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 is apt for 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, keep in mind 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

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How Engagedly Can Drive Your Performance Management Process Forward

How Engagedly Can Drive Your Performance Management Process Forward

Performance management system measures the overall performance of the employees. It is used for setting goals, sharing feedback, rewards & recognition, and performance assessment. A powerful performance management system allows HR and managers to set clear performance expectations. It helps them anticipate what is expected from them at work. Most organizations or employees use performance management systems appropriate to their needs based on elements like industry, number of employees, etc. 

Performance management is the system of organizing a motivating work culture in an organization, in which employees and executives continuously evaluate themselves and work towards common organizational goals. Essentially, it consists of goal-setting, goal tracking, ongoing check-ins, real-time feedback, 360-degree feedback, rewards and recognition, learning and development, and skills analytics. 

All the primary parameters of organizational and personal achievement are connected to performance management in the following ways:

  • Helps in setting goals that can be inclined to organizational objectives
  • Provides feedback to group members
  • Acts as a medium of communication to talk about issues, opportunities, and development of projects
  • Offers learning and development opportunities, praise and recognition based on personal performance
  • Creates performance requirements for employees

It is significantly crucial to observe that performance management isn’t a one-size-fits-all method for every company. Even though it’s a corporate device that enables solving challenges related to productivity, performance, retention, and engagement, each organization desires to remodel or customize performance management according to their business needs to get results.

Why is Performance Management Important?

The rapidly changing environment, the evolving technical landscape, changing customer preferences,  and personnel expectancies requires employees to perform their best. Finding the proper skills and keeping capable employee spersonnel is getting harder each day. On top of that, organizations are nevertheless reeling from the financial strain of the pandemic. 

To stay aggressive in the modern enterprise environment, it’s imperative to recognize the need to construct a systematic, goal-oriented, and employee-centric performance management system.

Also Read: Top 8 Sales Communication Mistakes That Sales Teams Often Commit

Types of Performance Management Systems

A performance management system acts as a guiding light that facilitates businesses to stay dedicated to their vision by continuously tracking the performance of employees.

Some of the most commonly tools to manage performance of employee are

  • Balanced scorecard
  • Management through objectives
  • Objectives and key results
  • 360-degree feedback
  • The graphic score scales

Technology and performance management 

The developing need for innovation, creativity, problem-solving, and flexibility is remodeling workplaces. Employees’ expectations have modified over the years, and so has the way businesses operate.

Real-Time Performance Management Taking on Traditional Ones

They assist HR managers in:

  • Formulating strategies,
  • Offer greater visibility,
  • Innovate,
  • Customize,
  • Streamline processes, and
  • Provide a framework for collaboration among employee and management.

The Deloitte Global Human Capital Report offers high-quality insights about businesses that have redesigned their performance management systems:

  • 96% of businesses discovered improvements in employee engagement levels
  • 83% say that the best of conversations have progressed among managers and employees
  • 96% discovered the system to be less complicated than before

Google, Kelly Services, IBM, Cargill, Juniper, and many other organizations around the world have redefined their performance management systems. They have leveraged technology and innovation to establish a continuous performance management framework. Regular feedback and check-ins, enhanced job descriptions, constructive performance reviews, and a robust focus on fostering learning and growth have made performance management holistic. Focus has shifted towards nurturing employee development and engagement rather than focusing on past performance.

Employment Performance Tools 

Goal-setting tools Setting proper goals for employees is one of the initial steps that result in employee and organizational growth and improve productivity.

It is essential to outline performance plans and goals clearly. Having plans that can be open-ended and unclear creates a lack of interest in employees. At the beginning of the quarter or year, managers should meet with their employees and set clear goals.  These goals need to be SMART and challenging, but at the same time making sure that it is attainable.

We suggest the usage of goal-setting tools that assist you in creating goals and key results (OKRs and KPIs) and align your individual goals to those of the organization.

Feedback tools – Frequent employee feedback is one of the first-rate practices for monitoring employee development and enhancing it from time to time. This helps individual employees, and the team, and helps in the organization’s growth and productivity.

Encourage your employees to share feedback with their managers. This will help you create an open culture and continuous development. Teams using Engagedly permits employees to share, receive, and request feedback from their managers, team members, and peers.

