What is performance management?
The most common performance-management definition is as follows:
Performance management is the process of overseeing employee activities to create a healthy and efficient work environment. In a positive environment, employees put forth their best effort, making performance management an effective way to increase productivity.
Performance management vs. performance appraisal
Performance management is different from performance appraisal due to its focus on being proactive. When you do a performance appraisal, you review the employee’s performance from the previous month, quarter or year. Even if you provide actionable feedback, the appraisal does nothing to correct performance issues in the moment.
In contrast, performance management is an ongoing process. If an employee needs to improve in a specific area, you don’t have to wait for their next appraisal. You can deliver corrective feedback as the need arises.
In this way, performance management is both an encouragement strategy and a mitigation method. Its purpose is to address work-related productivity problems before they become habitual.
Performance management doesn’t involve evaluation forms, appraisal meetings or the use of metrics to track and assess an employee’s performance at set intervals. It’s much more proactive.
An effective performance management system follows the entire employment lifecycle, beginning when you hire an employee and ending when that employee leaves your organization. Ideally, this process creates a learning environment in which you and your employees focus on constant improvement, increased productivity and better outcomes.
The purpose of employment performance management
The main goal of a performance management system is to help employees align their work with the company’s expectations and goals. This includes understanding the company’s overall vision, core values and policies.
Components of a performance management program
There are many performance management software packages and templates, but they’re often customized to the type of company using them. However, programs typically have these elements in common.
Mission alignment
The program should aim to align employee goals and productivity objectives with the company’s central mission. Before you set goals, it’s important to review your company’s mission statement to ensure you understand what employees should be striving to achieve.
Work-specific performance analysis
A performance-management program should help employees understand exactly how their duties affect company outcomes. This includes understanding how their performance affects coworkers, supervisors and customers.
Measurable performance expectations and outcomes
Employees and managers should work together to establish measurable goals and outcomes. The employee should also have the right to give input on how they think their success should be measured.
Well-defined job duties and best practices
Employees and managers should be able to clearly define their work and explain how they can improve it through new procedures, new knowledge, or updated work policies. This involves defining job duties and establishing best practices to maximize productivity and promote positive employee/employer relations.
Regular meetings
Performance management is, by definition, an active process characterized by frequent communication and feedback. It depends on regular interaction, clear discussions and frequent (but concise) meetings.
Embracing the true performance management meaning
When implemented correctly, performance management leverages ongoing accountability and regular, honest mutual communication to improve employee performance.
By shifting away from annual reviews and focusing on consistent feedback and personal responsibility, you can create a more open and communicative environment for everyone in your workplace. Open discussions between employees and managers increase employee engagement, reduce work stress and build a stronger commitment to meeting company objectives.
These four components are essential for the effective performance management of employees.
Planning
Your performance management system should start at the beginning of the employment process. When preparing job descriptions for new hires, develop a clear recruitment plan and identify the skills, attributes and qualities you seek in an ideal candidate. Include your company values in each job description to attract candidates who are motivated by a similar vision.
Acting
As the leader of your team, it’s essential that you’re aware of all your employees’ projects and activities. Don’t wait until an employee is finished with a project to review their work. Take time to discuss their progress and offer guidance and encouragement throughout the process. Engaging regularly will help increase team members’ skills and confidence and improve employee-manager relationships.
Additionally, work to increase employee satisfaction and motivate performance by developing attractive compensation packages, providing career development opportunities and defining clear paths for career advancement.
Monitoring
This component requires you to supervise employee progress and identify potential roadblocks or obstacles that may prevent your staff members from performing at their best. It also ensures that you recognize employee achievements and successes so your employees are aware of their accomplishments and further motivated by them.
Monitoring also helps employers provide the appropriate education, training, coaching and feedback necessary to help employees improve their performance.
Reviewing
The review component focuses on results and goal achievement. To begin an employee evaluation, walk through their accomplishments within a specific timeframe. This also involves asking team members to share what they learned from the process and what they will focus on improving in the future.
