In today’s era, the markets are getting intense gradually and the main reason observed behind this was the dynamic changes in technological innovations (Woodbury, 2014). Gentzkow and Shapiro (2008) did not supported the study of Woodbury by stating that the reason behind increased competition in the marketplace was due to the skills and competencies that are brought by employees within an organization. Similarly, it has stated by Bakker and Schaufeli (2008) that the market of skilled and qualified workforce has become scarce and it becomes very crucial for organizations to retain their key employees, which is the most challenging task. Bhatnagar (2007) mentioned that effective and spirited workforce is the most influential and strategic internal resources an organization could have. With such type of workforce, an organization can also become capable of dominating power over their rivals. Consequently, with the purpose of competing in the marketplace, organizations must have the skills to manage their employees appropriately and for this, it is essential for organizations to design effective and efficient performance management systems as their business strategy. This assignment has written in order to shed a light on the importance of performance management system as one of the effective business strategy that an organization can formulate and implement to manage and retain its key employees. The aim of this assignment is to evaluate role of performance management systems and its potential consequences on organizations.
Performance Management System
According to the study of Folan and Browne (2005), performance management system refers to a system through which managers assess and maintains performance of an employee by ensuring that organizational goals have consistently met in a most lucrative manner. The system acts as a tool through which not only profitability of organizations has enhanced; however, it also played an important role in motivating employees towards their duties and responsibilities. From strong perspective of Aguinis (2009), it is highlighted that there exists a strong linkage between performance management system and the improve performance of an organization. The better the performance of employees has managed; the better will be the productivity, which thereby strengthens position of an organization in the market.