Performance Management
- andresalyza123
- Jun 30
- 5 min read
HSC Business Studies | Free Study Notes
Performance management is the human resource strategy used to monitor, assess and improve employee performance. In HSC Business Studies, this topic sits within Topic 4: Human Resources and is important because employee performance affects productivity, customer service, quality and overall business success.
Performance management can be developmental or administrative. Both approaches help a business manage employees, but they are used for different purposes.
In this lesson
what performance management means
the difference between developmental and administrative performance management
how appraisals are used
why feedback matters
how performance management can improve business performance
Core notes
What is performance management?
Performance management is the process of setting expectations, monitoring employee work, giving feedback and taking action to improve performance.
It helps a business answer questions such as:
Are employees meeting expectations?
Are employees achieving targets?
Do employees need more training?
Are employees ready for promotion?
Is poor performance being managed fairly?
Are rewards linked to performance?
Performance management is not only about judging employees. It should also help employees understand how they can improve.
This links closely with training and development strategies [Training and Development Strategies], because performance feedback can identify skill gaps and training needs.
Developmental performance management
What is developmental performance management?
Developmental performance management focuses on helping employees improve and grow.
It is used to support employees by identifying strengths, weaknesses and future development needs.
Developmental performance management may involve:
coaching
mentoring
training recommendations
setting improvement goals
identifying career pathways
giving constructive feedback
discussing future skills
The main aim is to improve employee capability and support long-term performance.
Benefits of developmental performance management
Developmental performance management can help a business:
improve employee skills
increase motivation
build confidence
support career development
reduce staff turnover
prepare employees for future roles
improve productivity over time
For example, if an employee is strong at customer service but weak at using a new sales system, the manager may provide training and set a goal for improvement.
This links with development [Development], because both focus on building employee skills and future potential.
Administrative performance management
What is administrative performance management?
Administrative performance management focuses on making formal HR decisions based on employee performance.
It may be used to support decisions about:
pay increases
bonuses
promotions
warnings
transfers
demotions
dismissal
contract renewal
Administrative performance management is more formal and is often linked to records, policies and procedures.
Benefits of administrative performance management
Administrative performance management can help a business:
make fair and consistent decisions
reward strong performance
manage poor performance
provide evidence for HR decisions
improve accountability
support legal compliance
For example, if an employee consistently fails to meet targets after support and warnings, performance records may be used to justify further action.
This connects with legal influences: employment contracts [Legal Influences: Employment Contracts], because performance decisions must be fair, documented and consistent with workplace obligations.
Appraisals
What is a performance appraisal?
A performance appraisal is a formal review of an employee’s work performance.
It usually involves a manager assessing how well the employee has met expectations or targets.
An appraisal may consider:
quality of work
productivity
attendance
teamwork
customer feedback
achievement of goals
workplace behaviour
skill development
areas for improvement
Appraisals may be completed annually, twice a year or more regularly, depending on the business.
Why appraisals matter
Appraisals help managers and employees discuss performance clearly.
They can be used to:
recognise strong performance
identify training needs
set future goals
discuss career development
address performance concerns
support reward or promotion decisions
For example, a manager may use an appraisal to identify that an employee is ready for a leadership role but needs communication training first.
This links with career development [Development], because appraisals can help employees plan future progress.
Feedback
What is feedback?
Feedback is information given to employees about how well they are performing.
Feedback may be:
formal, such as during an appraisal
informal, such as a quick conversation after a task
positive, to recognise good work
constructive, to suggest improvements
Feedback should be clear, specific and useful.
Why feedback matters
Feedback helps employees understand what they are doing well and what needs to improve.
Effective feedback can:
improve employee confidence
correct mistakes early
increase motivation
clarify expectations
support training
strengthen communication
improve performance
For example, instead of saying “your work needs to improve”, a manager could say, “your customer response time is slower than the target, so we will practise using the new enquiry system to help you respond faster.”
This connects with communication [Communication], because effective feedback depends on clear and respectful communication between managers and employees.
Improving performance
How performance management improves employee performance
Performance management can improve employee performance by making expectations clear and providing support.
It can help employees improve through:
goal setting
regular feedback
training
coaching
performance appraisals
recognition
improvement plans
career development discussions
For example, if a sales employee is not meeting targets, the manager may review sales data, identify weaknesses, provide coaching and set a new target for the next month.
Linking performance to business goals
Performance management should connect employee performance to business goals.
For example:
if the business wants better customer service, employees may be assessed on customer feedback
if the business wants higher productivity, employees may be assessed on output levels
if the business wants improved quality, employees may be assessed on error rates
if the business wants stronger teamwork, employees may be assessed on collaboration
This links closely with strategic role of human resources [Strategic Role of Human Resources], because HR strategies should help employees contribute to long-term business success.
Developmental vs administrative performance management
Developmental and administrative performance management are both useful, but they have different purposes.
Developmental performance management focuses on:
improvement
training
growth
coaching
career planning
future performance
Administrative performance management focuses on:
formal decisions
rewards
promotion
warnings
dismissal
records and accountability
A business may use both approaches. For example, an appraisal might identify training needs for development, but also provide evidence for a bonus or promotion decision.
Why performance management matters for business performance
Performance management matters because employee performance directly affects how well the business operates.
Effective performance management can help a business:
improve productivity
improve quality
increase employee motivation
reduce poor performance
identify training needs
reward strong performance
support fair HR decisions
improve customer service
retain skilled employees
Poor performance management can lead to confusion, unfairness, low morale, workplace conflict and reduced productivity.
A strong performance management system should be clear, fair and linked to business goals.
Worked example
Exam-style question
Explain how performance management can improve employee performance.
Sample answer
Performance management can improve employee performance by setting clear expectations and giving employees feedback on how well they are meeting those expectations. For example, a manager may use a performance appraisal to identify that an employee is not meeting customer service targets. The manager can then provide feedback and recommend training to help the employee improve.
Performance management can also motivate employees by recognising strong performance. If employees know that good performance may lead to rewards, promotion or career development, they may be more motivated to work productively. This can improve employee performance and support the business’s overall goals.
Common mistakes
Thinking performance management only means punishing poor employees.
Confusing developmental and administrative performance management.
Writing about appraisals without explaining how they improve performance.
Forgetting that feedback should be specific and useful.
Not linking employee performance to business goals.
Quick quiz
What is performance management?
What is the main purpose of developmental performance management?
Give two HR decisions that may use administrative performance management.
What is a performance appraisal?
How can feedback help improve employee performance?
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