We’ve all sat in performance reviews and whilst some might have made us leap for joy at the end, others, may have left us reeling in dread. The allure of the great performance review has been lost however, with many HR leaders citing that their performance review programmes are anything but effective.
However, if we were to take performance management reviews back to their roots and understand a new way of delivering them, could we be unlocking the full potential of our teams and individuals on a professional level that we may not have experienced beforehand? Would you feel better knowing that the work you put in day-to-day has an impact, and can lead to greater things if channelled correctly?
The answer is yes. We can achieve all of those things and even better have a review programme that really gets to the core of our daily professional lives. Now, more than ever, staff and management performance reviews matter.
With more people working from home, and in offices around the world, reviewing performance management is increasingly important to understand what motivates, what can help with morale and what makes your business perform better.
In this guide, you will learn about performance management, why it is important, what a Performance Management System looks like and how to improve it.
What is performance management?
Performance management is the process of monitoring, maintaining and improving an employee’s performance in line with the organisational and individual objectives that make up the day-to-day and longevity of a career and business operation. Performance management isn’t just about an individual’s performance, it can be about an organisation, a department or the processes that are in place to manage particular tasks.
Unfortunately, understanding performance management is more than just a simple definition, it embodies a wider ethos of creating a workplace that is centered around creating a two-way relationship between staff and management to maximise the performance of people and aligning that with the objectives of a business.
With both a mixture of informal and formal meetings, the idea of an effective performance appraisal is to learn and develop whilst measuring performance and organisational development. It is not to be mistaken for an annual performance review.
One of the keys for any business undergoing performance management is about defining and reviewing objectives, finding ways to link achieving those objectives to business plans, and understanding what the measure of success is. Meetings between line managers and employees will take place at an informal and formal level and these can be your performance reviews and appraisals.
It is therefore really important to have people managers that can work well with employees and understand the objectives of the business at the same time - so that they can reinforce the objectives of the business and give feedback that helps motivate them to achieve these shared goals whilst also holding them to account. It requires managers who are skilled to turn these ideas into objectives, and create an environment that allows staff to come to them with issues and ideas so that the organisation can benefit from each individual input.
The aims of performance management thus are multi-variant but can be best summarised as:
Setting and defining goals to fulfill business objectives
What does the business want to achieve? How quickly does it want to achieve it? What is going to be required to get to that point? What kind of environment needs to be created in order to get that level of performance and success?
Setting the right expectations for managers and employees
How do we want to best manage our staff in order to achieve these objectives? How specialist a skill set do we require, and how much can we train employees? What do we want our employees to bring to the table in both skills and knowledge as well as performance? How realistic are these objectives?
Effective communication between individuals and teams
How do we develop a team environment that fosters effective communication? What is the best way to get this information? Formal and informal meetings, even water cooler conversations can lead to impressive changes.
Set performance standards
How well the business performs can only be in line with how well the individual performs. Can the individual hold themselves to account as well as being held to account to get the business to the level it wants to achieve?
Determining individual training and performance plans
What does the individual require to achieve their goals? What training is required? How do we want to evaluate performance and how effective are the performance plans in helping them get to the level of performance they want to be?
Why is performance management important?
Performance management is equally important for two groups of people, employees and employers.
- Employees
Performance management for employees is especially important because it helps boost their engagement and productivity. The more employees are engaged, the longer they are going to stay in their roles and produce better results. Being able to improve engagement will, in return, boost ROI.
- Employers
Performance management for employers is important because it helps align organisational objectives, resources and systems to align to the strategic performance of the business.
So what are the advantages that can be gained for both staff and managers when effective performance management is completed?
Boosts morale
Did you know that 69% of employees say that they would work harder if they felt that their efforts were being recognised? It’s not just about pay anymore, understanding that people are motivated differently today. Everyone loves to be told what a good job that they’re doing. Understanding that a performance review provides the best opportunity to formalise the praise is important.
Performing regular feedback and reviews are key to maintaining employee morale.
