This is an obvious first question that all CEOs (not only HR Directors) should ask themselves. By the prosperous times before Lehman Brothers collapse, this question didn´t seem so crucial, since money flowed profuse. Today the situation is completely different (maybe fortunately) and most of the corporate decisions must be solidly justified.
Let´s explain it simple.
1) Strategic alignment.
A PMS is a useful tool to make people follow corporate goals. Undoubtedly any strategic goal can be translated to personal goals and behaviours, so that personal accomplishment drives corporate success.
2) Provide feedback.
Any department or person needs a corporate reference to be aware if its performance is correctly oriented. Sometimes we look for this reference from clients, workmates, friends… but corporate feedback is irreplaceable.
3) Talent management.
What is the model that your performance in the company must be appraised under, what arguments should HR function use to decide who will promote, what candidate choose or who must have a higher variable salary? All that questions (and many others) must be responded by an objective and unique system (a PMA system). Of course these issues are anyway solved in companies, but the point is how to respond efficiently and fairly.
No matter if I was called by a well-adviced prospect or just I am talking with an expert in other managerial subject, the question remains. But if you really need a PMS, you will find the answer in one of these points, perhaps in the three.