Performance Management is vital within any organization. Armstrong and Baron 2010 define performance management as "a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance." Performance management is not simply providing an annual review for the employee, but is about working together with the employee to identify strengths and weaknesses in their performance. Most managers and employees dislike performance management process of their respective organization. What managers hate most about their job, is performance management because they don’t know how to do it effectively.

The Key steps in developing an effective performance management system are:

1. Organization’s Objective: One of the significant obstacle of performance management is the indistinctness of the organizations as well as  employee’s objectives. The employee should know what is expected from them all the time. Surveys suggest that many employees complain that they are unaware of what the organization expects from them. Hence, every employee need to know all the hows, whats , whys and whens related to their work. An organization can work better when an employer views the task through their employees' eyes.
2. Communicate: Managers should not limit communication to just problems even if they lack time. They should instead increase the horizon of communication by providing  continuous coaching, training, communication through regular emails, face to face meetings etc. It will help the employee to know the acceptable standard of the employers expectation. In short – Try to communicate multiple times in multiple ways.
3. Document: Maintain records of your employees successes and failures. keep the document short, factual and behavior based. A concrete feedback is the key to success under performance management process.
4. Frequency of appraisal: Multiple Assessment and Self Assessment: Performance management should not be once a year event there should be a continuous dialogue between manager and an employee, because employees have a legitimate need to know how their performance is viewed. Also, the supervisor has a legitimate reason to conduct performance appraisals.
5. Frequent Feedback: The optimal way to manage performance is to measure it on regular and informal basis. Conduct formal meetings to confirm and maintain records of what has been discussed throughout the year. The most important key to effective performance management is, First – No Surprises and Second – no selective memory by the manager or the employee. The effective performance management helps to create a motivated and committed workforce.
6. Development & Support: Provide development opportunities to the employees, giving them  chance to do new things, learn new things, develop professionally in terms of Individual and as a team, promotion, multiple projects etc. This will statistically help organization to create a high performing team with high level of productivity, retention, motivation and satisfaction towards work.