What are the strategies for effective implementation of performance management?

Performance management is an important tool for all companies. It can promote a greater sense of well-being among employees, as well as cultivate learning and growth. That being said, how do you know that your company’s performance management system is working?

What Is Performance Management?

Performance management is the key, systematic process through which organizations can improve the performance of individuals and teams. However, it is important to note that performance management is not just the actual evaluations themselves, but the overall system put in place to execute these assessments. In addition, performance management is crucial in generating a work environment in which employees are encouraged and enabled to perform to the best of their abilities.

Why Is a Performance Management System Important?

With evolving challenges facing companies, many organizations have shifted their focus to management systems and improving employee performance. Having a well-defined and easily executed system can optimize potential interactions into opportunities for employees to grow and learn. Only 8% of companies believe that their current performance management system is effective in its task of driving value within the company. In addition, 58% believe it is ineffective and tends to waste time. Developing a useful performance management system within your company can reduce this waste and increase the productivity and success of employees.

How Can It Help?

In addition to productivity benefits, having an effective performance management system can create connections among your organization’s policies, practices and departments. This communication can create higher caliber employee performance. A performance management process can better integrate any human resource goals you might have by reinforcing the company’s ideals. This can also create ties among HR practices to complement and strengthen them, therefore reinforcing the conditions that produce desired employee performance.

When effectively applied, performance management can help your company to create and sustain high levels of employee satisfaction and engagement, leading to greater levels of performance within the workplace. The support created through the effective use of performance management encourages employee well-being, meaning employees are more likely to deliver better performance outcomes. Your system should create a structure through which teams and managers can generate an environment where employees can contribute and grow within the company over time.

What Should a Successful Performance Management System Look Like?

The important question in integrating a new performance management system, or even updating an existing one, is how to get started. There are many different ways you can go about setting up your company’s process—it mainly depends on what your company is looking to get out of it and how you want to accomplish goals. That being said, a good place to start is with some simple goals that will lead your performance management strategy.

Some useful performance management activities could include objective setting, creating feedback options, the performance review or appraisal itself, as well as employee development. These activities should all contribute to ensuring that people:

• Understand what is required of them—including results and behaviors
• Understand how to contribute to the goals of the organization
• Are motivated to perform—and perform well
• Have the skills and abilities to deliver required performance levels
• Are supported by the organization in meeting what is expected of them
• Understand how they are performing based on useful feedback
• Deliver the required performance
• Are rewarded appropriately for their hard work and contribution

By establishing these objectives, you guarantee that employees understand what is required of them, feel supported in achieving what is needed and are given regular feedback to enable them to continuously improve. Therefore, employees add greater value to your company through improved effectiveness.

Performance Management Should Be Cyclical

Performance management should be looked at as a cyclical, ongoing process instead of an annual, rigid performance review of employees. Your company’s system should allow employees to receive continuous feedback on their performance and clearly reiterate what it is that is expected of them on a daily, monthly and yearly basis. Additionally, the emphasis should be on ongoing, evolutionary monitoring and evaluation. Current practices need to be able to evolve as the company does, and should encourage learning among employees that generates growth and improvement.

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Performance management is important to get right and easy to get wrong. We explore the fundamentals of effective performance management, and how to keep your strategy on track

Getting performance management right is crucial for organisation’s success in today’s cut-throat business climate. But making the shift from annual appraisals to a continuous and more informal approach performance management isn’t straightforward. Here, we explore why performance management is important if your organisation wants to get ahead, the hallmarks of an effective strategy, and the role of technology in getting performance management right. 

What is performance management?

Before diving into the characteristics of a good strategy, let’s start with a definition of performance management. The CIPD, the professional body for HR in the UK, describes it as the “activity and set of processes that aim to maintain and improve employee performance in line with an organisation’s objectives.”

This definition is deliberately broad; there is – unfortunately for an organisation hoping to overhaul its performance strategy with as little effort and as much speed as possible – no single template for effective performance management. The ‘how’ and ‘what’ you do in terms of performance management depends on your organisation’s culture and objectives: one size certainly does not fit all. 

Why bother with performance management?

In today’s knowledge economy, many companies’ performance depends solely on the output of their workers. If their people perform to a satisfactory or suboptimal level, then the overall business performance will follow suit. But if people are supported to perform brilliantly, then the company will enjoy success as well.

