Organizations gain competitive advantage by outperforming rivals in performing tasks required to ensure optimal operational effectiveness in delivering products and services to customers (Porter, 1996). Operational effectiveness depends largely on the extent to which the organization's performance management (PM) system is able to develop the knowledge, skills and abilities of its people (Allan, 1994). Therefore, knowledge of developing and implementing an effective PM system plays an essential role in achieving a competitive advantage. Using the table provided in Case Study 1-1 (Aguinis, 2009, pp. 24-25), this paper analyzes the content and effectiveness of the PM system used by Aeternus Life Insurance Corporation (renamed to comply with confidentiality agreements) to develop its people. An effective analysis of a PM system begins by comparing the characteristics of the actual system to those of an ideal system, then evaluating the system's ability to identify, measure, develop, and align performance with organizational objectives (Aguinis, 2009). Value of an Effective PM System Overall, an effective PM system contributes to the achievement of organizational strategy, administration of employee transactions, communication of organizational performance expectations, human resource planning, and employee development (Aguinis , 2009). In addition to the elements corresponding to conducting performance evaluations, the ideal PM system addresses several key characteristics that contribute to the alignment of performance with strategic objectives. Overall, an effective PM system represents a “. . . systematic, data-driven approach to managing people at work that relies on positive reinforcement to...... middle of paper ...... task management (2nd ed.). Upper Saddle River, NJ: Prentiss HallAllan, P. (1994). Design and implement an effective performance evaluation system. Business Review, 16(2), 3.Daniels, A. (1989). Performance Management: Improving quality and productivity through positive reinforcement. Tucker, GA: Performance Management Publications. Hopkins, S., & Weatherton, B. (2006). The relationships between justice perceptions, trust, and employee attitudes in a downsized organization. Journal of Psychology, 140(5), 477-498. Porter, M. (1996). What is strategy? Harvard Business Review. Retrieved from http://hbr.harvardbusiness.org/1996/11/what-is-strategy/ar/1Scott, S. G., & Einstein, W. O. (2001). Strategic performance assessment in team-based organizations: One size does not fit all. Executive Management Academy, 15(2), 107-116. doi:10.5465/AME.2001.4614990