What is Performance Management? Definition, Types, and Examples
Table of contents
- What is performance management?
- What makes a good performance management program?
- Why is performance management important?
- The challenges of traditional performance management processes
- What does the traditional performance management cycle look like?
- What is continuous performance management?
- How to build an effective employee performance management system
- Examples of performance management processes
- FAQs
Performance management is one of the most important processes a company can implement, yet only 6% of CEOs think their organization’s performance appraisal systemOpens in a new tab is beneficial. Developing effective ways to manage talent and give employees the feedback they need to do their jobs effectively is essential, no matter what industry you’re in or how many people you’re responsible for managing.
In fact, a high performance management system can help you keep your employees engaged while achieving important organizational goals. The future of performance management is today, and you won’t want to miss out.
What is performance management?
Performance management is a work process that allows managers and company leaders to stay up to date with their employees’ performance. If you're wondering what is enterprise performance management, it refers to this system on a larger scale, helping organizations better track and assess how well individual employees complete their tasks and individual goals.
Continuous performance management helps you create an environment where all employees can do their best work and feel empowered to take control of their own professional development.
See how we can help you create a culture of continuous performance management.
Performance appraisal systems aim to measure employee progress toward various goals, milestones, and strategic initiatives. They establish a baseline to determine employees’ performances over a certain period of time, whether it be a 90-day check-in for new hires or a quarterly catch-up.
What makes a good performance management program?
A successful program focuses less on managing, and more on developing employees by providing coaching, training, and performance management tools to help them learn more about their performance and how they can continue to improve in their roles.
Prioritize developing a foundation for constructive feedback to aid in your employees’ growth. Consider using an agile software solution to spark a culture of feedback and continuous performance improvement.
See also: Crafting Compelling Performance Review Phrases: A Comprehensive Guide with Examples
This unique solution can boost the effectiveness of your feedback strategy with useful features, such as:
Check-ins
Build trust between leadership and employees by driving more frequent communication and by allowing employees to create agenda items, deliver progress updates, and outline discussion points.
Real-time, crowdsourced feedback
Learn and grow in the moment when employees at all levels across the company can give or receive feedback from co-workers and managers alike at any time, rather than at the end of the year.
Priorities
Connect employees’ strategic objectives to company values by helping them create and manage their short-term goals during check-ins.
Formal assessments
Use assessments like annual or semi-annual reviews to complement check-ins to help measure employee performance as a whole. Formal assessments are also useful at the end of a project or business quarter and leverage performance improvement plans to help employees succeed.
Integration
Recognize high performers and promote learning and development by integrating your performance strategy with Workhuman’s Social Recognition® capabilities.
Why is performance management important?
Effective performance management systems help foster a mutually beneficial relationship between employees and the people who lead them. Continuous feedback can enhance trust in a company and help everyone feel properly supported.
A study by ValamisOpens in a new tab found that employees are almost 50% more likely to have an above-average financial performance if they meet to review their goals at least once each quarter. Having a system in place to manage and develop performance, whether by business cycle or year, can help with:
Keeping employees engaged
Having proper performance management mechanisms in place helps employees become more engaged in their work because they’re aware of what’s expected of them and can take the steps necessary to ensure that they’re on track.
Retaining talent
Performance management also makes attracting and retaining talent easier, as employees who feel empowered by the organization they work for are more likely to invest in a long-term career within that organization.
Developing leaders from within
You can use your performance management program to assess a variety of key performance indicators, or KPIs, to measure employee performance over a certain period of time and identify potential leaders within the organization. This internal mobility can save you from having to invest resources in recruitment.
Identifying training and development opportunities
Through performance management, you can assess the skills that employees need to develop more easily. You can then design training and professional development opportunities to help them build those skills and boost their performance.
The challenges of traditional performance management processes
According to the Association for Talent Development, just 14% of organizations report being happy with their performance management system. Without a performance management program in place, you have no way to support employees and keep their performances in line with your organization’s mission.
Even if you do have a program to monitor performance, getting it right can sometimes be a challenge. Often, performance reviews occur too infrequently to be effective, and the feedback employees do receive may not always be productive or useful by the time they get it.
In fact, 2021 research found that 88% of employees desire the same level or more feedback from their managers. Workhuman research also found that employees who check in with their managers at least weekly are 2x as likely to trust and respect that person and feel they can grow within the organization. They’re also 5x less likely to feel disengaged.
