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Annual Reviews are Out. Performance Management Is In

Stuart Hearn
Stuart Hearn

These are the core elements of an effective performance management system.

Performance management is a complicated and constantly changing field. It is an exciting, continuous process by which employees and managers collaborate to plan, review, and monitor objectives, engagement, progress, and overall contribution to the company. It begins before an employee is recruited and ends when an employee leaves your company.

Performance management is a multifaceted area and describing it fully and satisfactorily would take significant time and fill a number of books. However, below are the basics of performance management, what it involves and how to best tailor your performance management system to get the most out of your employees.

Performance management is evolving

In light of studies and surveys, as well as advancements in psychology, performance management duly adapts and evolves. There are many instances of how we have changed our workplace processes to better serve employees and motivate them to achieve greater levels of performance. As each generation enters the workforce, we learn that different techniques and approaches are required. As such, our performance management systems respond.

As an example, we can look to the traditional annual appraisal, which was once considered the standard of judging employee performance and progress. Over the years, it has become clear that single yearly meetings don't suit dynamic business environments, and they are becoming phased out in favor of more regular one-on-one check-ins.

Similarly, stacked ranking systems have fallen out of favor as we have learned how they impact employees' well-being. We have also changed the way we set objectives. This is what makes this area so exciting – there is always a new performance management trend to explore and implement.

It's concerned with employee engagement and motivation

Performance management is all about your employees. To get the most out of your workforce, you need to carefully tailor your performance management system to engage and motivate. If you have an old-fashioned, backward approach that generally disregards well-being, your business won't live up to its full potential, as it won't be filled with dedicated employees enthusiastic about its success.

It's therefore necessary to place an importance on employee recognition schemes, to constantly gather employee feedback and examine whether existing processes are efficient and beneficial in terms of engagement. There are a number of articles on how to better engage and motivate employees that can help you in this area. 

Performance management requires the exchange of feedback

Performance management necessitates feedback in both directions. Managers need to give detailed, informative and specific feedback to employees in order to drive great performance. Without reliable, regular feedback, employees will be uncertain as to whether or not they are performing to standard.

At the same time, employees need to be encouraged to give honest feedback to their managers. This is critical for the advancement of any company. If an employee struggles with a given process or believes it to be time-consuming and cumbersome, this is something to be taken seriously. Feedback should be regularly solicited and explored, and employees should be aware that their viewpoints are valued. 

It involves the creation of SMART objectives

SMART (specific, measurable, agreed-upon, realistic, time-based) objectives are at the heart of a truly effective performance management system. Worryingly, a remarkable percentage of employees report not knowing what is expected of them in their jobs. This is largely due to an inefficient goal-setting process. When this is the case, employees are unable to meet expectations or excel, because they aren't given the tools to do so. Rather than being a unified team working toward a particular set of company goals, you are left with confused individuals who want to do a good job but are unable to do so.

Traditionally, objectives were set at the highest level and trickled down to employees, but it has been shown that this form of goal setting is flawed. It is much more efficient for manager and employee to meet and collaborate on objectives. Employees should be given context regarding the direction of the company and its goals. Employees will then be able to use this information, in conjunction with their role, to assign themselves appropriate SMART objectives. This promotes a feeling of ownership and pride in their work, meaning employees are much more likely to accomplish their objectives in the long run. 

Effective performance management involves constant development and learning

No performance management system is complete without training and development. Employees are now increasingly looking for development opportunities when considering whether or not to take a job, so whether or not you focus on adequate training will seriously impact your recruitment efforts. Employees don't want to remain in a given position for years on end without opportunities for growth and advancement, so your performance management system should be crafted to account for development.

During your one-on-one meetings, cover personal development plans (PDPs) and let employees know what steps they have to take to climb the next rung of the ladder. Keeping track of the development progress of each and every employee might sound intimidating, but your company will ultimately benefit from engaged and highly skilled employees. You can also turn to HR tech, such as performance management software, to track employees' development needs and progress.

In essence, performance management is all about meaningful communication and an understanding that everyone in the company plays an important role. Remembering this will help HR executives craft and streamline performance management systems to create an environment that is engaging, motivating and welcoming.

Image Credit: Diego Cervo/Shutterstock
Stuart Hearn
Stuart Hearn Member
Stuart Hearn has twenty years of experience in the HR sector. He co-founded plusHR, a leading UK HR consultancy, and previously worked as International HR Director for Sony Music Publishing. Stuart is currently CEO of Clear Review, an innovative performance management software system.