Performance management has come a long way since the term performance appraisal first came into being. It’s far more important today than it was ever before.
Most employees and managers dread the idea of a performance appraisal. Even high-performing team members often get defensive about their work, while managers brace themselves for confrontations.
In fact, 81% of HR managers are changing their performance management strategies to increase employee engagement. With this guide to performance management, you’ll understand the best approach for a successful, highly productive workplace.
All organizations are perfectly designed to get the results they are now getting. If we want different results, we must change the way we do things.
What is Performance Management?
Performance management is essentially an ongoing communication process between employees and management. It’s a strategic feedback system that aligns the company and employee goals, creating high engagement and employee satisfaction.
We often assume that performance management means the tools used in appraisal meetings,
Performance management is much more than that. It supports every human resource management level, right from onboarding to retaining employees.
What is the Purpose of Performance Management?
The primary purpose of performance management is to clarify an organization’s expectations of its employees. When a team knows what goals they’re working towards, productivity increases. More specifically, a performance management system:
- Outlines clear definitions of the company’s goals and expectations
- Improves productivity from all parties
- Enhances leadership skills in HR managers
- Identifies performance rewards to incentivize good performance
- Increases employee engagement and retention
How to Achieve Effective Performance Management?
There are four main steps to an effective performance management process:
- Train Managers on Effective Performance Management
- Identify and Reward Top Performers
- Address and Improve Poor Performance
Good performance management begins with competent leadership. Managers must understand how to set the right goals and objectives and communicate effectively with their team.
Remember that goal setting is a collaborative process, so HR managers must work with company members at all levels to ensure that everyone is on the same page. Goals may include problem-solving, rewarding good performance, and growing the bottom line.
Employee recognition is another ingredient of effective performance management. Team members who feel appreciated for their work are more productive, and are always looking for more feedback with over 52% of employees seeking more recognition from their managers. Implement a formal employee recognition program with a clearly defined reward system. This continuously identifies and appreciates your team’s performance.
No employee wants to confront mediocre work, but poor performance must be identified and improved professionally. Poor performance may arise due to:
- High-stress levels in the workplace
- Increased workloads
- Poor leadership
- Ill-defined roles
- Ineffective performance appraisals
- Lack of recognition
An effective performance management system helps HR managers to communicate clearly with their team, identify challenges and chart a practical course to improve performance.
As mentioned above, performance management is more than the paperwork involved in an annual appraisal. Employees need authentic managers who inform them of key company decisions and listen to feedback.
The more open and frequent the communication channels in a company, the better the overall performance. This real-time approach eliminates the anxiety of the annual performance review and replaces it with the beneficial effects of continuous performance management.
Importance of Performance Management
A performance management system helps in three critical areas of an organization:
1. Employee Engagement
When a performance review happens only once a year, employees go for long periods without knowing if their work makes much of a difference to the company. This indeed kills employee engagement since most teams prefer real-time performance feedback for their motivation.
Ideally, your performance management system should have daily, monthly and quarterly feedback between leaders and employees. This keeps company goals in focus and facilitates faster problem-solving.
2. Employee Retention
Employees are more likely to stay in an organization if they have frequent and consistent performance discussions with management. Companies can use a performance management system to develop their employees professionally, offer incentives and rewards for good performance, and give training and upskilling opportunities to their teams.
3. Leadership Development
A performance management system encourages partnership between leaders and their teams, which has two key advantages. First, leaders become more effective at guiding individuals and groups towards company goals. This is a considerable challenge given the diverse backgrounds, personalities, and skills employees bring to an organization.
Secondly, performance management can quickly identify potential leaders within employees. You can train team members with exceptional interpersonal skills for more suitable or higher positions within the company, which saves on recruitment and turnover costs.
How to Choose a Performance Management System?
The aim of the performance management system is to automate performance tracking and communications in an organization. When choosing a performance management system, consider these factors:
Top Performance Management Features
Ensure that your performance management system offers performance reports, continuous performance tracking, peer-reviewing or 360 degree performance reviews, and integrations with other on-premise and cloud-based applications.
Choose a performance management system provider with a great customer service record. This is especially crucial for enterprise-level companies that need to integrate the system for hundreds, even thousands of users.
Self-evaluation is an integral part of performance management. Your system should have employee portals that allow your team to:
- Set their own goals
- Update their milestones
- Conduct self assessments, and peer reviews
- Access monthly, quarterly and annual performance reviews
A performance management system should be intuitive, easy to navigate, and accessible on different devices. All your users should be able to use the performance management system with as little specialized knowledge or training as possible.
Data analytics give you insights into your team’s performance. The performance management system can draw on historical data to offer career forecasting using AI, much better than a human HR manager can.
Profit.co’s performance management module combines the flexibility and versatility of a continuous feedback system with the analysis and in-depth dashboards that your team needs to properly monitor employee performance.
Performance Management Best Practices
Here are the essentials of performance management to implement in your HR strategy.
Identify your goals
As an organization, what do you want to accomplish? Goals include:
- Increased productivity
- Streamlined processes
- Talent building and retention
- Higher revenues
- Improved customer relationships, and much more
Describe Each Goal in Detail
Performance management means that you define the ultimate results and identify the actions that lead to those results. For example, if your goal is to retain talent, your efforts may include training and mentorship opportunities for team members.
Get feedback about each plan from employees and top management since your performance management system is for everyone’s benefit.
Consistently Monitor Progress
Your performance management system should include metrics that measure your team’s success. For example, if your goal is higher productivity
- Count the number of hours worked
- Leads collected
- Sales revenues
- Resolved customer inquiries, and so on.
These metrics generate valuable data about your team’s performance.
A monthly performance management meeting is the best way to identify and solve problems before they overwhelm your team. More frequent meetings save time, too. Shorter meets are more efficient than day-long annual meetings. Even a full day may not be enough with so much time between the performance meetings.
Create Solid Guidelines
Identify the specific opportunities, limits, and room for experimentation for each performance goal. Close-ended guidelines are much clearer for your team to follow, rather than open-ended guidelines that raise more questions than answers.
Give Constructive Feedback
A performance management system should have less finger-pointing and more constructive, open feedback. An organizational culture of respect will reduce tensions during your performance meetings. Remind your team that you’re all working towards the same goals, and everyone is accountable for their role in the company.
Meet With All Departments
Performance management workshops should include all the departments in the company, not just the sales and marketing teams. You’ll discover innovative ways to build upon each unique business element for your success.
Offer Training For Managers Too
Every member of your organization can benefit from training opportunities, not just your employees. Managers can engage with specialist mentors or coaches to further develop their skills or enroll in higher education opportunities that add value to their careers.
Continuously Reward Performance
You don’t have to wait for the end of the year to reward good performance in your team. Set performance standards and reward them as soon as they’re achieved. Offer unique rewards beyond monetary compensation. Use a tiered reward system as well to recognize both minor and major achievements.
Acknowledge All Performance Challenges
Performance challenges stem from many places, not only from employees. For example, your team could be 100% motivated and effective, but they may lack resources because of supply chain disruptions, internal bottlenecks, or outdated company policies.
Performance management becomes a highly effective and enjoyable process for leaders and teams in any organization with the right approach. The key is to step away from traditional, paper-based, annual performance reviews. Embrace an ongoing performance evaluation process with the help of technology. Use this guide to create an effective performance management strategy today.