Performance management increases retention, boosts performance and promotes employee autonomy.
If you’ve ever been involved in an employee review, or sat down for a strategy meeting between an employee and a member of management, then you’ve already experienced performance management. But while these are reliable examples, the reality is that performance management goes well beyond the annual one-to-one with the boss.
Performance management is a set of processes aimed at developing an employee so they can perform their job effectively. It relies on ongoing communication between supervisor and employee in support of accomplishing the strategic objectives of the organisation. The goal of performance management is to improve employee performance in a way that is constructive and enduring—it is a continuous process that, when used correctly, can produce continuous improvement.
As previously stated, performance management is not restricted to the annual performance reviews; it’s a system that expands throughout the entire duration of an employee’s tenure with the company. As such, performance management includes every interaction that management has with an employee, at every step of the employee journey. Ideally, it should turn each of these interactions into a positive learning opportunity.
Performance management systems may take many forms, and yours will likely be unique to your company values, culture and goals. Nevertheless, most follow a similar structure. Common components/actions of a performance management system include the following:
Performance management is not a single event or tool. It’s not an employee review, survey or self-evaluation, and it’s not the technologies that exist to promote improved performance. Performance management is bigger; it encompasses and includes various actions and their associated resources, but performance management itself is a process—one that continues to take effect through the entirety of the employee journey.
For an organisation to be successful, it needs to have a clear idea of what its employees are doing. Without this knowledge, it is much more difficult for management to guide employees and accurately direct their efforts. Performance management creates a system designed to establish roles and responsibilities, recognise individual strengths and weaknesses, communicate feedback, reward exceptional behaviour and promote ongoing innovation. In short, performance management is important in that it gives teams and individuals the support and feedback they need to do their best.
Performance management exists to optimise employee performance, so it naturally delivers on all of the benefits that come as a result of having a workforce that is reaching its potential. This includes increased productivity and revenue. But more specifically, performance management helps address three major problems that most organisations face:
More regular, consistent communication and training improves employee engagement, which in turn has a positive impact on absenteeism, turnover, safety incidents, product and work quality, and customer experience.
Essentially, as employees see that you are willing to invest more time and effort into them, they are incentivised to invest more effort in your organisation. This means that they’ll be more likely not only to remain with the company longer, but also continually work to improve their performance.
Through effective performance management, you can groom your top employees for future management positions, providing training and feedback designed to help them develop the right leadership skills.
With the understanding that performance management is an ongoing process, it would be inaccurate to visualise it as a sequence of steps. Instead, think of performance management as a cycle—one that is constantly repeating itself, while also adapting to incorporate new discussions. Here, we take a closer look at the four phases of the performance management cycle:
The first phase of the performance cycle is focused on planning. Here, organisations and employees work together to establish expectations. Performance expectations may cover a wide range—everything from hours spent in the office to compliance with company policies, but they usually fall into one of two categories: results and actions. Results are what the employee produces or accomplishes, and actions are the methods and behaviours demonstrated during the process.
With expectations firmly in mind, work together to establish SMART (Specific, Measurable, Achievable, Relevant, Time-Bound) goals. These SMART goals should each contribute to various company objectives, but they should also relate to personal development for the employee.
Identify the actions that should be taken within the next few months. Then, review the performance expectations within the employee’s job requirements, and make updates where necessary. Remember that this should be a collaborative effort between management and the employee, working together to construct a personal development plan that can help guide future action and show the commitment that both sides have to improving performance.
During phase 2, employees review their goals and take necessary steps to achieve them. This phase is a continuous one, occurring throughout the year as employees work with management to implement and follow their personal development plans.
The tracking phase tasks management with monitoring employee progress, while also providing support wherever necessary. Committing to regular feedback allows management and employees to identify problems and make course corrections quickly, rather than waiting for these issues to become unmanageable.
In this phase, it is the responsibility of management to identify and mitigate any potential blockers that might be standing in the way, and to offer professional development resources, training and coaching to help ensure employee success.
The final stage of the performance management cycle brings the employee and management back together in a review setting. Here, they can discuss goal progress, assess training and development opportunities, review achievements, discuss possible advancement opportunities, reaffirm or re-evaluate career goals and evaluate the employee’s overall performance. This review is also an ideal time to work together to establish what steps should come next.
Again, relegating this phase to a yearly performance review may be an ineffectual approach. Instead, more regularly implementing this phase in concordance with the other three phases can ensure ongoing improvement.
Performance management can and should be tailored to the specific needs of your organisation. However, successful businesses have identified several basic elements that help contribute to performance management success. These elements include the following:
Although many will argue that performance management begins only after an employee has been hired, the truth is that by clearly identifying goals before even posting a job is fundamental to ensuring you are setting future team members up for success. Promoting effective performance management at this stage involves creating clear job descriptions and using an employee recruitment plan that identifies the selection team.
As you recruit skilled candidates for interviews, evaluate their strengths, weaknesses and abilities, as well as whether they will be a good fit for your established company culture. Meet with top candidates more than once, and use employee testing and assignments where appropriate to the position.
Once you’ve selected the best candidates, negotiate the terms of employment and finalise the hiring process.
Rather than waiting for employees to fully acclimatise to their positions, make sure to incorporate performance management into the onboarding process. Their first days and months in a new position is when an employee will be introduced to the people and processes they will be working with. Perhaps more than that, it’s when they will begin to get a feel for your company’s performance culture.
As new hires join your company, effective performance management incorporates new employee orientation. It may also involve assigning a mentor or taking other actions. The purpose of onboarding is to effectively integrate the new employee into your organisation and culture.
The earlier you can establish goals, the more quickly a new employee can begin improving their performance. Bring employees and their supervisors together early and often to negotiate requirements and accomplishment-based performance standards, outcomes and measures. Allowing employees to collaborate in setting their own goals and aligning them with larger company objectives leads to improved employee autonomy and ownership.
It’s worth reiterating that a yearly performance review may not be regular enough to effectively monitor and evaluate employee performance. Instead, effective performance management relies on a consistent cadence of meetings designed to help realign employee goals, prioritise projects and identify and mitigate any blockers to employee progress.
Top talent is exceptional for a reason: it drives itself to improve. If you hire skilled individuals but don’t offer them any chance at professional development, then they will likely grow bored and move on. At the same time, by improving employee capabilities, your organisation will benefit from the development of their additional skills. Allow for lateral movement within a company, as well as transfers to different locations.
Ensure that your performance management strategy includes robust employee development options, so that your most valuable resources don’t stagnate. This may include job shadowing and other education and training, as needed.
It’s natural to want to be recognised for a job well done. This is especially true for employees—when employee recognition is not included in performance management processes, employees tend to become dissatisfied and disengaged. Prioritise effective compensation and recognition systems within your organisation to reward your people for ongoing contributions.
Probably the most common theme in effective performance management is frequent feedback. Regular reviews and honest evaluations, along with quarterly performance development planning discussions, will give employees not only the insights they need to improve, but also show them that management is committed to their success.
Additionally, recognise that feedback flows both ways; allowing employees to evaluate management is also essential in improving performance. Assisting in exit interviews, for example, will allow you to gather vital feedback on possible issues within your organisation that might be contributing to turnover.
Businesses of all sizes need a proper performance management tool with the right features. The system should streamline the performance management process while easing it every step of the way. Some ideal tools include:
Learn more about what ServiceNow’s HR Service Delivery could do for your organisation.