improvement plans tailored to their needs.

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The Outcome

By the end of the year, CrystalTech Solutions saw remarkable improvements:

• Productivity increased

• Employee engagement scores rose

• Turnover decreased

• Team collaboration improved

Nadeesha proudly presented the results to the CEO.

“This is exactly what Armstrong described,” she said. “Performance management isn’t a form—it’s a culture.”

The company realized that treating performance management as a continuous journey—not a once-a-year task—helped both employees and the organization grow together.

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References

Armstrong, M. (2014). Armstrong’s Handbook of Performance Management: An Evidence-Based Guide to Delivering High Performance. Kogan Page.
Aguinis, 2019). Performance Management (4th ed.). Chicago Business Press.

Pulakos, E. D. (2009). Performance Management: A New Approach for Driving Business Results. Wiley-Blackwell.
Dessler, G. (2020). Human Resource Management (15th ed.). Pearson.
DeNisi, A., & Murphy, K. R. (2017). “Performance Appraisal and Performance Management: 100 Years of Progress?” Journal of Applied Psychology, 102(3), 421–433.

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