What is a performance management system?
A performance management system is more than just an annual performance review as it can help employees improve on an ongoing basis through a variety of different components that support employee growth, engagement and success.
This type of system typically consists of four main elements: goal setting, regular feedback, formal performance reviews and employee development or performance improvement plans (PIPs).
Why implement a performance management system?
Performance management systems are useful tools for increasing productivity and overall employee satisfaction in the workplace. Other benefits of implementing a performance review system include:
- More opportunities for employee development
- Improved employee wellbeing
- More positive company culture
- Reduced employee turnover
- Improved management skills
- Ability to better identify training needs
Performance management helps your employees understand what level of work is expected of them, giving them a better understanding of what skills they need to work on and improve. This guidance often results in heightened employee morale and greater motivation to achieve goals. These reviews also help you build better relationships with your employees and develop more effective organizational goals.
The ongoing nature of a performance management system helps employers to:
- Identify what drives performance in the workplace. With only 26% of employees thriving at work, discovering the connection between performance and wellbeing could unlock greater creativity, innovation and AI adaptability.
- Work seamlessly with microlearning and gamification initiatives. Breaking down employee learning into brief, manageable, even fun tasks can help employees to learn key information without overwhelming them too much. Ongoing performance review management helps employers keep track of these small learning and development gains.
- Reduce recency bias. Ongoing performance review management systems have the capacity to be fairer. Rather than feedback on an employee’s performance from several months ago, they can provide managers with fresher and more timely feedback that’s more relevant and accurate.
You can break a performance management system down into three stages: before, during and after. In doing so, you can create a feedback loop where you can quickly analyze and respond to any ongoing performance feedback you receive from your employee. This way, you can develop personalized learning and development initiatives that benefit them more.
Before the performance review
Performance reviews require some preparation beforehand, such as clear, standardized goals, asking employees to complete self-assessments and gathering other important information about employee performance so far. By preparing, you are in a better position to provide insightful, actionable feedback that is easy for your employees to understand.
Here are a few ideas for what to achieve before a performance review:
Set clear goals
The first step in a performance review management system is setting meaningful and attainable goals for each employee. Creating goals sets performance criteria that employees will be graded on later in the performance review process. Try using the SMART goals system to set goals that are specific, measurable, achievable, relevant and time-bound.
Make goal setting a collaborative process to help create objectives that align with the company’s strategic goals and values and an employee’s individual strengths and career goals. This step is especially important to help keep employees engaged and productive because when an employee knows what their goals are, they’re more likely to stay at your company.
During the review
Once you’re in the process of reviewing an employee’s performance, check that you have readied any SMART goals, notes or important performance data you will need to accurately assess them. You might give some of these notes to your employee beforehand so they can better prepare for the conversation.
Formal performance reviews
A performance review, also known as an annual review, is an assessment that allows you to evaluate your employees’ success in the workplace. Through this formal review, you discuss each employee’s strengths and identify areas of improvement, then create a plan of action to meet improvement goals.
Common types of performance review methods include:
- 360-degree feedback: With this method, you receive feedback from everyone your employee interacts with, which may include peers, other managers, customers and vendors.
- Quantitative evaluation: This type of feedback is based on numbers and data, which may include sales numbers, customer satisfaction and quotas.
- Self-reviews: This gives employees a chance to reflect on their performance and gives employers a better sense of what employees have accomplished.
Using performance management software
Performance management software helps you keep track of all performance review information in one place, making it easier to access and summarize.
With new artificial intelligence (AI) performance management software on the market, employers might turn to these systems to provide recommendations and summaries of employee performance. Predictive analytics, for example, can also track trends and even suggest learning outcomes.
While performance review management can benefit from automated goal tracking and feedback, it could provide incorrect information about an employee. A personal approach can help make sure that any feedback provided to an employee is accurate, constructive, fair and sensitive.
After the performance review
Performance-related communications between you and your employee do not stop after the performance review. Take the feedback you have gathered on board and use some of the tips below to continue reviewing your employee’s performance:
Regular feedback
Giving frequent feedback can help your employees improve in real time, instead of waiting for the annual or quarterly performance review to find out how they’re doing. Consider scheduling weekly one-on-one meetings with each employee to give feedback on job performance and progress toward goals. Make sure your feedback is both specific and prompt.
Provide positive and constructive feedback and offer specific ways for employees to improve. When giving constructive feedback, try saying something like: “I would love for you to do more of [this behavior, task, responsibility]. Here are some ways to get there,” and provide some key examples. Encourage the employee to document any changes they make as well.
Employee development or performance improvement plans (PIPs)
The final step in the performance evaluation process is to offer career development opportunities for high-performing employees or implement performance improvement plans (PIPs) for employees who continuously fall short of goals.
PIPs are usually the first step in a progressive discipline process that addresses employee performance levels. They are usually formal documents that outline specific performance expectations and deadlines to meet them. Here’s how to create a PIP with a template and examples you can use to write your own.
How to conduct a performance review
Consider the following steps to conduct an employee performance review:
Set expectations at the beginning of the year
Typically, the most effective performance reviews are a culmination of strategic planning sessions and check-in meetings throughout the year. At the beginning of the year, give your employees a clear understanding of what work is expected of them and a specific pathway to reach their goals.
Prepare for the meeting a few weeks ahead of time
A few weeks before the formal review, start preparing your materials, which may include:
- Employee’s own self-evaluation
- Specific examples to explain strengths and weaknesses
- Feedback from key individuals, like peers and other leadership
- Goals and objectives were identified at the beginning of the year
- Any notes you’ve kept about the employee’s behavior or accomplishments
It’s important to keep notes regarding your employee’s behavior, both positive and negative, throughout the year to make sure their review is based on facts and real examples, rather than memories and assumptions.
Establish the purpose of the performance review
A performance evaluation provides your employees with valuable information they will take with them after the meeting. This information may be certain skills they need to work on enhancing, a specific goal they need to reach for next quarter or their future opportunities for growth in the department and how to advance.
Create an agenda for the performance appraisal
Before the review, create an agenda of what topics you’ll discuss and ask the employee to provide their own agenda as well. A performance review is a conversation, and both parties should have the opportunity to talk about their concerns and objectives.
Discuss highlights and challenges
During the review, follow both agendas, making sure to discuss both highlights of your employee’s work and ongoing challenges that need addressing. Identifying shortcomings is just as important as recognizing their achievements.
Discuss a plan of action
Determine future goals and what steps the employee needs to take to get there, including the employee’s own career goals and your company’s plans. Constructively coach them during this process by providing guidance and solutions, then agree upon actions you both must take to participate in your plan of action together.
Tips for conducting a performance review
Use these suggested tips to help conduct an effective performance review:
- Spend ample time preparing. Reviews may help increase employee productivity and morale, so it’s crucial to prepare ahead of time for the biggest impact.
- Use peer reviews lightly. Peer reviews help you gain a broader perspective of an employee’s work ethic but are just one form of feedback, not the driving force of your review conversation.
- Provide significant feedback. Employees need to leave the review feeling confident that they understand how to improve their skills and know what their future outlook is with the company.
- Create a follow-up plan. Following up helps you and the employee stick to the plan of action you created during the review to ensure goals are met by the next review.
Performance review management involves keeping track of employee performance on an ongoing basis, rather than occasionally throughout the month or year. By regularly assessing performance according to an organized plan, businesses can make sure their employees are on track to meet their professional goals.
Providing clear, constructive and actionable feedback is a key facet of improving performance, as well as identifying blocks such as a lack of resources or low morale. Finally, if you are particularly concerned about an employee’s performance, you can create an employee performance improvement plan to help them.
