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Last updated: 23.08.21

What is Performance Management?

Performance management is the process of communicating, measuring and reflecting on the progress and performance of employees within an organisation, in line with overall business goals. The success of a company is largely dependent on how well its employees are performing, so this process ensures that every member of a team is working to the best of their ability, is having their needs met by their employer, and is held accountable for the work they do and the progress they are making.

The majority of companies have performance management systems in place so that employees have access to the feedback and support necessary to work to their full potential. Most performance management programs involve several different approaches and processes instead of just a single activity, as this means that employee performance can be assisted in a variety of ways, such as career development, pastoral support and success in the role.

Whether you’re an employee taking part in workforce performance management or a manager who is responsible for handling their team’s own performance, this article covers everything you need to know about the concept.

The Essentials of Performance Management

All performance management strategies are different, but several key principles influence each one of these approaches and should be considered when coming up with your own method of managing performance.

Goal Setting

Without setting clear goals, a performance management program cannot be successful. Not only do goals ensure that all employees are working toward things that will benefit the business, but it also gives employees an objective and creates a measurable aspect of performance that can be tracked and recorded.

Every business will have a different way of setting goals, but what is important is that employees have been allowed to identify areas where they would like to improve, understand what metrics indicate positive performance, and put a plan in place for how they are going to achieve those goals.

Coaching

Facilitating employee development and growth is a very important part of performance management, where techniques such as coaching are used to help members of a business reach their full potential and learn helpful strategies for success.

Coaching might involve the implementation of a mentorship program in the workplace to allow for senior employees to offer support and guidance to those who have less experience. You may also set up coaching partnerships within a team that helps members of staff learn from one another and provides them with a peer-to-peer support system for reaching their goals. Coaching and wider learning opportunities could also involve funding training courses for employees to expand their talents or offering workshops within the company that target the development of certain skills.

Accountability

An essential part of successful development and performance at work is accountability. Whether the employee in question is a manager or a member of staff with less responsibility, feeling a sense of accountability for pursuing personal goals and wider business goals means that you’re much more likely to make a tangible effort and succeed.

A performance management program should be set up so that everyone involved feels responsible for their own performance and holds themselves accountable for the progress they make. A key part of this is ensuring that company culture also involves accountability and praises employees who actively work to improve themselves and the business, as this means you’ll already be working with people who want to make progress.

Frequency

In order to keep maintaining momentum and motivation towards reaching goals and improving performance, a key element of performance management is frequency. There don’t need to be official meetings with every employee at a frequent rate, but there should be protocols put in place to ensure that everyone in the organisation gets the chance to reflect on their progress and get additional support and feedback if needed.

If there are only quarterly or annual performance reviews with employees then it is likely that the goals set at these meetings will be forgotten if not promoted, which is why frequency is an important factor in successful performance management. There are different ways in which to do this, whether you organise peer-to-peer check-ins, hold team meetings every month to review goals or just encourage employees to chart their progress so that goals and performance are kept in mind.

Align with Business Goals

Perhaps the most important element of performance management is ensuring that employee goals line up with overall business goals. This means that the individual progress that is made by everyone in a company has a positive impact on the business as a whole, and helps company values to be embodied by all the work that takes place.

To help business objectives inform performance management, these overall goals should always be used as a starting point when it comes to setting employee goals. It can also be beneficial to set up a process or system that rewards certain employees who have been embodying company values or working particularly hard to make progress towards company goals, as this will encourage more cohesive progress and provide incentive.

Rewards

Leading on from that last point about incentives, rewards are also an essential element of workforce performance management. Recognising the hard work that employees do by rewarding them is a great way to boost morale and keep everyone motivated to reach their goals and improve their performance at work.

Many traditional performance management approaches use pay raises, bonuses, or promotions as rewards for hard work and progress, but you can do a lot more. Simply highlighting good work with an ‘employee of the month’ system can be rewarding enough, or you can offer incentives like extra paid leave, a voucher or gifting employees with an experience if they are performing particularly well.

Feedback and Development

Finally, a performance management program must have an element of feedback and adaptation in order to be successful. Reviewing overall company progress and making necessary changes is commonplace in most businesses. This process should also be applied to the current system of performance management to ensure that it serves its purpose and actually makes a difference.

Getting feedback from employees must be a part of this, as managing performance in a way that nobody in the company is actually happy with will not lead to a developing and motivated workforce. Feedback sessions can be organised separately or made a part of other performance management sessions, but getting feedback and suggestions from staff needs to be included in the overall framework.

What are the Advantages of Performance Management?

Performance management systems look different for every organisation, but the overall process of measuring, encouraging and supporting employee productivity and growth is beneficial for everyone. Here are some of the key advantages:

  • An increase in employee engagement
  • A more motivated workforce
  • Higher employee retention
  • More satisfied members of staff
  • A clearer understanding of performance and goals
  • A more cohesive workforce
  • More opportunities for learning and professional development
  • Risks can be identified sooner
  • An increase in overall business performance
  • A more talented workforce is cultivated
  • Clearer expectations for each role
  • An increase in workforce efficiency

What is the Performance Management Cycle?

The performance management cycle is one of many models used to facilitate performance management. It focuses on several key areas to set goals, review progress and provide an incentive for success.

Most performance management models begin with the planning stage. This is where areas of potential development are identified, goals are set and any other needs are discussed. After planning, the next stage of the cycle is to monitor growth and progress on an individual and company level to ensure that progress is being made and that the program positively impacts the overall business.

The reviewing stage of the performance improvement cycle comes after the monitoring stage and involves reflecting and giving feedback on the progress made towards achieving personal goals and making any necessary adjustments. This feeds into the next stage which is development, where goals are adjusted and expectations are gradually raised to keep driving business growth and employee progress forward.

The final stage of the performance management cycle model is rewarding, which is what drives the other stages forward. This reward motivates employees to work towards their goals and is an essential part of making your performance management program engaging.

FAQs

What is the difference between performance management and performance appraisals?

Performance management is the process of monitoring and supporting employees in their roles to improve productivity, efficiency and satisfaction in the role. A performance appraisal, on the other hand, is the process of sitting down with an employee and evaluating their performance over some time to identify successes and areas for improvement or where support is needed.

A performance appraisal is often a part of performance management, but the two are very different concepts.

What is the bell curve in performance management?

A ‘bell curve’ is a type of data distribution that peaks in the middle, and is sometimes used in performance management as a type of appraisal system. The idea is that employees are placed somewhere on this bell curve based on their performance in their role, and this is used to determine which ones need additional support, which employees should be rewarded for their efforts, and which might be better off leaving the company.

The bell curve is not often used in performance management anymore as it is quite a reductionist method of assessing performance and doesn’t account for external factors that might be affecting how well an employee can do their job.

What is a performance management framework?

A performance management framework is a summary of all the internal processes that take place within an organisation that make up its approach to employee performance management. It offers a strategic approach to managing performance and means that there is a core document that can be consulted, reviewed and updated if necessary. 

Summary

There used to be a very rigid set of ideas and processes that made up performance management, but now more and more companies are using more organic ways of measuring progress and performance and helping their employees to grow. Understanding the essential elements of this concept is very useful however, whether you’re currently rethinking a method of managing performance, taking part in a new scheme or are implementing it in a workplace for the first time.

If you’d like to find out more about performance management, we offer an online ‘Performance Management’ course as part of our new Leadership and Management resource collection that covers how best to review, inspire and facilitate exceptional team performance.

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