Employee appreciation tools – Most employers neglect to understand their employees, however, they particularly do not forget to criticize whilst something is going wrong. This creates disengagement and dissatisfaction in employees, that directly affects their productivity. So appreciating and recognizing your employee efforts is crucial.

Using an employee recognition tool may be a start to converting your organization’s culture to a tradition that promotes appreciation and acknowledges employees for even the smallest wins. Engagedly’s reward and recognition helps employers reward and recognize their employees for their efforts and contributions

HR management tools – HR is surely one of the most important functions in any organization. Managing employees physically is time-consuming and hard for an HR. Therefore, having automatic HR management software in your organization can automate HR activities and resolve many HR management issues.

When searching out an HR software program, there are numerous matters HR managers want to consider, which include ease of set-up, analytics, security, client support, effective performance management, etc. Besides the features, it’s also essential to discover a performance management tool that could evolve with your business needs.

Performance appraisal tools – Performance appraisal is one of the most important modules when it comes to performance management. It’s an effective tool that helps organizations align their goals to individual ones and track their development and performance over time. But ensure that the process is fair, optimistic, two-way communication between you and your employees. If you fail to create an environment in which your employees can communicate freely, they may get demotivated and will not stay with the organization for too long.

Personal development plans – Both managers and personnel benefit substantially from the PDP process, which allows for figuring out areas for growth, goal setting, and tracking, etc. Some key advantages of the tool include

  • Gives direction to attain goals
  • Measurable goals, development, and results
  • More specific alignment with organizational and team goals
  • Employee development and accountability

Engagedly’s LMS or Learning Management System helps in setting up personal development plans for employees.

Pulse survey tools – Pulse survey tools are a simple, powerful, and flexible manner of gathering employee feedback and analyzing employee temperament. The end result helps in strategizing for better employee engagement.

Also Read: Employee Management: Dealing With Awkward Situations At Office 

Performance Management Techniques 

Plan – The strategy planning stage comes first. Here, you define individual targets & strategies clearly and communicate them organization-wide so that your employee recognizes how their individual goals contribute to the organizational targets.

Coordinate and help them set SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).

Monitor – After you define the goals for your employees, track them. Monitoring constantly, offering ongoing feedback, and consistently measuring employee performance will help improve productivity. It will help you understand whether the goals are on track and will your employees be able to achieve them.

Rate – The rating means evaluating employees based on their performance. Though this step is part of tracking and giving feedback, it is considered a formal way to assess employee performance. It additionally enables managers to recognize their top performers.

Additionally, it facilitates managers to examine and compare performance through the years or throughout a set of employees.

Reward – Effective managers are the ones who reward their employees for their hard work. Employees experience empowerment and motivation when their work is recognized and valued.

This results in improved productivity. So reward the employees who meet or exceed your expectations.


In conclusion, Engagedly has become a powerful tool for organizations of all sizes and industries to manage their performance management processes. With its extensive set of features, user-friendly interface, and detailed analytics, Engagedly not only streamlines performance management but also makes it more effective.

Engagedly’s continuous feedback, goal setting, rewards and recognition, public praise, and LMS modules ensure a holistic approach to the performance management process. It makes the process more transparent, efficient, and growth-oriented, which ultimately drives the success of the employees as well as the organization.

Frequently Asked Questions 

Q1. What are performance management tools? 

Ans: Performance management tools are real-time software programs that allow managers and leaders to track the productivity of their team members. 

Q2. What are the four stages of management? 

Ans: The following are the stages/cycle of performance management: Planning, Monitoring, Reviewing, and Rewarding.

Q3. What are some of the performance tools?

Ans: The following performance management tools are especially useful for businesses: Goal setting, Real-time feedback, Surveys, Learning and Development, and 360 performance reviews.

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Demystifying The Performance Management Process for Employees

For many employees, the performance management process is often layered with misinformation, fear, and a lack of clarity.

It is wrongly assumed that performance reviews are tied to appraisals when actually, the fact that they happen together is only a consequence of the fact that final reviews tend to happen at the end of the year, as do appraisals. However, the mystique of performance management is such that not everyone has a clear idea of what it entails as well as what they need to do in order to prepare for it. And of course, it is natural to fear something that you do not know.

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