You can also take this opportunity to highlight your employee’s contributions toward company objectives. The more employers recognize and show appreciation for employees, the more likely the employees will be to see the value in their efforts as part of your workforce.
Shifting to a performance management process from a traditional employee evaluation system can take time, but using this approach can benefit your organization by creating a more satisfied and motivated workforce.
By following the steps above, you can begin integrating the performance management process piece by piece into your business with minimal disruptions to productivity.
Benefits of performance management for businesses
When implemented effectively, the performance management process can significantly impact the productivity of the workplace. The most common benefits of performance management include:
- Improved accountability. Employees in a performance management environment are held accountable for their actions on a regular basis. Due to the regular check-in system, if an employee makes a mistake or struggles to complete a task, the manager is able to quickly address the issue and determine the source of the problem.
- Increased transparency. Implementing the performance management process often lessens the tension between managers and employees by making their relationships more transparent. Because they communicate so regularly, managers and employees may be more likely to be open and honest when discussing issues or suggesting improvements. Encouraging mutual feedback also helps employees feel like their opinions and feelings are heard and respected.
- Effective communication. With traditional performance appraisals, employees have to wait for feedback on their performance. Performance management improves communication by ensuring employees receive immediate feedback, giving them opportunities to correct their behavior.
- Higher employee retention rates. Performance management is about more than delivering constructive criticism. Ideally, you’ll tell employees what they’re doing right. Therefore, implementing a performance-management system shows employees your company is dedicated to their professional growth. As a result, your performance-management system may lead to better retention rates.
- Enhanced collaboration. Performance management makes it easier to identify skill gaps and determine what type of training your employees need. As employees gain new skills, they become more productive, enhancing collaboration. For example, if an employee has a chance to improve their communication skills, other staff members may find it easier to work with them on group projects.
Performance management: Best practices for managers
There are several practices and behaviors that managers can use to improve their performance management skills.
Find the best person for the job
The first step in effective performance management is to select the right employees for specific positions. During the interviewing process, managers should ask questions that help them understand the applicant’s strengths and weaknesses.
They should determine how well the candidate would function within the company’s culture and work environment. The best hiring processes are comprehensive, evaluating the applicant’s skills, qualifications potential to succeed.
Provide high-quality training
In many workplaces, a new hire learns through the process of on-the-job training. Ideally, this training will come from a specific mentor who has been assigned the responsibility of introducing the new employee to the position and answering all of their questions.
The training should familiarize the new hire with their role in the team, the daily performance expectations and the environment in which they will work. At the end of the training period, the new employee should feel confident and prepared to begin working independently.
Focus on improving communication
It is crucial for managers to communicate effectively. Whether they’re giving instructions or providing constructive feedback, it’s important they be skilled in both verbal and written communication.
Ideally, if an employee is struggling or feeling frustrated, they should be able to immediately reach out to a manager for support. Managers who are available to talk and willing to listen are more likely to be able to motivate and inspire their team members.
Performance management FAQ
Does performance management require special software?
No, it doesn’t. You can apply performance management strategies at any time without any particular software suite or implementation package. Performance management is more of an interpersonal process than a simple evaluation metric that relies on consistent documentation.
Can I apply performance management in a small business?
Yes. You can even apply performance management in a business with just a few employees. In fact, this level of growth is ideal for getting started with performance management and incorporating it into your company’s culture.
Does performance management apply only to full-time staff?
Not at all. Performance management can be implemented for every staff member in your company, not just full-time employees. It can work well for part-time employees and even contractors.
What are the primary concerns of performance management?
The primary concerns of a performance management system include:
- The output of employees and the organization as a whole
- The processes required to reach business goals
- Regular reviews of employee performance to ensure the achievement of set goals
- Continuous improvement as a result of the performance management system
- Transparency and fairness regarding decision-making and performance management
