Performance management is an integral component of talent management that is aimed at ensuring that organizational goals are being met effectively and efficiently through individual and collective performance. It can thus encompass an individual employee, a department, a team, or even a process to build a service or a product.

Dr. Aubrey Daniels in late 1970’s used this term to describe a science for managing and enhancing both behavior and the results. It is this behavior and results that amounts to the performance of an employee. This is primarily achieved through attitudinal interventions. It was also defined as a strategic and integrated approach to increasing the effectiveness of organizations by improving the performance of the people who work in them and by developing capabilities of teams and individual contributors (Armstrong and Baron - 1998).

Performance management is most often used in professional organizations where the results and behavior of a certain course of actions has financial implications. Otherwise we can use it anywhere we wish to or enhancing people performance like sports, education, NGO’s, anywhere where there is an interaction between people.

Through performance management, organizations aim to align personal goals of employees with organizational goals and increase the overall efficiency, productivity and profitability for the larger benefit of the latter. There is no cap to the number of individuals on which it may be applied. It can be applied to one single individual or the entire department.

Typically the following steps are involved in performance management:

1. Commitment analysis.
2. Work analysis.
3. Defining performance standards.

In commitment analysis a job mission statement is made for each job or process which is a job definition in terms of product, scope and purpose. Here the key objectives are outlined and performance standards are set against the same.

Work analysis follows next; this underlines the reporting structure and job description. Finally performance standards and expectations are set against each job or process keeping in view the efficiency and effectiveness both.

Employee performance management is of key benefit to organizations in helping them realize effectively the strategic and operational goals. In organizational behavior lexicon, performance problem is a gap between desired and actual results and performance management seeks to address just the same problem. There the effort is called as performance improvement. The guidelines that determine whether or job is being carried out effectively is based upon factors like whether the work is planned and clear expectations are set, work performance is monitored, staff is trained and developed continuously for a certain job etc.

The benefits of performance management are both financial and non financial in nature. Financial benefits include growth in sales, reduction in costs incurred, organizational alignment with the vision and mission, decrease in lead time.

In addition the workforce is motivated to a greater extent, employee engagement is enhanced, the incentive plans are optimized as per specific target or goal achievement and the importance professional development programs is better understood and made used of in learning and development. The management gains more control over its human capital, a transparency is ensured, work efforts are rewarded befittingly which boosts employee morale.