Every business has its own unique goals and challenges. In theory, these should inform an organisation's performance management process, but how many do? Perfecting a business performance management process requires as much knowledge of the business goals as the ins and outs of the performance management process. This blog delves deeper into the performance management process, highlighting key elements to consider when implementing or refining your own.
What is a performance management process?
The performance management process is the framework and activities that help employees achieve their objectives. At its most basic level, it’s about getting the best out of people, and helping employees to be effective and productive in driving the organisation in the direction it needs to go. Some components of the staff performance management process include setting objectives, monitoring progress against these and providing the support, feedback, and training necessary to ensure an employee can attain these goals.
A good performance management cycle combines the employer’s need to ensure their employees are as productive as possible with the employee’s own life goals, motivations and aspirations. A system that encourages a win-win for employees and the organisation can be extraordinarily effective. That is what a performance management system like Appraisd is designed to do.
Why is a performance management process important?
An effective performance management process ensures all employees know what they are working towards, have the skills to make that happen and are aligned, working together to help the business get to where it needs to go. It is the tool that ensures an organisation’s most valuable asset is working to its full potential.
Think of it like the cox in a rowing boat. They provide instructions to each oarsman, letting them know exactly what to do. They also provide the beat, the rhythm that ensures the whole team works in harmony, following shared goals. Of course, you can row a boat without a cox, but the result will be chaotic, ragged, and ineffective. You will waste vital energy, and competing with other, more organised crews will be much harder.
Rowers are happy to work to the same beat because they share common goals. And even though it looks repetitive with no room for individualism, the truth is quite different: every pair in a rowing eight has subtly different strengths; some seats require particular finesse and a deft touch of the oar. The middle, also known as the engine room, provides consistent power but with a lower impact on the boat’s direction.
So, while everyone has their own goals, to be successful, these need to be aligned with the overall goals of the crew, just as employee objectives should contribute to strategic business objectives.
How does a performance management process work?
Determining how productive an employee is, is far from a new concept. Some historians believe the practice goes back to the third century when the Wei Dynasty emperors in China rated the performance of their family members.
From these early beginnings, the performance management process has evolved. It has developed from a top-down approach, where managers just looked at whether employees were achieving set targets, to a performance management cycle. This is much more collaborative, where goals are mutually agreed upon, reviewed regularly and tracked.
Today a performance management process is about creating goals that work for employees and drive a business forward. You must clearly communicate these goals to employees, so they know what is expected of them and what they need to do to develop themselves and add value to the business.
How have performance management processes changed?
A decade ago, performance management primarily consisted of an annual appraisal. This was the chance once a year for employers to go over an employee’s performance, reviewing how they had performed against their objectives. The chances are they would have been rated on how well they had done, and they would have used this rating to inform their annual pay rise or, for some, their bonus. Objectives for the next year would have been set as part of this process, and that would have been that for the next 365 days.
This began to change in the early 2010s as companies began to see that this approach wasn’t effective or efficient for an increasingly digitised workplace, where employees were used to having information at their fingertips whenever they wanted it. Waiting a whole year to discuss objectives that may have become irrelevant or outdated due to changing external and internal factors seemed archaic.
Both employees and managers wanted a performance management cycle that was more agile, flexible, proactive, and inclusive. A new approach began to emerge – continuous performance management.
What is a continuous performance management process?
This is about facilitating continuous dialogue between employees and their line managers around their objectives. This performance management cycle can be done in various ways.
Some organisations do this through more regular reviews, for example, twice a year or quarterly. This allows employees to focus on a much shorter time frame, making their goals more immediate and relevant. Other employers will choose to do regular 1-2-1s or check-ins between line managers and their employees to discuss progress, offer feedback and plan development.
Our research revealed a wide range of approaches to this continuous process:
There is no right or wrong answer regarding how often you should hold reviews or check-ins. The important thing is finding the balance that works in your organisation. However, every successful approach requires an opportunity to:
Review employees’ performance, discuss objectives and adjust as necessary depending on relevant circumstances.
Performance evaluation to offer timely, relevant, and helpful feedback
Make employees feel fully included in the process and have the ability to raise issues if they think the process is going off track.
What are the benefits of an effective performance management process?
An effective performance management process is the glue that holds a business together, helping employees to perform to their full potential. Gallup's research found that employees whose managers excel at performance management are more engaged than employees whose managers struggle with it.
This employee engagement is crucial. Employees who connect with their work are happier, healthier, and more loyal. Further research from Gallup discovered engaged teams were 17% more productive than those that lacked this connection.
However, this employee motivation is one of many benefits. An effective performance management cycle can positively impact other key metrics in an organisation, helping to create an inclusive, vibrant, and successful culture — a workplace where employees actively want to work. Here are some of the additional benefits of getting performance management right:
[fs-toc-omit] Reduced employee turnover
For nine years in a row, the Employee Retention Report has reported that the number one reason employees leave their jobs is a lack of career development. With an effective performance management cycle, which includes frequent conversations on development and career ambitions, employees can see clearly how they can get to where they want to go, encouraging them to stay with their current employer.
[fs-toc-omit] Reduced absenteeism
According to the Health and Safety Executive, more than half of all workplace sickness absences are caused by stress, depression, or anxiety. Research has shown that unrealistic management expectations, overwork and looming deadlines are employees’ leading causes of stress.
Effective performance management provides employees with a platform to raise issues around overwork, deadlines, or expectations, allowing managers to act before the situation causes an employee to go off sick.