Introducing strategic performance management will help employees to understand what is expected of them and how their goals contribute to the organisation’s overall success. It should also help to motivate employees; ensure that they have the right skills, developmental support and resources to achieve the tasks and standards that are expected of them; and make sure that employees are held accountable for achieving their goals.

What are the characteristics of effective performance management?

Many organisations have fundamentally rethought their performance management strategies in the recent past. Before the 2000s, many companies – including a significant proportion of the world’s biggest and most successful businesses – relied on annual appraisals and forced rankings of their workers’ performance, with the lowest-ranked staff routinely dismissed.

This approach not only served to foster a sense of internal competition that made collaboration and team-working difficult, many companies realised that it was a waste of valuable time (Deloitte calculated it was spending 2 million hours a year on performance management), and that Managers and employees hated it (a 2015 Willis Towers Watson survey found that 45% of managers didn’t value their company’s performance management system). Nor was this approach still relevant to the way businesses operated: the rapidity of change in the 21st century meant that holding employees to account, once a year, for goals that were set 12 months ago just wasn’t useful: their aims and priorities were shifting much more quickly than ever before. And, because appraisal conversations tended to focus on past performance, companies that were struggling to build their capabilities for the future were missing out on forward-looking conversations with staff about their career development.

According to Acas, the four fundamental components of effective performance management are:

1. Employees being set standards and goals, against which their performance will be measured
2. Managers and individuals meet to discuss their performance
3. Employees are assessed against their performance standards and goals
4. Employees’ performance is recorded

The CIPD notes that effective performance management comprises both operational and procedural elements and should be managed through a holistic range of HR activities and processes. Your strategy should also have clear aims: is its goal to recognise and reward staff? To ensure organisation objectives are met? Improve staff performance? To help staff develop? To identify and solve problems? Or a mix of some or all of these elements?

A classic performance management cycle will involve four stages: plan (set and agree objectives); act (achieve objectives); track (measure progress, offer coaching and feedback); and review (of achievements, learnings, and next actions). The regular check-in conversations should strive to cover goals (which are agile and responsive to business need), career development, and real-time feedback.

Your performance management strategy – and the system of policies, procedures, and digital tools that support it – should align with how your people work. Check-ins and the sharing of feedback should not only be honest, but regular: “the content of these conversations will be a direct outcome of their frequency,” writes Marcus Buckingham and Ashley Goodall in the Harvard Business Review. “If you want people to talk about how to do their best work in the near future, they need to talk often.”

What are the obstacles to effective performance management?

Unfortunately, introducing an effective performance management strategy isn’t as simple as designing a process and instructing people to follow it: a culture of continuous, honest and constructive feedback is required to support the strategy.

Managers will also need support, and possibly training, from HR, in order to have effective developmental conversations with their people. For, as Terry Gillen, author of Great Appraisal, writes: “If someone’s not skilled at doing appraisals annually, aren’t we compounding the problem with more regular conversations?”

There are other pitfalls to navigate, too. Writing in the Harvard Business Review in 2016, Peter Cappelli and Anna Tavis highlighted five key challenges that HR professionals will have to navigate in implementing – and maintaining the effectiveness of – a performance management programme:

1. How to align organisation-wide and individual goals
2. How to reward good performance (without ratings and rankings)
3. How to identify poor performers
4. How to mitigate the risk of discrimination and bias
5. How to manage the volume of feedback being given and received (which might be overwhelming for some staff, and insufficient for others)

Acas recommends carefully monitoring key metrics associated with your performance management strategy so you can understand how it is working and if it needs to be reviewed. Such metrics might include the number of completed performance management records, the quality of performance management records, and staff retention and absence levels. It also recommends that performance management programmes be reviewed if your organisation undergoes major change, such as a shift in its vision or goals, or alterations to its structure or working practices, and if new technology that would simplify the performance management process becomes available.

How can technology facilitate performance management?

Digital tools – such as Ciphr’s talent management functionality – can help support your performance management efforts through customisable online review forms, objective setting (including linking individuals’ goals to organisation-wide objectives) and performance dashboards for line managers and HR users. Automatic notifications can also be used to remind managers to carry out regular reviews, particularly at key points such as role anniversaries, and after a period of absence.

This article was first published in October 2012. It was updated in November 2019 for freshness, clarity and accuracy.

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