Performance management is a focused planning process that allows a manager to increase productivity by aligning the activities of his or her employees in order to accomplish organizational goals. It fosters open communication between employee and manager through joint goal setting, feedback and appraisal and helps keep people motivated and engaged.

A performance management system generally consists of four parts:

1. Establish goals and expectations
2. Create a development plan
3. Provide ongoing coaching and feedback
4. Appraise performance

Each of these parts is done in collaboration with employees and utilizes existing job descriptions, strategic planning objectives and departmental goals as inputs into the process. Initially, the emphasis is on helping employees develop their skills and abilities in order to meet the goals. Later, once the system is in place, it can be more closely linked to compensation and promotion decisions.