Performance management is an option that many industries are adopting. "Managing performance" might sound like what you’ve been doing all along. But it’s actually a specific process that includes steps not usually found in the traditional performance appraisal process.
The past several years have seen an increasingly vocal opposition to the traditional performance appraisal process. Detractors call annual reviews “pointless,” “insulting,” and “dead.” Much of the corporate world agrees that employee performance assessment is antiquated and inefficient.
And, corporate culture is changing in the favor of technology.
The use of performance management software allows managers to identify problems based on the employee's current performance to implement initiatives that get the employees back on track.
But, what exactly is performance management in business and why is it important?
Let's dive in.
What is Performance Management?
Performance management is a process that involves measuring and evaluating employee performance, providing feedback about where employees can improve their performance, and identifying opportunities for growth within the organization. Performance management isn’t just about appraising performance; it is also about developing employees so they are equipped with the skills they need to thrive in the future.
Managing performance should be an ongoing process that drives employee development. It'll be used to identify areas of strength as well as growth opportunities across different functions and roles within the organization.
Why is Performance Management Important?
Performance management is important because it's a critical part of employee development and retention. Organizations that engage in a regular performance review process are better equipped to retain top talent and identify opportunities for employees to take on additional responsibilities.
The best way to measure the effectiveness of your performance management process is to identify the metrics that indicate success within your organization. You can track key performance indicators (KPIs) to measure the progress of your employees. KPIs can be related to the overall organization’s performance metrics, your employees’ performance metrics, or both.
If your metrics show that employees are not meeting expectations, you can use performance management to identify areas of improvement. You can also use it to recognize employees for their accomplishments, no matter how small.
This is important because recognition plays a key role in employee engagement. Engaged employees are more likely to stay with your company.
What to Include in Your Performance Management Process
There’s no one-size-fits-all approach to performance management. Every organization is different, and every manager has their own style.
But there are some performance management best practices that can apply to any organization:
The first step of every performance management process is to set goals for the year and for each quarter. Goals can be both professional and personal, and they should be aligned with your company’s strategy. Goals should be SMART — specific, measurable, achievable, relevant, and time-bound.
After you’ve set goals, you need to identify key performance indicators (KPIs) for each goal. KPIs are the metrics that indicate success for your organization. In other words, these are the things you’re tracking to measure progress.
3. 360 review
A 360 review is a process where employees are evaluated by their superiors and peers. It’s not typical to include direct reports in the review process, but it’s a useful tool, especially for high-performing employees who aren’t receiving regular feedback.
4. Interviews and ratings
Once the review process has been completed, you need to determine which employees are ready for a performance review. This process varies from company to company; some organizations conduct reviews annually while others do it every six months.
How to Conduct an Effective Performance Review Meeting
Managers should set aside plenty of time for performance reviews to make sure they get the job done. In general, it should take about two to three hours to review each employee. That might sound like a lot, but it will only take about 10 to 15 minutes per employee if you’re prepared.
Keep in mind that performance reviews are not one size fits all. You should tailor each review to the employee you’re reviewing.
Here’s a general outline of how to conduct the performance review meeting:
Step #1: Start with a recap
Review each employee’s goals, KPIs, and other metrics to see how they’ve been performing so far. You can also ask each employee what they want to accomplish during the rest of the year.
Step #2: Give feedback
This is where you provide your assessment of each employee. You might also want to ask employees how they think they’ve been performing, and how they want to grow and improve during the rest of the year.
Step #3: Set expectations
At the end of the review meeting, you need to set expectations for the rest of the year. This includes setting new goals, reviewing KPIs, and setting new expectations for each employee. You might also want to discuss goals that aren’t related to the company, such as finishing a degree or starting a side hustle.
Tips to Measure Performance Management Effectiveness
The world of performance management is ever-changing. But, the need for businesses to have effective and reliable ways to manage employee performance is universal. If you’re looking to elevate your performance management practices, here are five ways to measure performance management:
1. Performance management cohorts
A cohort is a small group of individuals or organizations that have a common objective or characteristic. Cohort sessions offer significant chances for cooperation, creativity, and problem-solving.
When creating a performance management strategy, it could be advantageous to associate with other businesses in your industry that have similar goals. You can meet together on a regular basis to discuss difficulties, successful strategies, and ambitious objectives. Having a realistic benchmark for where your business should mean knowing what other organizations are doing with their performance management systems.
2. Peer-to-peer reviews
A channel for the direct feedback of coworkers in the creation and execution of performance management initiatives is provided through the implementation of peer reviews to evaluate performance management.
Peer evaluations may give valuable input from a range of different perspectives and help make obvious what the current level of performance is from the view of relevant company employees or stakeholders.
3. Employee self-evaluations
A crucial method of measuring performance is self-evaluation. In this practice, objective standards are developed that an organization may use to gauge its progress toward its performance goals.
Forms of evaluation include surveys, questionnaires, and graded assessments. Any self-evaluation should aim to provide a clear depiction of the current situation so that plans may be made to achieve the desired outcome and develop an effective performance management strategy.
4. Numeric ratings and scales
Specialists in performance management can assign each performance indicator a point value by using a numerical rating. This assists them in prioritizing the performance planning steps. You might, for example, create a rating system on a scale of one to five, with five representing a high degree of performance.on
5. Job duties and activities checklist
Responsibility and effectiveness are ensured by establishing a thorough and authoritative list of tasks and duties. You may improve management process transparency by detailing which team members are responsible for which tasks. This helps in providing team members a clear understanding of what is expected of them, which can improve performance.
Human Resources Tools for Better Performance Reviews
A good performance review process is more than just a meeting. It’s a process that includes setting goals and expectations, providing regular feedback, and driving employee engagement.
This can be challenging for busy managers, but there are human resources tools that can make it easier:
1. Employee performance management software: Employee performance management software can help you stay on top of reviews and provide regular feedback.
2. 360 review software: 360 review software can help you conduct 360 reviews with your team members.
3. Recognition software: Recognition software can help you stay on top of employee recognition within the company.
Key Takeaway on Performance Management
Performance management is a critical part of employee development and retention. A good performance review process includes setting goals and expectations, providing regular feedback, and setting KPIs. It also includes a 360 review, where employees are evaluated by their superiors and peers.
A performance review meeting should be tailored to each employee and include feedback and setting expectations for the rest of the year. Human resources tools can make the process easier and more effective.
Managing the performance of your employees is a proven way to improve the development of your organization and employees alike. When all parties are improving, the benefits go beyond the individual employee.