Whether you’ve been in business for just a few months or your experience spans decades, heading up a team is an exciting and challenging prospect. On top of the daily tasks that keep the company running, there’s an important part of managing people that is often overlooked or thought of as a last minute, end-of-the-year afterthought: the performance appraisal or performance review.
Annual reviews are something that employees have come to expect and it’s a chance for everyone to talk about the highs and lows of the year in real-time. But not having a standardized review process can cause headaches for your human resources department and your employees alike.
If you’re about to start working on a performance management system for the very first time or you’re thinking about overhauling your current performance evaluations or even implementing performance management software, we have a few tips to help you find the best solution for your business.
What Is Performance Management?
Long story short, employee performance management is a way to track employee development within a company to ensure that everyone is working to the best of their abilities. It’s about helping employees understand the company's expectations when it comes to performance standards and allowing them the opportunity to discuss and work toward individual goals in their work.
Ultimately, you want all of your team members to be collectively striving to achieve the overarching strategic values and business goals of the business—and you want that to happen all year long, rather than just once per year.
A performance management program is there to help you plan regular check-ins across the team (usually human resources management will help to arrange these) and work one-on-one with individual employees to review and discuss their work on a regular basis.
While yearly performance appraisals focus solely on the individual employee and their goals, performance management is a bigger process that takes into account the work of every team member and how they align to the company’s strategic vision as an ongoing measure of success.
Why Is Having a Performance Management Process Important?
Since all employees should be working toward your company’s growth goals, performance reviews are an important part of deciding on individual promotions, bonuses or, in the case of poor performance, dismissals.
But these should only form part of the performance management cycle, rather than be the sole point of contact between an employee and their manager. Why bother focusing on performance or talent management (especially when you have so much else on your plate)? Effective practices mean you can:
- Encourage employee engagement through ongoing communication between staff and leadership.
- Provide employees with constructive feedback, along with development opportunities that may not have been in their original job description but have become part of their day-to-day responsibilities.
- Boost employee retention by helping employee set and met their goals.
When it comes to onboarding new hires, new employees want to be in the loop from the beginning on how they’ll be evaluated, what expectations they need to meet, and how they can reach the next level (including promotions, salary increases, bonuses, and more).
Having a clear performance management process in place early (and emphasizing continuous performance management throughout their tenure) sets the right tone and expectations from the very get-go.
In short, remember that performance management starts on day one—it’s not something that comes into a play only after an employee has invested years.
Performance Management Is a Two-Way Street
It can be easy to think of performance management simply as a way for the senior leadership team and human resources to track and encourage good performance, but it’s vital that your process provides an opportunity for 360-degree feedback, where employees receive input not just from their direct managers, but also their coworkers and other people they directly work with at your business.
Additionally, performance management conversations should focus on collecting feedback as well. After all, your managers aren’t exempt from criticism and those that they oversee are the perfect people to provide that insight (something you’ll hear referred to as “upward feedback”). Managers can ask questions like:
- Do you have adequate access to the tools and resources you need to do your job effectively?
- How can I, as your manager, best support your performance, development, and career goals?
- Are there certain challenges you continue to run into? How can I help you address those?
You or your company leaders can use the answers to those questions to make changes and ensure that performance management isn’t just top-down, but a collaborative process that shows employees you have their growth and best interests in mind.
With careful development planning and the right systems in place, performance improvement will quickly become an established part of your business and a system by which employees can feel valued and respected.
Building an Effective Performance Management System
As performance management relies so much on various metrics to measure progress toward goals and objectives, having the right tools in place is essential.
Every company will have different needs when it comes to continuous monitoring of employee performance but in general, most performance management tools will break down the cycle into the following steps:
- Performance Planning
- Employee Input
- Performance Monitoring
- Performance Evaluation
… and then you’ll repeat that process as your organizational goals evolve.
1. Performance planning
Working with the senior leadership team to align expectations and set goals is a crucial first step, as this informs everything else that you do within the company.
Get together with other managers at your business and start with this question: What are specific teams and employees responsible for? Having a list of duties your employees need to fulfill will help you develop goals relevant to their work.
Next, it’s time to turn your attention to those goals. You want to have a unified and cohesive method for goal setting across your organization to avoid confusion. So, along with the managers within your business, decide what processes you’ll use to set goals.
Some teams prefer the SMART goal framework (where goals are specific, measurable, attainable, relevant, and time-bound) while others prefer a more formal metric like objectives and key results (OKRs) or key performance indicators (KPIs).