What does the traditional performance management cycle look like?
The traditional performance management cycle typically includes the following five steps:
- Planning
- Monitoring
- Developing
- Rating
- Rewarding
Let’s dig into each step a little deeper.
1. Planning
During the planning stage, you first organize a meeting among your organization’s human resource professionals to decide on long-term goals and an annual business strategy. These company goals should be specific, measurable, attainable, and time-bound.
Then, it’s beneficial to consider just what you want employees to be doing to achieve those goals and what development mechanisms you might implement to help them along the way.
The challenge: To plan a year in advance not only requires a significant time commitment, but it also doesn’t account for the many inevitable changes and shifts that happen in twelve months. By the time the year ends, the things you planned may not have even happened.
2. Monitoring
The monitoring phase of the process requires organizational management to meet with the employees they’re responsible for evaluating on a monthly or quarterly basis and reevaluate their goals and, if necessary, adjust them.
Breaking employee goals down into smaller, more bite-size objectives can also be useful during this phase, especially as business circumstances and larger organizational goals change.
The challenge: On its own, a monthly/quarterly check-in is good practice, but only meeting four times a year may leave employees feeling under supported and on their own.
3. Developing
This stage in the process consists of providing further support to employees and empowering them to succeed in their roles, whether through employee development opportunities or training. Regular training can inspire employees to build their skills and take on new responsibilities. Consider areas where employees may need extra help and the processes you could implement to help them overcome the challenges they’re facing.
The challenge: Professional development can happen at any time, and sometimes it doesn’t come from a training course. Managers should be actively checking in on the status of these training sessions and the morale of the employee.
4. Rating
At the end of the year or quarter, employees and management meet to discuss their goals and determine whether they were able to meet them. This phase of the cycle presents a great opportunity to create an inviting and collaborative environment to build trust. Managers may consider each goal separately and each employee might describe how well they felt they did.
The challenge: To rate an employee is to treat it like an asset, rather than a person. Strong bonds between managers and employees come from a mutual understanding that we are all human and are bound to make mistakes. Rather than punishing employees for past performance, work to break the cycle with positive reinforcement.
5. Rewarding
By rewarding employees, you motivate them to continue to strive to meet company goals and let them know that the organization appreciates their talents. For the final phase of the management process, create a fair system to reward high-performing employees. After this phase, the process begins again.
The challenge: Rather than wait to reward employees, managers should provide support and appreciation at different, more frequent times throughout the year.
What is continuous performance management?
Continuous performance management can have a significant impact on employees, and it has many benefits in comparison to more traditional methods of performance management. It puts employees at the center of the feedback process and helps them feel positive about taking control of their own professional development.
For many years forward-thinking companies have adopted a continuous performance management approach. Many are now using continuous performance development as a way to complement the annual review, enabling them to weave in a consistent stream of feedback, check-ins, and priorities throughout the year.
This strategy is a win-win for both the employee and the organization. Now is the time for other organizations to get on board.
The basic elements of continuous performance management include:
Ongoing check-ins
Foster a collaborative environment by developing a system of ongoing check-ins so employees don’t feel like they’re in the dark about performance standards.
Provide the opportunity for managers and employees to meet to discuss their progress and goals throughout the year. This way, they can address changes as they occur and focus on streamlining the performance management process as much as possible.
In addition to ongoing check-ins, managers should also meet with employees to discuss their talent development strategy and career goals.
See also: Team vs Individual Performance
Goal setting
Inspire employees and managers to work together to set goals and performance expectations, so they’re both on the same page. Before and after a check-in, employees should have a thorough understanding of their goals.
Not only does discussing and setting goals make it easier for employees to perform at their absolute best, but it also simplifies the feedback process for managers.
Seeking feedback
Continuous performance management is ultimately about fostering growth and creating an environment where people feel comfortable freely requesting and receiving feedback.
Typically, employees feel more comfortable receiving feedback when there are mechanisms in place to encourage them to ask for it. When feedback occurs more often, it becomes easier for managers and employees to develop mutually beneficial and constructive working relationships.
Rewarding
Continuous recognition and rewards help employees feel inspired and appreciated by company leadership. Rewards can range from big to small: A monetary bonus, additional vacation time, a promotion, the chance to work on a special project, or a small gift. Regardless, having a solid employee recognition program or rewards system helps to build a culture of gratitude and trust.
