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Every company wants to succeed. And at its heart, that means tapping into your employees’ fullest potential.
Performance management is more than just a line of communication between a manager and their employees. It’s more than an annual performance review, too.
Performance management can be a tricky process to navigate. In this article, you’ll learn how to implement a successful performance strategy. And you'll learn why the annual performance review has become a thing of the past.
What is performance management?
For years, companies have talked about performance ratings. It’s only until recently performance management bled into talks with HR folks.
What is performance management?
Performance management is a set of processes and systems to develop employees. These systems, processes, and lines of communication help focus on strategy. At its heart, performance management is about helping employees perform at their best.
Traditionally, companies relied on performance ratings. As research has shown, humans are bad at accurately “rating” employee performance. It was largely a system that put the power in the hands of the manager. As Harvard Business Review reports, it was a highly flawed system.
Performance management emerged as a way to remedy the broken performance rating process. Different performance management strategies and systems are developed with employees at the center.
In today’s workforce, performance management has become a non-negotiable for many companies. And yet, performance management is still largely regarded as a “work in progress” for many HR professionals.
The 4 phases of performance management
Performance management moves through a cycle. At its foundation, performance management is built on strong communication, feedback, and a culture of trust. While performance management looks different at every company, we generally see this process move through four phases.
This first phase is around expectation-setting for employees. This starts with employees clearly understanding roles, responsibilities, and expectations. Oftentimes, this first starts with the job description. It’s important for the job description to accurately reflect (as much as possible) what the employee will be doing.
But this phase also includes connecting dots to larger organizational initiatives. Consider the ways this role connects to your company’s larger goals.
It’s also important to include the employee in this planning phase. That means that as a people manager, you should work together to create a plan. This includes outlining tasks, deliverables, and how work will be measured.
2. Assessing (or reviewing)
Long are the days where career development is only talked about once a year.
At BetterUp, we factor career conversations into our regular one-on-one meetings on a monthly basis. It’s important touchpoints between an employee and their manager.
These deliverables can be reviewed in regular one-on-one meetings. Tracking progress doesn’t need to wait until an annual performance review (and nor will that set up the employee for success).
As a manager, it’s important to stay close to how progress is being made — and provide support where needed. To be able to provide that support, you need to be attuned to how your employee is progressing towards their goals.
Carve some time in your regular meetings to assess or review. This phase of the performance management process is integral to ensuring you’re setting up your employees for success.
This third phase of performance management is critical to success. As humans, asking for and receiving feedback can be sensitive. In fact, 360-degree feedback can actually empower your employees to tap into their full potential.
But beyond feedback, we all need coaching.
In this phase, managers should identify any barriers the employee may face in reaching their objectives. It’s also critically important for open lines of feedback to be fostered in the form of coaching.
Without coaching, the employee is likely not going to know how to best allocate their time and resources effectively. But it’s also a great opportunity to ask for feedback from your employees. Feedback isn’t a one-way street.
If your organization needs help in fostering a culture of feedback, BetterUp can help. Pairing employees one-on-one with a coach has tremendous benefits. Of the people who start out stuck, 77% will significantly improve their mental fitness in just a few months with personalized support.
This last and final phase of performance management is centered around recognition.
Employee recognition can come in all shapes and sizes. And it doesn’t need to be reserved for the annual performance review. In fact, quite the opposite. Recognition can be used as an employee retention lever. When employees are recognized and rewarded for their work, they’re more likely to stay committed to the organization.
Throughout their tenure, managers should make sure reward and recognition are built into their habits. This can be as simple as a Slack message recognizing an employee for their hard work. Or it could be something more in-depth, like a gift, a card, or a shout-out in a big team meeting.
And, of course, when performance reviews do come around, factor in this rewarding phase. An employee who exceeds expectations should be rewarded. Sometimes, that will be a promotion and praise. Other times, it might be extended time off or even a merit increase.
3 benefits of a performance management system
A performance management system can help capture and streamline all key components. Here are three benefits to implementing a performance management system.
Capturing data and analytics
Performance management software (PMS) can help with capturing data. With the right system, your organization can gain insights into things like employee engagement and key metrics.
Insights into this data can help identify problems earlier rather than later. It can also help see where certain teams or managers are excelling. It might offer up opportunities for those who are doing well to share what’s working.