Highlights training needs
What skill sets does your team have? What do they need to perform better? The more reviews you perform, (formal and informal) you will get a better understanding of your employees and the skill sets they require, especially before it affects productivity.
Performance management is about understanding where potential issues could lie and planning a route for your team to overcome them.
Workforce planning
What workloads are you facing? Do you know how taking on additional work could impact your current workforce? Having regular reviews will give you an indication of what is going on in teams and understanding what requirements are needed for your future work.
You may need to also bring in temporary help to cover the work or ask other departments to offer help and reorganise workloads accordingly.
Identifying employees for promotion
Reviews give you an opportunity to understand who is performing or not performing and in return, see who merits the opportunity for promotion or salary increases. This will create more transparency and opportunities for staff and also increase morale.
Deliver greater employee autonomy
Giving your employees an understanding of the wider business goals and how they contribute to achieving them, there is a greater acknowledgement and appreciation for the work that they do. How they go about achieving it and making their own choices is the most important aspect that is gained.
In return, employees are more committed to their work, happier, more productive and even more loyal.
What is a Performance Management System?
A Performance Management System is a method of tracking an employee's performance consistently and through measurable criteria.
A good Performance Management System will allow the company to make sure that employees and departments across the whole business are working to achieve the strategic business goals that have been set out.
A performance management cycle is an annual process in which employees are evaluated throughout the year. A performance management process is when employees and managers come together to plan, monitor, develop and review performance over the year.
Planning
This is about setting performance expectations on an individual and sometimes organisational level to ensure that organisational objectives are being met whilst also aligning personal objectives to the overall plan.
From a management perspective, having your employees on board to understand the goals set out will mean that they have a wider understanding of their role and what impact it can make to achieving them.
An employee at this phase will need to agree on a personal development plan which is discussed with their manager. What is expected of them, what their job role is and updating that job role if requirements have also changed. SMART objectives are usually set in this phase as well.
Monitoring
These are the steps taken to consistently measure performance and provide ongoing feedback to individuals and groups on how they’re going to achieve the goals laid out in the plan.
Managers have the opportunity to identify if there are any issues which the employee is facing, if they are behind or not being challenged enough in the role and where they may require further support or training to achieve the goals.
Employees can start to raise any issues in this phase. Maybe their original role has changed due to ongoing organisational changes or maybe they need to work with a different goal in mind as they’ve achieved what was laid out in their development plan.
Developing
What further actions need to be taken in the coming months to ensure that objectives can be met and that the employee remains motivated and happy.
For managers, this is about putting together training solutions or introducing new responsibility into the role or improving work processes so that employees can level up their skill levels to meet these requirements.
For employees this provides another opportunity to highlight anything they require and show where they have improved a process or their skill level in order to meet the organisational goals.
Rating and rewarding
Based on the timescale, you want to know at this phase how well it has all gone.
From a manager's perspective you want to be able to compare the goals set out at the start with those of the organisation and see if the employee, team, department has managed to reach those goals. Managers at this stage can even reward staff with either promotions, salary raises or handing over new responsibilities.
From an employee's perspective, it’s an opportunity to see how well they have done and what is further required to meet the objectives of the business.
Different types of Performance Management Systems
We understand that when good performance management systems are created, we can gain many different benefits. However, there are great challenges involved when it comes to managing large and varied workforces, not least employee reluctance.
Having different methods of evaluation is key in a performance management system. You can use systems such as:
Technology performance evaluation
How good are the employee’s technical skills? By using the employee's throughput it determines his or her technical abilities.
General appreciation
Constant communication between the manager and the employee throughout the year will determine whether the set objectives have been met. This is also a good method to provide feedback and set new objectives.
360-degree evaluation
Being evaluated by your peers is always a good experience to understand how you are doing. It can add to the evaluation process the manager uses.
Employee self-evaluation
Performing a self-evaluation is very common practice, and this is compared to the results of the manager’s assessment. Naturally, wherever there are differences, the manager will discuss these with the employee.