How to build an effective employee performance management system
Traditionally, annual reviews and performance appraisals have been the most common forms of performance management. While there are still some benefits to these two methods, there’s no denying that they have their limitations.
There are many innovative ways to get employees to perform at their highest potential. With an increasingly agile business environment, there’s a lot of benefit to making your performance management system agile as well.
Ask yourself these questions:
- Do managers have the tools to handle the performance management process?
- Do you deliver continuous performance management?
- What aspects of performance management could provide the most benefit to employees?
- Do you have a culture of open and effective communication?
- What can you do to help employees feel more comfortable seeking feedback?
Best practices for a continuous performance management systems
Consider the following best practices for implementing an employee performance management system:
Identify goals in your performance management strategy
Consider the goals you want your strategy to achieve. Use the SMART frameworkOpens in a new tab to develop goals you can track and measure easily. Keep in mind these goals will likely change throughout the year.
Pair goals with a performance plan
Performance plans are formal business documents that outline your goals for employees. They provide employees who might struggle to meet certain goals with the chance to succeed in their roles. It’s always good when employees can receive clarity on their duties and how they align with their employer’s mission.
Offer actionable feedback
Make sure the feedback you provide to employees is useful. Actionable feedback enables employees to take real action. This means that it’s consistent and precise and makes it easier for employees to produce results that can benefit the company in the future.
Train management on effective feedback
Develop a few coaching questions for managers to use to motivate their employees. The best performance management strategies require managers to be present, alert, and in tune with their employees. They recognize the importance of empowering and coaching their employees, rather than micromanaging them from afar.
Take advantage of multiple-source feedback
Consider implementing a system where feedback can come from anywhere in the company. This can give employees – and their managers – additional insights into their performance while increasing accountability.
Key elements your system should include
In order for a performance management system to be successful, it has to have more than just a space to input meeting notes. A good performance development tool supports:
- Goal setting
- Self evaluations
- Feedback requests
- Employee recognition
- In-app reporting based on clear goals and metrics for success
Workhuman's Conversations®Opens in a new tab® can help you establish an effective performance management system and allow anyone in your company to take part in any of the above activities and more.
Examples of performance management processes
Here are some real-world examples of performance management processes:
IBM: The leaders at global technology giant IBM desired a performance management system that allowed for increased innovation and connection between employees and management.
They determined that the traditional year-end assessments were widely unpopular among their employees and decided to revamp their performance management process by gathering input from all employees.
The new performance management model, Checkpoint, focused instead on self-driven feedback to provide a more holistic evaluation model for employees. It quickly became a way to empower employees to take their development into their own hands.
Organon: Organon is a global healthcare company that aims to maximize women’s health.
The company uses a comprehensive approach to performance management that involves providing plenty of employee recognition. It recognized the importance of developing a robust culture and ensuring that all employees felt connected to the company.
Organon decided to focus on appreciation and feedback throughout the year, rather than at certain times of the year. Their aim was to reduce the stress of the annual review process and make people feel valued.
DeloitteOpens in a new tab: The professional services network Deloitte changed its traditional way of assessing performance by allowing for check-ins and encouraging frequent conversations between team leaders and team members about the work they do. Part of the new system also involves the use of performance snapshots, which provide a regular assessment of individual performance that’s easy to access.
Additionally, they implemented pulse surveys, which help leaders evaluate whether they’re creating conditions that allow employees to perform at an optimal level.
FAQs
What are the benefits of performance management?
Continuous performance management helps foster an open dialogue between employees and their managers. Frequent reviews allow managers to discover the strengths and weaknesses of their team.
They can identify opportunities where informative training sessions are needed to increase productivity and identify key players eligible for a promotion. When employees are given helpful learning opportunities and praised for their hard work, morale and overall retention will increase.
What are some good performance review goals?
Productivity. If managers learn what will motivate their employees to be as productive as possible, it allows the company to get more done in the same amount of time.
Time management. Whether it requires additional resources or training, offering what an employee needs to complete tasks and manage their workflow will help them hit their future deadlines.
Efficiency. While an employee might be producing more, the goal is to also make fewer mistakes and create better output each time. Managers can encourage this by helping employees create measures to assess their work.
What is the difference between performance management and performance appraisals?
During a performance appraisal, the manager will conduct an assessment of the employees and evaluate their overall contribution to the organization based on past performances. While these might only occur yearly, performance management is a continuous process that focuses on the future.
Its purpose is to increase the ongoing efficiency, effectiveness, and happiness of each employee.