A place for feedback
Some performance management systems are also feedback tools. Feedback — while it might sound scary — isn’t always critical.
For example, some software systems promote ways to recognize and give positive feedback to peers or colleagues. Try these positive feedback examples for a start. You can also leverage tools for more constructive feedback.
You might’ve heard the phrase, “You’re more likely to achieve your goals if you write them down.”
First, there’s science to back that up. Second, a performance management system can help with that. Consider how you can use a performance management system for goal-setting. It can be helpful for visibility across teams and workstreams. By making goals clear, easily findable, and visible, you can set your teams up for success.
Examples of performance review systems
There are a lot of performance management systems to choose from. And, the truth is, as company leaders, you’ll know what’s best for your organization.
We recommend consulting with peers, colleagues, and other organizations to see what works for them. It’s always a good idea to ask for recommendations and referrals from your network.
Here are the top two rated performance management systems from Trust Radius.
- Cornerstone OnDemand
- Ceridian Dayforce
3 common pitfalls of performance management systems
Like any other system, performance management comes with its pros and cons. Talk to any HR leader and you’ll quickly understand why performance management has pitfalls.
Here are three common pitfalls of performance management — and how your organization can overcome them.
Lack of strategy or focus
Problem. Performance management is adopted into your organization. But there’s a lack of strategy or focus around how it’ll be used. Or, if there is a strategy, it isn’t widely communicated and clearly understood by employees. This leaves your workforce confused, unsure of how to meet their goals, or potentially unsure of what the goals are in the first place.
Solution. Your organization should outline what performance management will look like for your employees. This dials into every aspect of their employee experience. It’s also important to have structured communication and training, especially if new software is introduced.
Clearly communicate strategy, goals, and systems. Reiterate and communicate them often. Make sure managers are trained on their role in performance management. Ask your managers how you can support them in this new performance management strategy.
Lack of accountability
Problem. Your organization might adopt a performance management system. You might implement the system. But maybe you fail to communicate the details or ask managers for their support.
But there’s no clear owner. There’s a lack of commitment from leadership to adopt the system at the highest level. How are managers going to adopt the new performance management system if leaders aren’t using it?
Solution. Your entire leadership team needs to lead by example. Without their buy-in, it’s likely their respective teams won’t adopt the system. Clearly communicate the reason behind the new performance management system. Ensure leaders clearly understand their respective roles and responsibilities.
Lack of feedback
Problem. Timely feedback is a massive challenge in performance management. Managers and employees alike are often scared of feedback. It can be scary to hear what you or your team needs to change. It can also be difficult to build trust to allow for open feedback between teams.
But without feedback, your employees aren’t reaching their full potential. You know that you need to create a culture of feedback where employees feel safe, valued, and heard.
Solution. Encourage employees to give upward feedback. Make sure employees understand the role of feedback in performance management. Train managers on how to effectively ask for and receive feedback.
Consider ways personalized coaching can help build a culture of trust in your organization. We know feedback is hard. But it’s not impossible. And without it, your performance management system won’t be effective.
11 key elements of an effective performance management program
More and more organizations are adopting performance management strategies and systems. But it’s important to understand the state of performance management today. Performance management requires different elements to soothe and nurture a thriving workforce.
- Accuracy and fairness (as little subjectivity as possible)
- Efficient and effective
- Foster development and learning
- Encourage open feedback
- Capture and analyze metrics
- Create a culture of responsibility
- Empower employee development (including development opportunities)
- Offer regular check-ins
- Empower employee engagement
- Reward good performance
- Ability to set individual goals and company goals
Start enabling your employees’ performance
You might be looking to enhance performance reviews. Or maybe you want to take career development to the next level. Consider the role of performance development and performance management.
Your human resources team should be deeply embedded in the performance management process. Work with your HR leaders to implement a performance management program that works for your organization.
The performance management cycle can be a tricky one. The standalone annual review process is long outdated. There are plenty of performance management tools to help reach performance standards.
From onboarding new employees to nurturing tenured veterans, individual performance matters. Consider ways you can take performance evaluation to the next level.
Madeline is a writer, communicator, and storyteller who is passionate about using words to help drive positive change. She holds a bachelor's in English Creative Writing and Communication Studies and lives in Denver, Colorado. In her spare time, she's usually somewhere outside (preferably in the mountains) — and enjoys poetry and fiction.