Performance management in 2025: A strategic guide for people-first organizations

Discover:

• What is performance management?
• Key goals of a performance management system
• Why is performance management important?
• Different types of performance management approaches
• Employee performance management best practices
• Top performance management trends in 2025
• 5 Real-world examples of performance management
• What is the difference between performance management and performance appraisals?
• Performance management FAQs

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What is performance management?

Performance management is a strategic, ongoing process that helps organizations align individual goals with overall business objectives. It involves continuous feedback, clear communication, and structured evaluation to support employee development and drive company success.

In contrast to other systems of reviewing employee performance, such as yearly performance appraisals, employee performance management is a much more dynamic and involved process with better outcomes.

For the Human Resources department, performance management is an important system for onboarding, developing and retaining employees, as well as reviewing their performance.

Done well, performance management becomes the thread that ties personal growth to company success. It’s a way to make sure people aren’t just busy, but moving in the right direction with confidence and clarity.

Key goals of a performance management system

Performance management has a simple purpose: to help people grow and do great work. The best systems aim to:

• Align individual work with company goals
• Keep people motivated, focused, and supported
• Encourage continuous learning and development
• Create space for honest feedback and meaningful conversations
• Catch potential issues early and address them constructively

It’s not just about hitting numbers—it’s about building a culture where performance is clear, supported, and rewarded.

Why is performance management important for business and culture?

When you get performance management right, everything clicks.

People understand what’s expected, feel valued for their work, and stay engaged because they see how their role matters. Teams get stronger, turnover slows down, and leaders have the information they need to support growth and make better decisions.

The strategic role of HR in performance management

HR teams often steer the ship. They build the structure, guide the conversations, and make sure the system stays fair, useful, and people-first. Their role is to:

• Ensure consistency across departments
• Support leadership development and internal mobility
• Use performance data to shape better people strategies
• Provide tools and training so managers can lead with clarity and empathy

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Different types of performance management approaches

There’s no one-size-fits-all model. Many companies blend different approaches depending on what works for their teams:

• Annual performance reviews: Still used in some places, but often too slow and disconnected
• Continuous performance management: Short, structured conversations that keep progress and priorities on track
• 360-degree feedback systems: A fuller picture by including input from peers, managers, and reports
• OKRs and goal-based performance management: A popular method for setting clear, measurable objectives and results
• Project-based performance reviews: Focused feedback based on specific deliverables or milestones

The best systems adapt to people—not the other way around.

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Employee performance management best practices

While performance management might look straightforward on paper—set goals, give feedback, measure progress, repeat—the reality is more complex.

That’s why we’ve pulled together a list of practical best practices. Think of these as the building blocks of a performance management system that actually works in the real world.

1. Identify the purpose of your performance management program

Before building your approach, get clear on what you’re trying to achieve. Ask questions like:

• Do we want to boost productivity?
• Are we aiming to develop future leaders?
• Is retention or engagement a priority?
• Should performance tie directly into compensation?

Once you have that clarity, you’ll be better equipped to design a system that delivers.

2. Clearly define every role

It sounds basic, but it’s essential: people can’t succeed if they don’t know what’s expected.

Make sure roles are clearly defined—including responsibilities, performance expectations, and what success actually looks like.

3. Link goals to a clear performance plan

Big, long-term goals are great—but without a roadmap, they often fall flat.

Break down those objectives into smaller, manageable steps. A well-structured plan can help employees stay focused and avoid getting overwhelmed.

4. Monitor progress with meaningful metrics

Don’t just set goals and hope for the best. Track key performance indicators and milestones along the way. Use that data to spot roadblocks early and adjust course as needed.

5. Make coaching a regular habit

Feedback shouldn’t be saved for annual reviews. Build regular check-ins—monthly or quarterly—into your rhythm so issues get solved early, and employees feel supported as they grow.

6. Establish practical guidelines

Set clear parameters for how work gets done. This helps people stay on track while leaving room for creativity and initiative. Good guidelines offer structure, not red tape.

7. Align performance with culture

Performance doesn’t happen in a vacuum. A shared sense of purpose and values across the organization helps everyone pull in the same direction. Culture supports performance—and vice versa.

8. Encourage cross-functional learning

Workshops and job-shadowing across departments help break down silos. Employees learn how other teams operate, build empathy, and develop new ideas they can apply in their own roles.

9. Give feedback that moves people forward

It’s tough to give critical feedback, but framing matters. Focus on behaviors—not personality traits. For instance, “reports were submitted late” is something someone can fix. “You’re careless” is not.

10. Keep it professional, not personal

Giving less-than-stellar feedback is hard on both managers and employees, it’s one of the reasons that performance appraisals tend to be a least-liked task. Managers should make sure to keep feedback professional and remember to focus on behavior, rather than characteristics.

11. Train managers, too

Managing performance well isn’t instinctive—it’s a skill. Invest in training so managers know how to coach, give feedback, and lead conversations that build trust.

12. Take advantage of multiple-source feedback

Encourage teams to offer peer feedback. When done thoughtfully, it gives managers deeper insights and helps employees understand how they’re perceived by those they work with every day.

13. Remember that reviews are just one part

Reviews matter—but they’re not the whole picture. Planning, feedback, coaching, and recognition are just as critical. Don’t let the review process overshadow everything else.

14. Look beyond the individual

Sometimes performance issues aren’t about the person—it’s about the system. Maybe a process is broken or a resource is missing. Be ready to zoom out and look at the bigger picture.

15. Recognize and reward performance publicly and frequently

This one gets overlooked more than it should. If people are hitting goals and contributing to your culture, make sure they know it. Recognition can be public or private—but it should always be timely and sincere.

