13 Practical Performance Management Strategies To Implement (In 2025)
Only 2% of Fortune 500 CHROs think their organizations’ performance management strategies are effective. The problem is obvious: business success relies on employee performance, but without a good performance management strategy, companies struggle to remain competitive.
Performance management strategies are crucial for driving results. Yet, companies often overlook them and don’t allocate sufficient resources to their development.
Gallup and SHRM found that under 20% of employees find their performance reviews inspiring, and 95% of managers are dissatisfied with their organizations’ review systems. However, 60% of companies with effective performance management systems report outperforming their peers.
It’s clear that performance management is effective. Let’s unpack what performance management is, why it matters, and what effective performance management strategies you can implement in your organization today.
Contents
What is performance management?
What are performance management strategies?
Why are performance management strategies important?
13 examples of effective performance strategies
7 steps to develop an effective performance management strategy
Best practices for developing a performance management strategy
What is performance management?
The performance management process aims to facilitate an open conversation between HR, managers, and employees. Discussions on job responsibilities, expectations, performance, and goals help to clarify where an employee currently is, how they hope to grow, and how they can align their development with business objectives.
Traditionally, performance management took place once a year, typically through a formal meeting between the employee and their manager. Today, most organizations use a mix of formal and informal strategies throughout the year to provide continuous feedback.
In fact, internationally renowned organizations like Adobe, Deloitte, General Electric, and Microsoft have eliminated the traditional performance appraisal process entirely.
What are the 4 stages of performance management?
There are four key stages of performance management:
- Planning: This stage involves setting performance expectations and goals and defining individual success metrics.
- Monitoring: HR and managers track employee performance in relation to the goals set and provide regular feedback.
- Developing and reviewing: At this stage, HR and managers analyze performance data to help employees correct underperformance. Employees performing exceptionally well may be assigned extra projects so they can excel further.
- Rating and rewards: HR and managers regularly track and rate employee performance. Continually underperforming employees could face dismissal while the organization recognizes and rewards top performers.
What are performance management strategies?
A performance management strategy is a systematic procedure organizations use to ensure they meet business objectives. Strategies for performance management primarily focus on the teams and departments (people) within the organization.
Performance management methods typically include goal-setting, continuous feedback, employee development, and performance evaluation. For instance, setting SMART goals helps employees understand their expectations and how their work contributes to organizational goals and motivates them to achieve these goals.
Managers then meet with employees regularly to discuss performance and goals, providing real-time feedback and ensuring accountability. This helps resolve issues before they escalate, improve relationships and communication among HR, managers, and employees, and create a culture of growth that helps employees maximize their potential.
Employers may also provide training and coaching to help develop employees’ skills and knowledge so they can meet their goals and advance in their careers. Managers then evaluate employees’ behavior, effort, and results to celebrate their successes, identify their strengths and weaknesses, and help them progress further.
Enhance your skills with AIHR’s Performance Management Course
Identifying the right performance management process and successfully setting it up in your organization can seem daunting, particularly when it comes to managing stakeholders and ensuring the success of your process.
AIHR’s self-paced Performance Management Online Course helps you to select and set up an effective performance management process and teaches you how to help managers successfully manage employee performance.
Why are performance management strategies important?
Strategic performance management is crucial for organizational success for many reasons. The main benefits of effective performance management include:
- Enhanced employee engagement, motivation, and morale: Performance management helps employees understand their role and importance in organizational success, which can lead to higher motivation and engagement.
- Improved organizational performance: When each individual works towards goals aligned with broader business objectives of the business, the organization’s overall performance improves.
- Greater career development opportunities: Regular check-ins and feedback help employees understand their strengths and weaknesses, undertake training to improve their knowledge and skills, and advance in their careers within the organization.
- Enhanced talent retention: Employees who are more engaged and motivated at work are more likely to remain with the organization.
- Comprehensive data for informed decision-making: Performance management strategies collect quantitative and qualitative data to track employee performance, allowing HR to make evidence-based decisions on training, mentoring, and career progression.
- Greater readiness for succession planning: Regularly monitoring performance gives companies a better understanding of skills gaps. They can then train employees for promotions sooner rather than later to minimize business disruptions.
