What Are the Benefits of a Performance Management System?
There is no law that requires employers to conduct performance reviews. However, there are very solid business reasons for conducting them, including:
- Performance reviews help document salary actions.
- They provide feedback to employees on their performance.
- Performance reviews help identify “good” and “bad” performers.
- They help document personnel decisions, such as promotions and discipline.
- They assist management in making a decision to retain or terminate.
- Performance reviews help identify training needs.
- They assist with personnel planning including staffing.
In most cases, the benefits of a performance management system will include:
The selection of employees for promotion, transfer, or other action should be more consistent. The right person — or a right person — should be matched with the right job more often.
All the organization’s employees (as well as supervisors and managers) should be more highly motivated. Objective performance appraisal will identify those who are outstanding, and management — applying promotion, transfer, and other policies — will reward them. Every employee will realize that the organization rewards achievement, and many will be encouraged to improve their performance.
3. Morale and retention.
More highly motivated employees are likely to be more loyal, as well, so that management will have better success retaining valuable employees even as the nation’s workforce becomes more mobile. In addition, morale should improve, making the workplace more pleasant, and output per hour worked should increase, cutting labor costs.
4. Organizational impacts.
Those who do research on human behavior stress that individual employees will grow in maturity and responsibility if their efforts are accurately judged and rewarded. The organization should see daily benefits — including financial — from having more responsible people throughout. The employer with an accurate evaluation system may truly have a basis for saying that he has better employees than others in his field.
5. Training needs.
While accurate evaluation is most often recommended for its role in making “good employees better,” it has a valuable remedial use as well. Evaluation can spot employees who need training — and not all of them will be recent hires. It is usually assumed that when an employee has completed the normal training sequence, he or she is trained. But that is not always the case.
6. Firing risks.
Finally, employees who are sufficiently weak that they should be dismissed can be spotted with more certainty under an evaluation system. Perhaps more important, management may be more willing to dismiss an inadequate employee if an objective evaluation system can be pointed to as identifying the inadequacy. The employee and the organization should benefit from an early end to a bad situation.
Reposted with permission from Wolters Kluwer.
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