Learn About Performance Management (What is it and How to Get Started)

What are the stages of performance management?

There are four main stages in a traditional performance management cycle:

Planning

This stage is devoted to creating performance expectations, which should be shared with employees. Job descriptions should delineate these goals in order to bring in the right workers. After a candidate is hired, you will need to reaffirm these standards and establish goals. Go over employee performance metrics together so that there are no misunderstandings.

Performance management plans should not be set in stone. Company objectives may change, and plans should be flexible.

It is essential to involve the employee in the planning process. This involvement increases motivation and satisfaction.

Monitoring

In the second state, managers and HR should observe employee performance and see if it meets the established goals. Provide feedback to workers concerning their progress. It is best to do this on a regular basis, rather than once or twice a year. This way, any problems can be corrected straight away.

Software can help track employee performance, though reports and data should not be a replacement for one-on-one conversations.

Developing

During this stage, gathered data is analyzed and acted upon to improve employee performance. To correct underperformance, HR may offer refresher courses, performance coaching, further training, or other learning and development methods. HR and managers can further improve performance by giving extra assignments that can help improve performance and knowledge. This will allow employees to further excel.

Rating and rewarding

This final stage involves reviewing employee performance. Performance should be given ratings throughout the year during an appraisal or performance review. This rating can help assess the value that an employee adds to a company. It also lets managers know when changes need to be made. For 360-degree feedback, employees should be given the opportunity to provide feedback to their managers.

If performance is consistently below average, a dismissal may be in order. A company should be sure to acknowledge and reward excellent performance. This reward may take the form of praise, a raise, or a promotion.

What are the best practices within performance management?

Examine what works and does not work

Prior to implementing any changes to your current performance management tools or process, you should understand what is working well and what is not. Human Resources should conduct a survey among both managers and employees to review opinions on the current process, as well as suggestions on what should change.

Aling with studies and research, these findings may be presented to executives and other decision-makers who can drive change in the company. It is important to show them the effect that a better performance management process has on the business.

Select the right approach

In performance management, there are two typical approaches. These are a behavioral method and a results-based method.

With the behavioral method, behaviors are recognized and assessed, and employees are reviewed based on their effort and behaviors. This method is helpful when planning desirable future behaviors, especially when individual results are difficult to quantify.

With the results-based approach, employees are assessed based on objective standards. In this case, the focus is on output with regard to quality and quantity. This is a good method when there are many ways to perform a job. The results matter more than the way they are achieved.

When selecting an approach, consider the particular role to ensure the efficacy of the performance management process.

You should also review the process as your work model changes. For example, perhaps your company is exploring remote and hybrid working models. According to a study by Willis Tower Watson, about 15% of companies have changed their performance management system to better fit hybrid and remote work models.

Meet and train managers

Managers are a key part of the performance management system. They are responsible for motivating, engaging, and developing workers. It is therefore critical that HR develops a plan for training managers in giving and receiving feedback.

Managers should receive training on how to establish an open, ongoing dialogue with employees.

Set SMART goals

Employees and managers should establish SMART goals for employee performance, bringing HR into the fold when setting employee development goals.

Every worker should have a personal set of KPIs, or key performance indicators. This way, they can better understand their manager’s expectations. It also allows their manager to monitor their achievements.

With these goals in place, you may measure performance and identify areas for improvement.

Apply ongoing performance management

Willis Tower Watson also discovered that over 90% of companies credited driving performance as a critical goal for performance management. However, less than half reported that their performance management program achieved that goal.

One of the main reasons for this is the lack of regular performance appraisals throughout the year. Similarly, there is a lack of one-on-one meetings where coaching and constructive feedback are provided.

Human Resources can teach managers how to effectively supply employees with constructive criticism. Such feedback increases motivation and identifies small issues before they become big problems. This system helps managers coach underperforming employees, providing them with the tools they need to get better.

Ideally, performance management is an open, continuous dialogue that happens many times during the year, not just at an annual meeting. With this approach, there is prompt feedback, goal-setting, and accurate reviews of worker performance.

More and more innovative companies are investing in agile performance management. This approach focuses on frequent check-ups, constant learning, and fostering trust and team bonding.

Set up a formal system

A continuous process of performance management improves employee motivation, performance, and engagement. That said, a formal appraisal or performance review system is just as vital. This system would reward top-performing workers, giving them a bonus, a raise, or a promotion for meeting certain objectives.

Help employees create development plans

When workers have a career progression plan with a company, they feel empowered at their place of work. This helps them to take control of their professional development, thus reducing the company’s turnover rates.

HR professionals should work with managers to better understand workers’ needs, help employees with any training, and schedule meetings to talk about career development.

It is notoriously difficult to implement employee development plans. This is because employees and managers are simply too busy. HR can help by creating templates that managers can use to establish development plans with team members.

Employ technology

The use of HR software and technology can improve the effectiveness and efficiency of the performance management pipeline. Data can provide patterns and insights that surveys and manual tracking cannot.

Technology, when used wisely, can save time. But it can only do so if a smart performance improvement plan is implemented. Managers should be able to see current data at any time to assess progress and re-evaluate goals.

That said, it is crucial to remember that performance management is focused on people. Software should not replace person-to-person dialogue, including difficult conversations between employees and managers. Managers should not shy away from this responsibility. But data has its place, and it can eliminate bias, facilitate honest conversations, and assure employees that they are being assessed objectively.

What are some examples of successful performance management?

HSBC

HSBC invested in a Human Resources mobile app that allows managers and employees to share feedback and document achievements.

Employees are able to review a to-do list, their development and performance plans, personal employment information, and online learning resources. With the help of the app, managers can set goals, review productivity, and manage approvals all on the go.

The app works well with remote and flexible working models. It has forged a stronger bond between employees and managers, with workers feeling better supported. End-of-year reviews feel more valuable.

Deloitte

Deloitte invested in a novel performance improvement program that had managers conduct frequent check-ins with employees about priorities, strengths, and performance. Employees filled out surveys that helped team leaders see the process from their point of view and make adjustments as necessary.

All employees also received custom career development plans. And everyone received the help of a career coach to help them develop their abilities.

Data has helped Deloitte’s underperforming employees respond to constructive criticism and take action. It has also improved the company’s understanding of its staff, tam, and trends in leadership that were previously invisible. One example of this is the link between frequency of feedback and employee performance.

Ikea

Ikea’s mission was to boost business performance by improving leadership and management skills. The company implemented a training program for management, testing it on 750 managers in the UK. This training included developing coaching skills, an interactive seminar, certification, as well as the recognition of coaching champions.

Managers who received this coaching witnessed their departments undergo a 5% KPI increase. They saw a 30% increase in management ability scores.

What is the difference between performance appraisals and performance management?

Performance appraisal refers to the individual meeting between an employee and their manager. These sessions typically occur twice a year, or even just once a year. Performance management, by contrast, is a regular, objective, and systematic process of training an employee to do their job to the best of their ability. Performance appraisal is therefore a component of performance management.