“Growsari is in full expansion mode, with plans to extend our reach to other parts of the Philippines. Our performance management process is a crucial part of ensuring this happens, as employees need to be aligned, focused and motivated if we are to succeed.”<div class="author">Andrzej Ogonowski, Co-Founder, Growsari</div>
What are the essential elements required in an effective performance management process?
Whatever performance management process an organisation adopts, you must include certain elements to create an effective, robust and collaborative approach that works for managers, employees and the business as a whole.
[fs-toc-omit] Setting SMART objectives
These are the bedrock upon which everything else in the performance management process is built. Getting this right is key to ensuring employees have realistic targets for them to achieve but also challenging enough to allow for growth. These should always be set collaboratively. Line managers and employees must do this together so that both are entirely aware of what is required and happy that the objectives provide sufficient direction and motivation.
These should also align with the organisation’s overall objectives to ensure each employee contributes to the business’s success.
The more employees are involved in the process and have the authority to put forward their views, the more engaged they will be in achieving these goals.
There are various approaches when it comes to objectives. Some businesses will favour setting personal objectives for each employee, while others prefer shared objectives across teams or departments.
Other companies use OKRs or objectives and key results. These were developed by tech companies in Silicon Valley, looking to promote greater creativity and encourage employees to be as ambitious as possible.
There is no right or wrong answer here. The important thing is to find the best approach for your organisation and your employees.
[fs-toc-omit] Regular performance reviews
Whatever performance management cycle you choose, it’s important that everyone knows when the reviews are and complete them on time.
These are vital opportunities for the progression made against the objectives to be discussed. If circumstances have changed and the objectives need to be adjusted, regular reviews provide that opportunity, ensuring everyone remains aligned and on track to contribute to the business’s success.
These regular reviews allow line managers and employees to build a stronger, more transparent relationship where both sides clearly understand what is expected of them. These also provide an excellent opportunity to discuss other issues, such as health concerns or outside responsibilities.
These reviews can dovetail neatly with workplace well-being, acting as an early warning system for anything going wrong.
[fs-toc-omit] Timely, relevant, and useful feedback
Knowing what works well and what could be improved is essential to employee development. Receiving feedback from across the business highlighting successes when they happen is of enormous benefit to employees. It shows them their actions are valued and appreciated and ensures no useful information is lost or forgotten.
Appraisd research with employees and their attitude towards feedback revealed that only 9% would not want to work in an organisation that embraces a feedback culture. Feedback is vital to younger employees starting in their careers. They actively want to work in organisations that offer timely, relevant, and useful feedback to help them develop and progress in their careers.
[fs-toc-omit] Personal development
An effective performance management process gives employees the freedom, opportunity, and licence to manage their own development. Encouraging employees to think about what they need to grow as employees, consider what training would be helpful, and the ability to ask for it creates workers who are engaged with the business and feel energised and enthusiastic. It treats them like adults, empowering them to make decisions about their future.
This emphasis on personal development can also extend to goals outside of work, using the same process to help them achieve important milestones. This approach may only work for some organisations, but it can build even stronger bonds between employees and the organisation.
What insights can a performance management process provide to a business?
Data provides useful insights into employee performance and is invaluable to an organisation. It can highlight a whole range of information that senior leaders, managers and HR teams can act upon to improve the business. Performance management data is beneficial, providing indications on:
Employee engagement — if employees regularly update their progress against their objectives and give and request feedback, they are highly likely engaged with what they are doing and are motivated and productive.
Effective management — if managers complete their reviews on time and provide regular feedback to employees, it shows that they are engaged with their team and involved in their development.
Employee retention/succession planning — employees requesting feedback and setting personal development goals have a clear vision for their future and a desire to improve. These are the employees an organisation should be looking to keep and help to thrive.
Identifying training and development needs — if several employees request training around a particular topic, it could indicate a broader issue across the organisation. Monitoring training requests makes it possible to spot these potential gaps and roll out broader training programmes, ensuring no one misses out.
Workplace culture — if employees regularly update their progress against objectives, requesting and providing feedback and completing reviews on time, the organisation has an inclusive, supportive culture. One where employees have grasped the opportunity to share their views and ask how they can improve. If employees or managers fail to complete reviews, update objectives or give feedback when those around them are, it could indicate a bigger problem. This could involve their role, their team, or their personal lives. It should be the trigger for those exploratory conversations to uncover what the problem is and try to rectify the situation before it turns toxic.
What is needed to make a performance management process effective?
An effective performance management process must adapt and change as the business and outside environment change. Just think about how much the world of work has changed over just the past 10 years, notwithstanding the current challenges presented by the Covid-19 pandemic. What employees want today has changed, as has what employers need to do to be successful. The last year has told us how difficult it is to predict the future, but it does tell us to be ready for anything and open to change. Making performance appraisal work in the modern workplace takes a flexible, agile and open mindset.
An effective performance management process must include:
A buy-in from key stakeholders across the business. They must agree and support the approach you choose to take and be ready to lead by example.
Collaboration with employees. They must feel the approach is there for their benefit and that their voice matters. Their suggestions for improvements should be encouraged to maintain their engagement.
An emphasis on completing reviews on time. Everyone should know that this is not a tick-box exercise and that reviews are vital for development and growth. No one should be exempt from this.
Training for managers and employees around areas like feedback to ensure everyone understands what is required of them and feels comfortable taking part in the process.
Regular reviews to check that the approach is still fit for purpose. Investigate what works well and what could be improved to ensure it works as effectively as possible.