Top performance management trends in 2025

Performance management is evolving fast. Here’s what’s shaping the future:

• Smarter AI tools that assist (not replace) managers by offering helpful insights
• Skills-based performance reviews that focus on what people can do, not just job titles
• More personalized growth paths tailored to how people learn and evolve
• Better learning integration so training connects directly to performance goals
• Employee well-being as a Key Performance Driver in overall results

These aren’t just trends—they’re shifts in how we think about people, potential, and impact.

5 Real-world examples of performance management

Of course, it’s one thing to understand the theory of what performance management is, but it’s another thing to use it in a real company. Let’s take a look at some real-world examples of the performance management process in action:

It’s no surprise that Google would show up on a list of companies that use a newer, innovative system of management. This company has always been a trendsetter, and their performance management process is one that relies on data and analysis, as well as making sure that their managers are well trained.

When assessing their performance management system, Google launched a project dedicated to assessing their managers, which has led to a thorough training and future development process that sets managers, and thus employees, up for success.

They also use a system of setting goals that have caught on across multiple industries. Using their Objectives and Key Results (OKRs) system, they reframe the goal-setting process, with great results.

Another tech trendsetter, Facebook has a performance management process that puts a heavy emphasis on peer-to-peer feedback. In semi-annual reviews, they are able to use that feedback to see how well teams are performing and understand where collaboration is happening – and where it is not. They also have developed an internal software to provide continuous, real-time feedback. This helps employees solve issues before they become problems.

Cargill is a Minnesota-based food-producer and distributor with over 150,000 employees and serves to demonstrate that even huge companies can ditch unwieldy performance appraisals and institute a new system. In following the latest research on the dissatisfaction of management with outdated performance management process, Cargill created their ‘Everyday Performance Management’ system. The system is designed to be continuous, centered around a positive employee-manager relationship, with daily activity and feedback being incorporated into conversations that solve problems rather than rehash past actions.

The Everyday Performance Management system had overwhelmingly positive results, with 69% of employees stating that they received feedback that was useful for their professional development, and 70% reporting that they felt valued as a result of the continuous performance discussions with their manager.

Adobe calculated that managers were spending about 80,000 hours a year on performance reviews, only to have employees report that they left those reviews demoralized and turnover was increasing as a result.

Seeing a system that only produced negatives, Adobe’s leadership team made a bold leap into a performance management system that began by training managers how to perform more frequent check-ins and offer actionable guidance, then the company gave managers the leeway they needed to effectively lead.

Management was given much more freedom in how they structured their check-ins and employee review sessions, as well as more discretion in salaries and promotions. Employees are often contacted for ‘pulse surveys’ – a way for the leadership team to make sure that individual managers are leading their teams well. One of the many positive results of this has been a 30% cut involuntary turnover due to a frequent check-in program.

Accenture is a massive company – over 330,000 people, so changing their systems means a huge effort. When they switched to their new system, they got rid of about 90% of the previous process. Now, they are using a more fluid performance management process where employees receive ongoing, timely feedback from management. This has been paired with a renewed focus on immediate employee development and an internal app for communicating feedback.

There are common threads in all of these examples. Each company has built a system that works for them, rather than following a one-size-fits-all approach. What works for one company might not work for another – it depends on the industry, the speed and flexibility of the company, and the overall goal of the system itself.

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What is the difference between performance management and performance appraisals?

With similar names and purposes that sometimes align, it is no surprise that some people find it hard to spot the difference between performance management and performance appraisals.

In fact, performance appraisals are often part of the performance management process, although some companies still rely on performance appraisals alone.

An easy way to understand the difference between the two is that performance appraisals are reactive, and performance management is proactive.

A performance appraisal looks at all of the past actions of the employee within a set amount of time, and rates how well they performed in their role and how many goals they met.

Performance management looks at the present and future of the employee, and what can be done to help future performance and meet future goals. Performance management is focused on the development and training of an employee, and how that can benefit both the employee and the company.

A performance appraisal is a formal, operational task, done according to rigid parameters and in a quantitative manner. HR leads performance appraisals, with input from management. Performance management is much more informal and strategic, led by management with input from the employees in a more flexible manner.

Performance management FAQs

How often should performance reviews happen?

Quarterly works well for most. But don’t wait—if something shifts, check in sooner.

What’s HR’s role in performance management?

They provide structure, coaching, and a clear process that supports everyone involved.

How do I choose the right performance management software?

Start with your people. What do they need? Look for tools that simplify feedback and support real progress.

What are the key components of performance management?

Clear goals, regular feedback, measurable outcomes, transparent evaluations, and alignment with company culture are foundational.

What’s the difference between performance management and performance appraisal?

Appraisals are typically one-off evaluations, often yearly. Performance management is continuous, proactive, and focused on development.

How can performance management improve employee engagement?

When employees receive consistent feedback, feel recognized, and know how they contribute to company goals, engagement goes up.

What metrics are used in performance management?

Common metrics include goal completion rates, quality of work, productivity, peer feedback, and growth indicators like skill development.

Is it better to have informal or structured performance reviews?

Ideally, you need both. Informal check-ins keep things flexible, while structured reviews ensure consistency and accountability.

Should performance management be linked to compensation?

It can be—but be mindful. When done poorly, it can cause stress or unfairness. Focus first on development and transparency.

How can small teams manage performance effectively?

Keep it simple. Prioritize clarity, regular communication, and honest conversations. You don’t need complex tools to build good habits.

Final thoughts on building a strong performance culture

Performance management is about more than tracking metrics—it’s about helping people do their best work, grow in meaningful ways, and stay connected to something bigger.

Keep it clear, human, and useful, and it will become one of your strongest tools for building a thriving workplace.