Many organisations have performance management systems that look good on paper. Employees have scorecards. Managers submit ratings. Annual reviews happen. But beneath this polished surface, a critical question remains: Is the system actually helping the business win?
Performance management should be more than a compliance exercise. It should be a strategic engine — driving clarity, accountability, growth, and ultimately, business results.
For CEOs and other senior leaders, diagnosing whether the current system is truly working requires asking the right questions. Not tactical questions about forms or deadlines, but deeper questions about alignment, culture, fairness, and impact.
Here are seven powerful questions that help executives uncover whether their performance management system is genuinely building value — or simply consuming resources.
l Are our people’s goals explicitly linked to strategy?
Every employee in your organisation should be able to look at their goals and see how those goals connect to the bigger picture — your business strategy. This means understanding how their daily work contributes to where the company chooses to compete (the “where to play”) and how it plans to win in that space (the “how to win”).
If your people can’t trace a clear line from their goals to your strategic priorities — such as increasing market share, reducing costs, or launching innovative products — then you have a problem. You are likely managing busy work, not progress. A good performance management system helps employees see the value of their contribution, which drives focus, motivation, and strategic alignment.
l Are performance conversations frequent and high quality?
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One of the biggest flaws in many organisations is the belief that performance management happens once a year — during annual reviews. But true performance improvement happens in the moment: during regular check-ins, coaching sessions, and problem solving conversations between managers and their teams.
The real question is: Are your managers having these kinds of conversations regularly? Are they helping their teams improve, learn, and adjust? Or are they just filling in forms once a year?
A lack of regular, high quality performance conversations is often not a process issue — it is a culture issue. It reflects whether leaders see performance as something they manage continuously or something they review at year-end.
l Are our KPIs evidence-based, balanced, and predictive?
Not all KPIs (Key Performance Indicators) are created equal. Some measure what’s easy to track, not what really matters. Others are lagging indicators — they tell you what happened in the past, but don’t help you predict what is coming.
A strong performance system includes KPIs that are chosen carefully: They are evidence-based, meaning they are grounded in research or data that links them to business outcomes.
They are balanced, combining both financial and non-financial indicators and a mix of short-term and forward-looking measures. And ideally, they are predictive, helping leaders act before problems grow. Without this kind of rigour, your KPIs are just noise — and decisions made on weak data can lead to costly mistakes.
l Is the data accurate, timely, and trusted?
The best designed performance system is useless if the data going into it is poor. If employees don’t trust the numbers, if data is outdated or incomplete, or if reports take weeks to produce, then the system won’t support real decision-making. It will be seen as irrelevant or worse — manipulative.
Organisations need to ensure their data is accurate, updated frequently, and easily accessible to decision makers. This includes both quantitative data (such as performance metrics) and qualitative data (such as feedback or coaching notes).
When the data is clean and trusted, leaders can use it to make better, faster decisions. When it is not, they either ignore it — or use it in ways that create confusion rather than clarity.
l Do employees perceive the system as fair and developmental?
Even if a performance system is technically sound, it can still fail if people don’t believe it is fair. If employees think ratings are biased, promotions are political, or feedback is inconsistent, their motivation and trust in the system will collapse. And once trust is lost, it is very hard to rebuild.
That is why fairness and transparency are critical. Employees should understand how their performance is being evaluated, have opportunities to give input, and see clear links between performance and outcomes — such as development opportunities, pay increases, or promotions.
Organisations should also monitor how different groups (by gender, race, department, or geography) experience the system.
A fair system is not just an ethical requirement — it is a strategic advantage for attracting, keeping, and growing talent.
l Are managers held accountable for coaching and follow-through?
Many companies say they want managers to coach their teams — but then only evaluate them on whether they submitted ratings on time. If you want performance to improve, you need to hold managers accountable for the right behaviours: Giving feedback, guiding development, following up on action plans, and helping employees overcome obstacles.
This means going beyond checkboxes and forms. It means training and supporting managers to become better coaches — and then measuring whether they are doing it. A performance system that rewards coaching behaviour turns performance management from a compliance activity into a culture driver.
l Can we prove a link between the system and business results?
At the end of the day, the most important question is this: Is the performance management system helping the business succeed?
Can you draw a clear, measurable link between performance efforts — such as goal-setting, coaching, or reviews — and business results such as improved productivity, higher profitability, reduced risk, or better customer outcomes?
Too often, performance management is seen as a human resources cost rather than a business investment. But when done right, it delivers tangible returns. It helps teams stay focused, improves execution, strengthens leadership, and drives continuous improvement. If those links are not visible in your data and results, then your system may be well-intentioned — but ineffective.
Conclusion
As a CEO or senior leader, your job is not to know every detail of the system — but to ask the right questions about its impact. These seven questions provide a powerful lens for identifying whether your system is working for you — or just keeping people busy. A high impact performance management system is one that builds clarity, motivates action, and moves the business forward. If yours is not doing that, it is time to redesign — not just the process, but the thinking behind it.
- Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. — Linkedin: Memory Nguwi, Mobile: 0772 356 361, [email protected] or visit ipcconsultants.com.
