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This article is written by Sai Gayatri who is pursuing a Certificate Course in Introduction to Legal Drafting from LawSikho.

Introduction to performance management 


To draft an effective performance management policy, you first need to know what is performance management. So, let us think of performance management as an instrument of a company, which helps in enhancing the performance of its employees by establishing an environment where all the employees can perform their best by making optimal use of their abilities.  

Performance Management is a continuous strategic-process where the main goal is to improve the performance of the employees and achieve the objectives of the company. This process helps in linking the performance of an employee with the comprehensive goals of the company. 

The supervisors of the company, through performance management, get to assess the performance of the employees and further provide them with feedback. This helps the employees to have clear insights on the milestones they are supposed to reach regarding their career development and the company’s mission. 


Performance Management is a continuous process and thus can be considered as a repetitive cycle that brings out a systematic approach towards the individual development of the employee and the company as a whole. The cycle can be understood from the below illustration- 

What is Performance Management Policy (PMP)? 

  • A performance management policy frames a structure for all the people working under a company to agree and review the goals and objectives within the context of the company’s overall development plan and their individual development needs. 
  • The policy should assist in developing the people working under the company and help, wherever necessary, to raise the standards of achievement for them. 
  • A performance management policy needs to be clear about certain aspects such as – the procedure involved in drafting it, the implementation of such procedure, the assessment of the result of such implementation, and finally the review of the assessment. It is a connected process and thus is required to be approached systematically.  
  • Performance management policy describes an ongoing-process of interaction between the manager and the employees of a company. 
  • It makes sure that the individual efforts of an employee in a company are in accordance with the strategic goal set by the company. 
  • Performance management policy establishes a system which is based on the company and
    job-specific competencies that are imperative to attain satisfactory job performance. 
  • An effective performance management policy includes both individual goals and team goals that adhere to the strategic objective of the company and achieve its goals. 

Performance Management Policy – its importance and benefits

  • An effective performance management policy takes into consideration, the company’s business goals and the employee’s personal goals, based on them both, a framework is given. Such amalgamation results in a better understanding between the company and the employee.
  • Since performance management encourages companies to recognize and reward the efforts of the employees, there is an increase in employee retention and employee loyalty. It also encourages bridging the communication gap between the managers and the employees. 
  • To achieve job satisfaction, an employee must feel that he plays a pivotal role in the development of the company. A performance management policy can do so by completely engaging the employee. Job satisfaction boosts the productivity of an employee and benefits the company. 
  • A performance management policy creates a healthy environment to regularly review and understand the skill set of an employee. This provides clarity on the areas upon which an employee might need training. This helps in the professional development of the employee and also prevents the company from facing any sort of drawbacks in the future. 
  • A proper performance management policy leads to the sustainable development of the company. Consistent engagement along with the issuance of constructive feedback helps the company in being up-to-date with its requirements and shortcomings. This helps in structuring future goals and contributes to the achievement of the objectives laid down by the company. 

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Elements of a performance management policy

The following are the key elements of a Performance Management Policy-

  • Goal Setting (practical goals as per the needs of the company)
  • Allocating Roles (describing the roles of each individual working in the company)
  • Agreement between the manager and the employee regarding the required level of performance
  • The Performance Management Cycle
  • Evaluating the outcome of performance 

Drafting a performance management policy effectively

While drafting a Performance Management Policy for a company the following points must be considered- 


As you are drafting a performance management policy, you must first question yourself about what you want the policy to achieve. Various aspects get involved in a policy such as the development of the company, retention of the employees, streamlining the finance, etc. Sorting out such questions will make it easy for you to recognize the goals of the policy.


Through the performance management policy, you can improve the capabilities of an employee by describing their role to them in a clear manner. Often the employee gets confused as to what exactly he is supposed to do and this hinders his professional growth as well as the company’s growth. Allocating defined roles will help in avoiding this issue.  


In the first step you have already set goals that your policy needs to achieve, now, they must be achieved with the help of the performance of an employee. A proper plan describing the expectations of the company and how an employee will achieve them will be beneficial to the company. It will also make sure that the employee meets such goals regularly. 


The progress of the employees towards achieving the goals set by the company must be monitored in a systematic way which involves the use of metrics. This helps in ruling out the areas where the employees lack knowledge or skill and action can be taken to improve in such areas and accelerate their professional growth. 


It does not make any sense to identify the drawbacks and not provide a solution for it. Employees should get consistent yet constructive feedback and coaching to perform and engage well with the assigned work. 


With the help of an effective performance policy, the employees work every day to achieve the goals of the company. This enhances the productivity of both the company and the employee. 


Employee engagement of a company can be improvised by creating a nurturing work environment of shared accountability which helps in the development and the career growth of the employee.  


Developing a culture of providing feedback for each other among the employees will help them in understanding the challenges and performance-based problems faced by them together as a team. This will also help in building peer-loyalty among them.  


Acknowledging the achievements of the employees in a public manner will make them feel valued and recognized for the work and efforts they put in achieving the goals of the company. This also helps a lot in employee retention. 


For a performance management policy to be effective and engaging, it must be viewed by the employees as an object which considers their interest. It means that a company must take the opinions of its employees while drafting a performance management policy. 

Implementing a Performance Management Policy

There are 4 steps involved in implementing a Performance Management Policy effectively- 


This helps in establishing performance standards for the employees and provides work accountability and its objectives. In this manner, you can create a development plan.


This helps in gaining insights on how the employees through their performance are giving a shape to the goals set by the company. The provision of constructive feedback along with updates and resources must be done at this point.


Evaluation is imperative when it’s about the progress or development of the employee. An assessment that involves appropriate parameters will provide the results of the employee and about their performance or underperformance. A proper way to assess performance is through appraisal forms. 


Sharing feedback with the employee will not constitute a review. You must provide the employee with clarifications as to which goals you expect them to achieve next or explain where the employee performed well or poorly and how it can be done right. Based on the performance experience of the employee, set the objective and goals for the upcoming term accordingly. 


A performance management policy, unlike the traditional annual inspection, provides employees with constructive feedback all around the year. This set-up involves a constant re-evaluation of goals of the company, performance of the employees, and progress of the company. It provides a more holistic view of the performance of the employees and establishes an interactive platform between the manager and the employee. It enhances the professional growth of the employee to meet the goals of the company. Though the evaluation process in this method takes more time, it elaborately provides performance details. A proper performance management policy leads to the sustainable development of the company. 

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