Advantages and Disadvantages of Performance Management

Estimated reading time: 6 minutes

Managers often struggle with directing the work of others. Managing people is a skill that motivates employees to do a good job.

Whether you call it employee or performance management, the intended outcome is the same – ensuring that corporate objectives are met.

I recently attended a conference on quality. During my shuttle bus commute from the airport to the hotel, I met another person who was attending the same conference.

When he learned that I was also attending the conference, we began talking about all sorts of things, but performance management (PM) and, more specifically, performance appraisals (PA) came up.

He had very strong feelings about why he thought performance appraisals were a waste of time and ultimately added no value to the employee or organization.

Most anyone who has managed people or has been managed by someone has experienced the sometimes stressful, time-consuming performance management process.

In theory, I agree that organizations that do not have strong performance management systems can have a negative effect on both employees and managers.

However, a well-designed performance management process can reward the employee and the manager.

So, what are the advantages and disadvantages of performance management?

Disadvantages of Performance Management

1. Time Consuming

It is recommended that managers spend about an hour per employee writing performance appraisals.

I’ve known managers who had to write performance appraisals on 100-plus employees, which would take weeks to complete.

And, depending on the number of people being evaluated, the process can take hours to write the department’s performance appraisals – but also hours meeting with staff to review the written material.

A very time-consuming and tedious task.

2. Discouragement

The performance appraisal process needs to be one of encouragement, positive reinforcement, and a celebration of a year’s worth of accomplishments.

If the performance appraisal process is not a pleasant experience, it can discourage staff.

Managers must document not only issues that need to be corrected but also the positive things an employee does throughout the course of a year, and both good and bad should be discussed during a PA.

For instance, encourage employees by sharing observations of successful project completion, positive teamwork, or professional developmental milestones.

3. Inconsistent Message

We all struggle to remember things when we get busy.

It is those times when we remember the bad and forget to acknowledge the great things employees do every day that send an inconsistent message to employees.

Make a habit of documenting employee observations (both positive and negative) when they are fresh.

Keep these notes as a source of information as you share feedback with employees.

This document of observations will provide you with the necessary feedback to review with the employee at performance appraisal time – to correct behaviors and celebrate success.

Keep notes and accurate records of employee behavior to send a consistent message to the employee.

4. Biases

It is difficult to keep biases out of the performance appraisal process.

It requires a very structured, objective process, as well as a mature manager to remain unbiased.  Be aware of this and take the time to learn about common rater (bias) errors.

Performance appraisal rater errors are common for managers who assess performance.

Learn to understand these natural biases so you can ensure your employees receive fair evaluations.

Advantages of Performance Management

1. Performance-Based Conversations

A performance management process forces managers to discuss performance issues with employees.

Managers are busy with day-to-day responsibilities.

This can result in neglecting to have those necessary interactions with staff that provide the opportunity to coach and offer work-related feedback.

This consistent coaching encourages staff, affects changed behaviors, and promotes employee development.

2. Targeted Staff Development

All employees are on a development journey.

And, it is the organization’s responsibility to prepare them for increased responsibility.

If done well, an effective performance management system can help to understand employee career ambitions, identify employee developmental opportunities, and be an important part of a succession planning process.

3. Encouragement to Staff

There should be no surprises if issues are addressed in real-time and not held until the annual review.

Performance appraisals are a time to celebrate all the wonderful things an employee does over the course of a year and should encourage staff.

The trick to positive appraisals is to focus on what the employee is doing well while gently course-correcting undesired behaviors.

Some organizations ask employees to do a self-appraisal so they can reflect on their performance.

4. Rewards Staff for a Job Well Done

The reality is people go to work because they need the pay, and employees want to know what behaviors will result in more money.

When pay increases and/or bonuses are tied to the performance appraisal process, staff can see a direct correlation between performance and financial rewards.

This cause and effect motivates and encourages employees to perform at higher levels.

5. Under-performers Identified and Eliminated

As hard as we try to screen, train, and manage employees, it is inevitable that some employees just won’t make it.

An effective performance appraisal process can help identify and document under-performers, allowing for a smooth transition if the relationship needs to be terminated.

6. Documented History of Employee Performance

All organizations must keep performance records on all employees. 

The goal is to maintain a historical record of an employee’s performance and development journey so a new manager can get a sense of progress over time.

This is a document that should be kept in the employee’s personnel file.

7. Allows for Employee Growth

Motivated employees value structure, development, and a plan for growth. 

An effective performance management system can help an employee reach their full potential, which can be a positive experience for both the employee and manager.

A good manager takes pride in watching an employee grow and develop professionally.

Organizations should take a global look at their performance management system and have very objective goals that are tied to strategic initiatives and the performance management process. 

Successful organizations have learned the secret to this. And while not always perfect, striving to constantly improve the process can be one of the best ways to help organizations achieve their Mission.