There isn’t one right way to do this. However, having a structured system ensures everybody is aligned—employees understand what success looks like and how they’ll be evaluated and you have a reference point you can use to evaluate everybody’s performance fairly and consistently.
Performance management example: Perhaps one of your company goals is to boost your customer satisfaction, and you need all of your customer-facing employees to be onboard with that. You might set the following objective and identify a couple of key results to indicate your team is on the right track:
- Objective: Improve customer satisfaction.
- Key result #1: Achieve at least four and a half stars on Google reviews.
- Key result #2: Improve scores on our customer service surveys from three stars to four stars.
Remember, while goals and metrics can be different from team to team or even employee to employee, it’s important to calibrate this system by making sure managers review each other’s ratings and reviews of their employees. That way they can be sure they’re generally rating employees similarly, which will help keep things as fair as possible.
2. Employee Input
This moves you into the stage where employees can provide feedback to management on whether these goals are realistic given the current workload and staffing levels, or any concerns that they may have.
Companies like Google and Facebook rely on copious amounts of data about things like employee productivity and behaviors to help inform this part of their performance management process. For example, Google collects a blend of qualitative data and quantitative data from employees through self-evaluations, frequent check-ins, and feedback surveys. This gives them valuable information directly from their workers, which they use to inform everything from their performance management processes to the entire employee experience.
While you might not have a program as large or established as Google’s, it’s vital that this step isn’t missed or put on hold until end-of-year appraisals. By that point, it could be too late to steer the ship in a new, more successful direction and unhappy employees may already be jumping on Linkedin and looking for job opportunities elsewhere. Use this as an opportunity to show the team that you’re taking on board what they’ve said and what you will be doing to resolve these issues, with firm timelines that can be reviewed during performance evaluations.
3. Performance Monitoring
The key word in performance management is “management.” This isn’t just about setting goals and then sitting back as your employees pursue them.
Instead, your managers need to be prepared to help employees achieve their goals. This can be done through:
- Hosting regular one-on-one conversations to discuss progress and performance
- Soliciting continuous feedback from employees, as well as others they work with
- Breaking larger goals into milestones to ensure employees stay on track
Remember, the goal isn’t to make the employee feel micromanaged, but instead to support them as they pursue the goals that you outlined together.
4. Performance Evaluation
Employees need to know how they’re doing. If you want a high-performing team, they need to be in the loop on expectations and their progress consistently—not just once or twice each year. The performance evaluation and review should be ongoing, culminating in the annual performance appraisal.
Rather than the annual performance review being the first time issues are raised, this meeting is a chance to discuss progress and updates on any notable concerns that have already been raised throughout the process, along with relaying strategic information on where the company is going and how the individual employee can contribute to its success even further. This gives employees a chance to course-correct if need be, and continue growing.
Remember that it’s also important to recognize, celebrate, and reward high performance, as that’s a powerful motivator for employees to continue working hard. That’s another thing that shouldn’t just happen at performance reviews but should be a frequent and regular practice within your business.
What Does This All Mean in Practice?
You’ll notice that this whole process is a cycle rather than a linear process that ends with the performance review. That’s because everything begins and ends with the company goals. But that doesn’t make the middle of the cycle any less important.
Think of individual employee goals as stepping stones that lead to the overarching results you’re looking for. Every single person on the team contributes, and those individual performances combine and ultimately determine the final outcome.
As an example, you might have an overarching company goal of increasing your sales. The performance of one single employee won’t make that happen. You need everyone from your sales team to your customer service team to chip in and perform at their best.
This may feel complicated, but you can easily use templated workflows that come with performance management software packages to break larger company goals down into individual responsibilities and milestones—along with other features and templates for things like performance reviews, one-on-ones, and even status updates.
Some popular examples of performance management software include:
You’ll probably find that you’ll need to adjust the workflows as you use the system so they can adapt to your business, but these basics will at least get you up and running.
Is Performance Management Right for Your Business?
You’ve seen how performance management tools can be beneficial to businesses of all sizes, particularly when it comes to keeping employees happy and working toward building a more effective company. But ultimately, the decision on whether to use this approach in your work is up to you.
If you’re still on the fence, talk to your employees. Find out if they’re happy with the current evaluation program, what insights they might be missing to help them achieve their goals, and how you can work with them more effectively to move the needle.
Ready to transform your business into a profit-pumping machine? Learn how with our monthly newsletter.
