Performance management includes long- and short-term goals—both measurable and quantifiable—coupled with appraisals, and plays a very crucial role in the effective management of business in today's competitive world. This paper analyzes the current performance management systems followed in the Indian banking sector. The results reveal that private sector banks have more quantifiable and objective performance management systems compared to their public sector counterparts. The paper articulates four major components of a performance management system—performance standards, performance measures, reporting of progress, and quality improvement—and suggests that there is ample scope for improvement of performance management systems in the banking sector.

When you are driving, you only glance at the rear view mirror because if you stare too long, you might just crash. This holds equally good for organizations. Several organizations are however now looking in the rear view mirror at the road they have traveled, by focusing on the historical performance appraisal methods.

In the current work culture, terms like performance appraisals, performance reviews, and performance evaluation are universally disliked and are usually dropped in usage. That is because employees would not want to hear that they were less than perfect last year. Even managers do not like these terms because they would not like to engage in unpleasant arguments and lower the morale of employees resulting from such reviews.

With this background, the concept of performance management is a "big picture", which includes long-term and short-term goals, measurable and quantifiable goals and performance appraisal. The traditional approach has primarily been concerned with the overall organization and has focused more on the past performance. The new approach to performance appraisal has been identified as the developmental approach, which views employees as individuals and is forward looking through the use of goal setting.