Performance management systems – why small businesses need it badly

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It’s pretty incredible how often you hear managers complaining about their best employees leaving, and they really do have something to complain about—few things are as costly and disruptive as good people walking out the door. Managers tend to blame their turnover problems on everything under the sun, while ignoring the crux of the matter: people don’t leave jobs; they leave managers.

Smaller companies do not have the budgets that large corporations enjoy. Their funds are tightly integrated with some of the more ‘perceived’ important functions primarily such as sales and product development. They have very little left to invest in their most important resource: the employees.

Even some startups, who receive large funding from their investors, are typically known for their aggressive growth. The entire focus in the initial stages is on developing a product that has the capability of disrupting the status quo. Once the product is ready, these companies shift most of the focus on selling that product.

Importance of performance management:

Performance management process enables managers to discuss performance issues with employees.  It is this consistent coaching that affects changed behaviors and employee development.

A good performance management system works towards the improvement of the overall organizational performance by managing the performances of teams and individuals for ensuring the achievement of the overall organizational ambitions and goals. An effective performance management system can play a very crucial role in managing the performance in an organization by:

  • Ensuring that the employees understand the importance of their contributions to the organizational goals and objectives.
  • Ensuring each employee understands what is expected from them and equally ascertaining whether the employees possess the required skills and support for fulfilling such expectations.
  • Ensuring proper aligning or linking of objectives and facilitating effective communication throughout the organization.
  • Facilitating a cordial and a harmonious relationship between an individual employee and the line manager based on trust and empowerment.

Alignment of goals helps employees understand the purpose of their efforts. They get to see that they too are instrumental in making the company successful.


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