Employees are critical to the success of companies and to achieve success, employees need to be heading in the same direction. Performance management is a way to get employees there. Learn more in our guide.
What is Performance Management?
Performance management is an ongoing process between a manager and an employee which is used to maintain and improve the performance of a workforce and supports the accomplishment of the strategic objectives of the company. It helps companies become more successful and stay ahead of their competitors.
It is a collaborative communication-based process where employees and managers work together to plan, monitor, and review an employee’s objectives, long-term goals and contributions to the company. It involves measuring, reporting and managing progress to improve performance, at both individual and corporate levels.
A good performance management system should align a team to the business objectives whilst developing, supporting and helping employees to improve their performance.
For managers, the best interests of their employees should always be at the forefront of their concerns; a happy and content team will always perform better than a team who feels unrecognised and undervalued.
Choosing the Right Performance Management Technique
Performance management includes an array of aspects regarding a team’s successful functionality, many techniques can be used to tackle one issue. It is key to choose the correct technique for each scenario.
Performance management techniques typically form to address the following:
- Monitoring performance – meetings and check-ins
- Progress checks – Reviews and summaries
- Setting expectations – explaining what is required and how employees can achieve this
- Offering incentives – For recognition, reward and to help tackle poor performance
- Continued professional development – conferences, mentoring and coaching
Two of the most important steps are making the organisational and individual performance objectives clear and using feedback to review and improve processes and performance.
The Performance Management Progress
The performance management process has 5 key elements for success, these are:
- Planning and Goal Setting – goals must be set and how these goals will be evaluated must be made clear and given specific time frames for achievement. (SMART Goals)
- Management and Employee Involvement – for reviews to work, employees need to know the process is not just a tick-box exercise. Employees need to be engaged in the process too. It is a two-way process between the manager and the employee.
- Monitoring and Feedback – this allows tracking of an individual’s performance and provides them with ownership of their development. It also allows an opportunity to provide help and support if the employee needs this to help achieve their goals. Feedback intervals could be monthly or quarterly.
- Development and Improvement – following the monitoring of employees, further improvement and development will need to be encouraged. An employee on target to meet their goals should be encouraged to exceed and go beyond the goal that was set.
- Reward and Compensation – for employees to continue to achieve and develop, there needs to be some kind of encouragement for them to do this. This can include salary increases, bonuses, shares in the business, extra holiday days and promotions.
Investing in or developing performance management tools, techniques and processes is an important part of creating a high-performance culture within a business. Every business regardless of its size should be aiming for a strong performance at every level of the business. They need to know what techniques will fit their size and structure and how managing performance arrangements will fit with other business policies.
The techniques that will work best depend upon the needs of the business, for example, an engineering company will probably do things differently than a retail business. Smaller businesses may prefer the idea of more informal techniques based upon regular face-to-face meetings and individual performance management, larger businesses will need to consider the number of teams they have and how they can best measure their employee performance across the business.
Techniques for Managing Individual Performance
The best techniques suited for managing individual performance are:
- Personal Development Plans (PDP)
- Performance Appraisals
- Utilise Feedback
- Management by Objectives (MBO)
Techniques for Managing Team Performance
Whereas, for managing team performance, the best techniques are:
- Balance Scorecards
- Peer Reviews/ 360-Degree Feedback
- Key Performance Indicators (KPIs) and Metrics
Top 7 Performance Management Techniques
Learn our top 7 performance management techniques to help your team members strive to the next level.
1. Peer Reviews/3600-Degree Feedback
360 reviews allow peers to provide both positive and constructive feedback. It provides individuals with a broad assessment of their individual performance based on the views of the people around them. This process allows members of teams to grow as they can identify areas for improvement in others, while they consider their own development needs. This process is mainly handled by team members, but managers should still oversee the reports that are generated to ensure that any concerns, praises or claims are made note of and addressed. Doing this shows teams the importance of peer review because it has resulted in action being taken and therefore team members are more likely to be engaged in the process.
Insights from 360-degree feedback are usually used in employee training and development. If done correctly 360-degree feedback helps to democratise the performance review process as it uses the opinions of others around the individual instead of just the line manager.
2. Utilise Feedback
If an employee is underperforming, they may not know it. A meeting should be held to identify possible causes for their underperformance and solutions to help the employee. When giving feedback to an underperforming employee, a manager must not give solely negative feedback. Positive feedback is needed also to encourage them to continue to do the good things they do, and it is a manager’s responsibility to let them know what their strengths are. Feedback needs to be done regularly, not done as a yearly review as this can create stress within teams, regular feedback (for example monthly) helps to keep teams motivated and engaged.
3. Key Performance Indicators (KPIs) and Metrics
These provide a way to measure how well companies, units, projects or individuals are performing in relation to their strategic goals and objectives. The main value of KPIs as a management technique is enabling data-driven performance conversations and better decision-making. Well-designed KPIs should be vital navigational instruments that provide a clear picture of current levels of performance and show if the business is where it needs to be.
4. Performance Appraisals
These are probably the most commonly used individual performance management techniques. When used properly, they can be very powerful for aligning the goals of individuals with the strategic aims of a business. To be beneficial employees must feel the appraisal is a regular, fair, honest and constructive two-way conversation between them and their manager. If they are not, then appraisals can become a tick-box exercise and end up a de-motivator which can lead to a decline in employee performance.
5. Management by Objectives (MBO)
This process is defining specific objectives and setting out how to achieve each individual objective. It is powerful for specific work that must be done one step at a time. This method is a good way to create a culture of working towards common goals as once each objective is achieved those involved are aware of their achievements which helps to improve morale and motivation. MBO measures individual performance and compares that performance to standards previously set.
6. Balance Scorecards
These are one of the best-known management frameworks and have been popular over the last 20 years, it was voted one of the most influential business ideas ever in the Harvard Business Review.
Managing performance using balance scorecards helps businesses to:
- clarify their strategy and communicate their business priorities and objectives;
- monitor progress by measuring what extent priorities and objectives are being delivered;
- define and manage action plans to ensure initiatives are in place to deliver the business priorities and objectives.
7. Personal Development Plans
A PDP is an action plan that is based on a reflection of an employee’s performance and needs, PDPS set out goals for future performance and actions that will support personal development. They are often used to identify specific training and development needs and create action plans to meet those needs. PDPs help employees set out how they want to grow and what actions they need to take to achieve that growth. This helps employees to feel more invested in the business and know the role they play in the success of the business.
7 Performance Management Tips for Managers
Managers are a vital role in promoting employee commitment, motivation, and engagement, and are key to developing and nurturing employees. This is why it’s crucial to adopt the right management techniques to manage team performance and boost productivity across the board.
The top 7 tips for managers to promote enhanced employee performance are:
- set meaningful and attainable expectations – be clear about expectations and explain what measures will be used;
- approach the process as a collaborative effort – work with employees to engage them in the process and gain employee ideas to lead to the achievement of business goals;
- provide employees with the necessary tools they need;
- continually assess and communicate progress – feedback should be timely and make specific reference to each goal;
- provide coaching and mentoring to optimise employees’ strengths and identify areas for improvement;
- do not leave feedback until the end of the year, feedback should be done monthly or quarterly and should be done via face-to-face meetings;
- provide employee recognition.