13 examples of performance management strategies
Let’s explore some popular performance management strategies examples to help guide you in developing your own strategy for your organization.
1. Set SMART goals
SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals can facilitate clear communication with employees, clarify expectations and responsibilities, and ensure goals are realistic and achievable.
They also offer clear criteria for assessing performance, establish clear deadlines, and encourage timely task completion. This boosts employee motivation and engagement and creates a culture of continuous improvement.
2. Ensure continuous feedback and check-ins
Maintaining regular open communication with employees and offering constructive feedback can help address problems quickly and drive growth and progression.
You don’t have to schedule formal one-on-ones, however. Informal chats while on the job can help guide employees on what they’re doing well and what they should improve in their day-to-day work.
Remind managers to maintain a consistent two-way dialogue with their team. This way, employees can feel comfortable asking questions, and managers can deliver effective feedback that supports employees’ professional development.
3. Create personalized employee development plans
Personalized employee development plans recognize that each employee has unique training and development needs. Such plans allow HR and managers to connect with employees personally and shape their professional development more efficiently.
This shows employees the organization is invested in their growth and fosters a stronger employee-employer relationship, increasing employee morale and motivation.
4. Implement 360-degree feedback
360-degree feedback involves collecting feedback from an employee’s manager, supervisor, relevant stakeholders, colleagues, and any employees they manage. You can distribute an online form to respondents so they can provide feedback easily.
This will help you and the managers you work with gain a more holistic, detailed overview of an employee’s performance instead of relying on only one person’s perspective.
5. Conduct performance appraisals
Performance appraisals rely on predetermined evaluation criteria to assess each employee’s performance over a specific period (usually six months to a year). Use specific examples of performance to highlight employees’ achievements and areas for improvement.
Employees should feel comfortable speaking openly and honestly with their manager during these appraisals. HR should also coach managers to actively listen to employees’ input. Objective, unbiased performance appraisals can further employee development.
6. Introduce recognition and reward programs
Recognizing and rewarding outstanding work is an integral part of performance management. Whether they receive monetary or non-monetary rewards, showing employees you value their efforts serves as crucial positive reinforcement.
This can boost employee motivation, performance, and retention. Don’t wait until an official performance appraisal to do this — rewarding hard work promptly is much more effective in making employees feel valued.
7. Use performance management software
Performance management software can help automate the more tedious aspects of performance management. These include updating performance review sheets, tracking performance metrics, and prompting managers to set up meetings with employees.
The right software can reduce manual, repetitive tasks and free up time to focus on other, more people-driven or strategic tasks.
8. Establish competency-based management
Competency-based management measures performance based on specific competencies, which vary between roles. It breaks up each competency into a series of relevant behaviors, which it then uses to assess the employee.
For example, the core competency “collaborates well with team” would be supported by behaviors like contributing significantly to team projects, actively listening to others’ ideas, and helping colleagues achieve shared goals.
9. Clearly define OKRs (objectives and key results)
OKRs involve the measuring of company and employee objectives through a specific set of desired results (quantitative metrics).
For example, an HR objective could be to reduce employee turnover from 15% to 5% by the end of Q4. Some key results in this case could be developing a personalized development plan for every employee and setting up a system for regular one-on-ones between managers and employees.
OKRs provide clarity and focus, turn strategic goals into plans, ensure alignment across the organization, and provide quantifiable results that make it easier to track progress.
10. Balanced scorecard
A balanced scorecard measures performance from financial, customer, internal business, and learning perspectives — which are all linked. This tool tracks the performance of different business aspects of the business, such as product/service quality, customer satisfaction, and sales numbers.
Balanced scorecards give employees a clear vision of organizational goals to improve alignment. Since a scorecard focuses on identifying the root causes of existing problems (as opposed to a single metric), improvements in specific performance areas don’t come at the expense of others.
11. Employee engagement surveys
Employee engagement surveys aim to measure engagement across the business by having employees complete anonymous questionnaires. These surveys help you better understand how your employees think, feel, and behave in the workplace.