Because performance management systems are based on the appraisal and reviews of employees, there are many different kinds of performance management systems that can be used which will help with evaluating staff performance.
The balanced scorecard
The balanced scorecard combined four different business perspectives which include, financial, customer, internal processes and people. It helps companies understand and achieve their business objectives.
- Objectives; what is your business trying to achieve strategically. This is broken down into four perspectives.
- Measures; what are the KPIs that help you understand what you’re trying to achieve.
- Initiatives; what projects are you creating to help your team achieve the objectives laid out.
Management by objectives
Originally conceived by influential management consultant Peter Drucker, Management by Objectives (MBO) has many variations. Essentially it is based on creating a set of organisational objectives, which are then used as guideposts for creating individual employee objectives.
Some of the key characteristics include:
- Objectives are not necessarily linked to one-another
- Objectives must be set by leaders and employees together to create buy-in
- Objectives are the main focus and not how it is done
Budget driven business plans
Budget can sometimes overtake performance management and thus, work plans are based on what the company has to spend over any other criteria. Spending goes to projects and programs to deliver results. Some of the key characteristics include:
- Departments having to review project success and whether or not more or less budget should be appointed
- Finance drives the decisions over strategic business wants
- The development starts with a review of the finance teams spending, department by department
How to improve performance management
We’ve talked about what performance management is, and why it is important but you are probably wondering how you can go about improving performance management in your business.
We compiled a list of the top 8 Tips for Effective Performance Appraisals which can help with actionable steps to improve staff performance management.
What other actions can be used to improve performance management? Here are some suggestions:
Use SMART objectives
Specific, Measurable, Achievable, Relevant and Time Specific goals help not only simplify what you want to achieve but they help align what the greater strategic requirements of the business is with individual goals as well.
Get rid of tired systems
The old system of performing yearly reviews is a tired one. It doesn’t give enough opportunities to assess how someone is performing or note what they need in order to perform better. If something isn’t working and you leave it a year to discover the issue, then that’s both bad for you and the business.
Establish performance planning
Performance planning is best when it is based on established goals. It sets the stage for the year by communicating objectives and creating an action plan to guide employees to achieve those goals.
Identify and reward high performance
Reviewing performance over a year is problematic because you can be reviewing on a bell curve however, a bell curve is ideal for finding the outstanding performances in your team and business. You should be able to clearly see who is doing what is needed and exceeding those goals, in return, you should reward that exceptional performance.
Align individual objectives with corporate goals
Objectives and Key Results (OKRs) promote the link between individual contributions to the highest priorities. The higher someone is up in the chain of command the greater their corporate goal will be.
What this does is allow the employee to see what impact their role has in helping the business achieve its goals. As it is done organically, employees are more inclined to achieve goals and employers can track progress in real time.
Establish a continuous feedback system
Give staff the opportunity to discuss their performance on an ad-hoc basis - not just at their annual performance review. Take the opportunity to discuss performance both formally and informally, ensuring training and development are regularly offered when required.
Agree an effective way to measure and quantify success
How are you going to measure how well your employee is doing when you are no longer using an annual system? Will making them weekly reviews help you and them? The key is understanding what you are judging the employee against, and that is the performance for their specific role - and how it is helping the business achieve its own strategic targets.
How Thomas can help you get the most out of performance management
Performance management is the process of monitoring, maintaining and improving an employee’s performance in line with the organisational and individual objectives that make up the day-to-day and longevity of a career and business operation.
A Performance Management System is a method of tracking an employee's performance consistently and through measurable criteria. When combined, the management and the system are a powerful tool that businesses can use to understand how well employees perform and if the business is clear enough in its vision and goals.
The Thomas suite of psychometric assessment tools can help employers and line managers find the candidates who respond to certain types of training and motivation, and in turn create an action plan to help develop their goals alongside those of the business.
If you would like to learn more, please speak to one of our team.
