How To Create A Performance Management Plan?

With so many elements to manage, your performance management plan must work well for HR professionals and your employees. In this article, we will discuss how to create a performance management plan that will motivate your employees and help them be the best they can be in their job roles. Whether you’re dealing with high performers or those who need improvement, this article will help you manage them well.

Learn how to determine benchmarks and goals, communicate effectively, and follow up with employees to create an effective performance management plan for your company. Along with HR, we have interacted with leaders from accounting, IT, sales, marketing, customer service, and management who have all shared their tips on how to design a PMP that works well in their organizations. 

What is a Performance Management Plan?

A performance management plan is a strategic process that organizations use to improve employee performance and achieve business goals. It involves setting expectations, defining goals, providing feedback, and evaluating performance to enhance productivity and align individual objectives with organizational success.

Performance management plans are required to document an employee’s goals and objectives related to the organization’s goals, along with the skills and competencies needed to achieve these goals. Effective performance management plans can help an organization thrive, and they can even help keep your employees happy and engaged in their jobs! 

How to Create a Performance Management Plan? 

The following section talks about the performance management planning processes. It is important to have skilled and experienced HR leaders on board while planning the process. It will help steer the team in the right direction and avoid any discrepancies from creeping in. 

  1. Document goals clearly: Once you know the direction to be taken, it’s time to create clear and measurable goals.
  2. Communicate with your employees: Once the goals have been created, it’s important to communicate them with employees so they can work towards them. Check-ins are an effective way of providing feedback to employees on their progress and rewarding them when they do well. 
  3. Provide feedback regularly: It’s also important to provide regular feedback to your employees by monitoring their progress. By checking in regularly with your employee, you’ll learn how they’re doing and provide helpful guidance as needed. When there are problems, give timely and constructive feedback so they know where they stand.
  4. Keep track of progress: There’s no point in holding back until the end of the year to evaluate performance! Track your employees’ progress throughout the year and make adjustments where necessary. At least once a quarter, review past assessments with your team members to identify any changes that may be needed going forward.

performance management

Questions to Consider While Creating a Performance Management Plan

As an HR professional, you need to be clear on the business objectives of your organization to create an effective performance management plan. What are the goals of the company? What does success look like? Once you have answers to these questions, you can begin to create a plan that will help employees achieve these objectives.

  • Define what the organization’s goals are and what success looks like.
  • Assess where the organization is currently at in terms of achieving these goals.
  • Identify any gaps between where the organization is currently and where it wants to be.
  • Develop strategies for closing these gaps. 
  • Determine how each strategy will help the organization reach its goal. 
  • Determine who needs to be involved in this process, including managers and staff members who should be measured using this process 
  • Establish a timeline for implementing each strategy (e.g., set specific dates by which certain tasks must be completed). 
  • Put everything together into one document—preferably with short sections and bulleted points – so that it’s easy to read and understand.
  • Send out to appropriate stakeholders or colleagues for feedback or edit as needed

Get Up-to-date Responses

This will give you insight into how others perceive your work and where you can improve. Here are some tips for getting started: 

  • Talk to your manager – ask for specific feedback on your recent performance and where improvement is needed. 
  • Talk to your peers – ask them how they perceive your work and what areas they think you could improve in. 
  • Use performance review tools – many online tools can help you assess your performance, such as 360-degree feedback tools or performance appraisal software. These types of assessment tools will provide you with objective data about how well you’re doing in certain aspects of your job and can help guide your development.
  • Identify strengths and weaknesses – make a list of both the strengths and weaknesses that were identified by others, then take some time to explore these ideas. Consider the possibility that some of the perceived weaknesses may be strengths in disguise! 
Also Read: The Ultimate Guide: Develop a KPI System for Performance Reviews

Measure Current Performance

To create an effective performance management plan, you first need to measure current performance. This will give you a baseline against which you can measure future progress. There are several ways to measure performance, but some common methods include surveys, interviews, focus groups, and data analysis.

All these methods have pros and cons. Hence, you need to identify what is most appropriate for your company. Once the right approach is known, you need to set SMART (Specific, Measurable, Actionable (and specific), Realistic (and challenging), and Time-bound (to define when objectives should be met)) goals. Next comes the tricky part – determining what type of disciplinary action or reward system fits your employees’ needs.

Here are some tips on how to go about this process: When defining punishments for bad behavior or rewards for good behavior, remember that there are two different types of motivation – extrinsic and intrinsic. Extrinsic motivations come from outside sources like money, recognition, promotion, etc., while intrinsic motivations come from within sources like personal growth and accomplishment. So make sure to pay attention to both extrinsic and intrinsic when designing your reward/punishment systems. Also, remember that the severity of punishment or reward should match the severity of the infraction – never give a minor punishment for a major infraction or vice versa.

Important Steps to Follow 

The steps below outline the process for creating a plan and should be followed when creating new plans or updating existing ones.

