What comprises a performance management system?

Companies use performance management systems to evaluate employees on their job performance. Goals and competencies, managed in the performance management system, populate the performance appraisal. After the performance appraisal, employees receive compensation rewards based on the performance rating and in accordance with the company's compensation plan.GoalsPerformance and development goals outline the achievements employees should meet. Companies add job specific and organization-wide goals to the performance management system.

CompetenciesCompanies expect employees to possess measurable skills called competencies, such as teamwork and problem solving. During a performance appraisal, managers evaluate employees on how well they demonstrate each competency and record this in the performance management system.

Development PlansA development plan lists activities employees need to complete to improve their job performance. The plan may include items such as a training class or new certifications.

Performance Appraisal FormThe performance appraisal records goals, tasks and competencies for each employee in the company. Each item receives a rating that is recorded in the performance management system, usually on a yearly basis.

Compensation PlanThe compensation plan, managed within the performance management system, contains salary, bonus and incentive-based pay options. In the pay for performance model, employees receive pay increases based on the overall performance rating listed on the performance appraisal form.

Source:"Talent Management Handbook"; Lance A. Berger and Dorothy R. Berger; 2004

US Department of Human Resources: Performance Management System Handbook