One of the many ways to measure an organization's success in meeting or achieving its strategic objectives is to evaluate the performance of its employees. This evaluation, if it is to be effective or of substantial value to the organization, it needs to be systematic and purposeful. In order to explain the impact that a performance management system can have on other areas of human resource management, it is necessary to define the relationship between a performance management system and human resource management.
First, a performance management system is one area of human resource management. It is now becoming a strategic issue for organizations, in their pursuit of addressing deficiencies in the performance of employees in a timely manner; channeling employees in the appropriate direction towards performance of specific objectives that are consistent with the work or overall strategies of the organization; and providing employees with appropriate and specific feedback to assist with their career development.
Secondly, a performance management system needs to be well conceived so that there is full concurrence on the system and that it is not viewed as a subjective tool to highlight employee weaknesses.
Human resource management involves "the development of a consistent, aligned collection of practices, programmes, and policies to facilitate the achievement of the organization's strategic objectives" (Mello 2002 p. 298). Given the fact that there is no single best way to manage people in any one organization, human resource management practices will invariably differ in organizations. The fundamental aspect of human resource management is the implementation of a successful people-management system that is supportive of the organization's mission and strategy. Human resource management therefore encompasses areas such as staffing, training, performance management, compensation and labor relations.