There are many advantages associated with the implementation of a performance management system. A performance management system can make important contributions for employees, managers, the HR function, and the entire organization. Employees are likely to develop a better understanding of their strengths and weaknesses and of the kind of development activities that are of value to them as they progress through the organization and their future career path.

Receiving feedback about one’s performance fulfills a basic human need to be recognized and valued at work. This, in turn, is likely to increase employees’ self-esteem. Receiving feedback about one’s performance increases the motivation for future performance. Knowledge about how one is doing and recognition about one’s past successes provide the fuel for future accomplishments.

A good performance management system leads to enhanced employee engagement. Employees who are engaged feel involved, committed, passionate, and actively participate in support of the organization. An obvious contribution is that employee performance is improved. In addition, there is a solid foundation for helping employees become more successful by establishing developmental plans.

A well-implemented performance management system allows employees to make suggestions for changes and improvements that are innovative and can lead to improved organizational processes. The job of the person being appraised may be clarified and defined more clearly so that employees gain a better understanding of the behaviors and results required of their specific position.