  • Define what you want to achieve with your performance management system: What do you hope to gain from this system? How will it help improve organizational culture? How will it support succession planning efforts? Why is this important for the company’s growth and success? 
  •  Assess your current performance management system: Do evaluations happen annually or more often? Do employees know their strengths, areas for improvement, goals, objectives, and competencies? Are 360 reviews used in addition to the manager’s feedback? Is formal training provided before starting a new position or after each evaluation cycle starts (6 months)? Does everyone get constructive feedback no matter their job level or rank within the company? 
  • Define what you want to achieve with your performance management system
  • Assess your current performance management system
  • Identify gaps in your current performance management system
  • Choose the right performance management software for your needs
  • Implement your performance management system
  • Train employees on how to use the system
  • Evaluate and adjust your system as needed
  • Establish an appropriate timeline
  • Monitor the results of your new system by looking at metrics and employee feedback surveys
  • Check in periodically to see if there are any changes or issues that need attention, and make adjustments accordingly

Set Goals and Start Working For it

  • Set up performance goals and objectives early on
  • Align those goals with the company’s overall strategy
  • Involve employees in setting their own goals
  • Monitor progress against goals regularly
  • Use data to identify issues and areas of improvement
  • Address problems and give feedback promptly
  • Celebrate successes and lessons learned along the way 
  • Ensure that all parties understand their roles and responsibilities
  • Give regular, meaningful feedback that supports your employees’ development
  • Revisit performance management throughout the year as needed to support employee growth and business success
  • Follow through on corrective action plans, based on conversations and/or documented behaviors
  • Document everything! 
  • Evaluate if there is a need for any changes before starting over again with the same process at the end of every year
  • Commit to the ongoing dialogue about an employee’s performance from both sides to foster an environment where everyone feels heard and valued

Design an Incentive Plan to Nudge Employees in the Right Direction

If you want your employees to perform better, you need to give them a reason to do so. That’s where incentives come in. By offering rewards for meeting or exceeding goals, you can encourage your team to put forth their best effort. But how do you design an incentive plan that will work? Here are a few tips to keep in mind when designing an incentive plan: 

  • Incorporate at least two different types of rewards (cash and non-cash) 
  • Offer larger prizes for reaching ambitious targets 
  • Use well-established company metrics as your criteria 
  • Offer prizes every quarter instead of waiting until the end of the year – Pay out large sums of money incrementally over time to increase interest 
  • Put together a committee with representation from across the organization before creating an incentive plan

Make it Easy for Employees to Track Progress Towards Goals

It can be difficult for employees to keep track of their progress toward goals if there is no system in place. By creating a performance management plan, you can make it easy for employees to track their progress and see how they are doing. This will help them stay on track and motivated to achieve their goals. The performance management plan should include specific objectives that the employee is working on. 

These objectives should align with the company’s strategic goals and the employee’s personal career goals. When determining objectives, managers should consider the needs of both themselves and their team members before deciding what an objective might be. After establishing the objectives, supervisors need to monitor employees’ progress against their goals regularly.

Ideally, reviews should happen every six months but this timeline may vary depending on the situation. Objectives could also change throughout the year as new priorities arise and evolve.  The final part of any performance management plan is annual reviews which take place during the first quarter of each year at most companies. Reviews usually involve a conversation between supervisor and employee about how well they achieved their goal targets over the past year and plans for next year.

Metrics & Dashboards

Employees need to know where they stand to improve or maintain their performance. Regular feedback loops are essential, which is why managers and employees need to use objective data (aka metrics) and visual dashboards when communicating progress.

This way, both parties can see if an employee is on track with his or her goals. It will also make it easy for employees to look back on how they were performing at specific times of their careers for reflection purposes. If you want your employees to succeed, you need to give them opportunities for training and education. Formal classroom training is good, but hands-on experience—whether through internships or apprenticeships—is even better. 

Training gives your team new skills and knowledge while improving existing ones. Training may cost money upfront, but there’s no better investment than in your team’s future capabilities. Investing in their development now ensures that they’ll continue to be valuable members of your organization long into the future. 

Provide Necessary Training and Resources to Employees

Employee development is essential in an employee performance management plan. Employees who underperform and those who do well need ongoing training to achieve optimal levels of competence. A range of training and development methods can be integrated into a performance management plan. Performance management software allows business leaders to see an overview of the organization’s composition.

Organizational charts and people databases reveal the distribution of skills and qualifications across teams and departments. Experienced employees often take on mentoring new employees because they can share knowledge and insight with someone who hasn’t been doing the job for long. Through one-on-one coaching, mentors can answer questions and get to know their protegees better while allowing the employer flexibility in managing other roles. Although this means experienced workers have less time for themselves, they understand what needs to be done to keep their company running smoothly.


The most difficult part of creating an effective performance management plan is making sure that it is based on solid data. When you base your performance management plan on numbers and real-time information, it becomes easier to create goals that are specific, measurable, achievable, relevant, and time-bound (aka SMART). 

After assessing each employee’s strengths and weaknesses, use those details to craft individualized plans for each team member. This step is crucial because employees react better when there is personal involvement in their career path. With clear expectations, insight into how their performance impacts other workers, and regular feedback from managers/leaders/supervisors, employees can get clarity around what needs improvement or what they should do if something goes wrong.

As long as all parties are communicating with one another, everyone has access to information at all times. This makes it easy for everyone involved to stay up-to-date on where things stand at any given moment and solve problems before they spiral out of control into something much bigger down the road.

Also Read: How to Implement SMART Employee Goal Setting in Your Company

Performance Management System

Subscribe To The Engagedly Newsletter