They also facilitate feedback employees may be hesitant to share directly with managers for fear of negative repercussions. Additionally, they help employees feel heard — just remember to act on survey data to show employees their opinions truly matter.
12. Mentorship and coaching programs
Mentoring can help employees develop the skills and behaviors they need to thrive at work. Mentoring and coaching help foster a culture of continuous improvement, build skills and competencies that heighten productivity and innovation, and increase engagement and trust among the workforce.
13. Talent reviews and succession planning
Succession planning helps you anticipate talent gaps, identify high-potential employees who can excel in leadership roles, and deploy strategic training and development to nurture future leaders.
This aids career progression and strengthens your talent pipeline. By regularly tracking employee performance and investing in their development, organizations can boost retention and ensure they have the personnel they need to meet goals and maintain a competitive edge.
Performance management techniques for HR professionals
- Behavioral observation scales (BOS): These help measure the behaviors you want employees to cultivate on a rating scale.
- Management by objectives (MBO): Managers detail the requirements of a specific role, determine how these align with organizational goals, then set achievable goals for the employee. HR then collects data to measure progress and provide employees with feedback.
- Critical incident technique: Managers observe and report critical incidents (behaviors related to outstanding or substandard performance), then give employees feedback so they know what to do and what not to do at work.
- Assessment centers: Typically lasting between half a day to a whole day, assessment centers require employees to complete a range of exercises in order to test skills other performance management methods cannot.
7 steps to develop an effective performance management strategy
Here are some simple steps you can follow to implement strategic performance management in your organization.
Step 1: Assess organizational needs and goals
First, determine your organization’s unique needs and priorities. What do you want to achieve? What are the most pressing issues in the business right now? Doing this will help inform the direction and design of your performance management strategy.
Step 2: Engage stakeholders
Make a list of the key stakeholders you would need buy-in from and set up meetings to communicate your plan. Explain to stakeholders why the strategy is important and what the benefits of implementation will be for the organization. Also, discuss what roles they will play in the rollout and implementation.
Step 3: Define clear objectives and KPIs
Remember to set KPIs (key performance indicators) for the improvements you want to make. Clear objectives and KPIs will help you measure your success so you can see what’s working and what’s not and pivot your approach accordingly.
Step 4: Design the performance management framework
A performance management framework lays out your proposed strategies, required resources, individual goals relating to organizational objectives, and current performance data. This document helps everyone understand the key objectives and their role in helping to achieve them, increasing the organization’s chances of success.
Step 5: Implement the strategy
The next step is to roll out your strategy. Be sure to do this in different stages to avoid overwhelming employees with too much information or too many tasks to do at once. A logical flow from one stage to the next will also help them better adapt to changes.
Step 6: Choosing the appropriate strategies and tools
Different challenges, roles, teams, and industries require different performance management methods and tools. Avoid using a one-size-fits-all approach and instead tailor your strategies to target your company’s specific needs, goals, and challenges.
Step 7: Monitor and evaluate
The final step is to monitor progress toward the goals you’ve set. Determine which metrics to track (e.g., employee performance metrics, engagement rating, leadership effectiveness). These will give you a clear picture of what’s working and what isn’t. Once you have the information you need, adjust your strategy accordingly.
Best practices for developing a performance management strategy
Here are some performance management best practices to keep in mind:
- Offer training: Provide ongoing training and support to employees and managers to help them build on strengths and improve their weaknesses. Don’t forget your own upskilling. Take a course in performance management to refine your strategy. For example, AIHR offers a self-paced Performance Management Online Course.
- Communicate clearly: Explain to employees the goal of your performance management strategy, how it will work, and how it will influence their performance evaluation. If you want your strategy to succeed, you must get all employees involved and engaged.
- Use more than one method: A mix of formal meetings with managers, self-assessments, and team feedback can create a more holistic and comprehensive view of performance, which also reduces bias.
To sum up
The right performance management strategies can boost engagement and morale, improve organizational performance, prepare you for succession planning, and give employees better career development opportunities. They can then grow within the company and envision a future within it, thus improving retention.
Employees are the most important resource in any organization. Creating a work environment that supports and encourages their continuous development helps hold them accountable for achieving goals, tracking progress, and thriving professionally.
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