Effective leadership is essential when it comes to managing specific organizational issues, especially concerning the company’s performance. As a result of the ongoing evolution of performance management, leaders must have an efficient system in place. A competent leader accomplishes this by bringing the team members together to raise morale and encourage hard effort. Establishing goals for individuals and teams that align with the organization’s strategic objectives helps ensure that improvement in performance is a continuous process. This happens through of reviews and evaluation of performance and ensuring that skills and information are developed and improved. This paper will analyze the process of developing an effective performance management system for an organization and look into the situational leadership model to study its impact on performance expectations.