5 Essential Elements for Optimal Performance Management

By Stuart Hearn

July 29 2016 - The importance of an efficient performance management system is fairly universally accepted in HR circles. Those organisations with high-quality performance management processes, who are willing and able to adapt to new and innovative performance management trends, tend to be far more productive and profitable. When performance management systems are incorporated properly, they can help to motivate and engage your employees, thereby boosting corporate productivity.

Performance management is in place to assist companies when it comes to setting organisational goals and monitoring individual employee progress. Opinion may differ when it comes to the minutia of how to setup and manage a performance management system, but there are certain elements that you should adhere to so that your system has solid foundations.

1) Introduce regular check-ins

The world has evolved; as a society, we demand up-to-date and regular feedback at the click of a button. This is as true in the corporate world as it is in the social world, and the benefits are undeniable. The tradition of once-a-year reviews is defunct and ineffective. Companies now move at a faster pace, and our performance management style must change to reflect this. There has been a recent shift toward continuous performance management which is reflected by high-quality, constructive and frequent performance discussions.

Adobe led the charge with continuous performance management back in 2012, ultimately achieving a 30% reduction in voluntary turnover. Other corporate giants such as Cargill, Deloitte, Microsoft, Accenture and IBM have also abandoned ranking systems to great effect. Even General Electric a company once infamous for their yearly appraisals and rankings, have made the switch.

Continuous feedback keeps employees engaged and the management informed on progress. It allows for shifts in approach when needed and can often indicate red flags that require immediate attention. With regular feedback, employees get used to receiving ongoing constructive advice, and it also provides an opportunity for managers to praise their workforce when needed, leading to a more engaged staff. Engaged staff genuinely care more about their work - psychologists call this intrinsic motivation or discretionary effort.

2) Set clear goals

A performance management system cannot be effective and productive without clear, meaningful and attainable expectations. Without clear goals, an employee is likely to feel a distinct lack of incentive and direction. From the offset, objectives should be set, communicated and understood, both in terms of individual, team and organisational goals. Define how progress will be monitored and measured and keep the lines of communication open; this is the only way that employees will feel they can contribute to the achievement of the company and remain in line with organisational values. This will ultimately lead to higher performance.

3) Reward and recognition

Without dedicated employees and their hard work, organisational planning is largely pointless. Recognition of this hard work goes a long way in boosting corporate morale and keeping employees enthusiastic about their goals. Individuals don't just work for monetary rewards. They like to feel that their effort is appreciated; humans have a fundamental need for praise. It also helps to offset any potential criticism they may receive along the way. Positive recognition can go a long way to improving employee engagement and retention.

4) Scrap performance ratings

This has become a hotly debated topic in the HR world. There has been a recent and significant backlash against performance ratings, with high-profile organisations such as Microsoft and Adobe abandoning them entirely. Recent studies indicate that these ratings actually demotivate and negatively impact employee performance, with the exception of those performing on the top end of the scale.

Research has indicated that a better alternative might be regular, helpful and productive feedback and coaching conversations. When a numerical rating is included in the review process, the employee has the tendency to remember the rating itself, and not the accompanying discussions relating to the rating.

It should also be noted that ratings systems are notoriously subjective in nature. They are often prone to certain psychological effects, such as the 'halo-and-horns' effect, which prompt a certain bias. Attempting to quantitatively reflect an employee's performance over the course of a year can be a difficult and problematic task that might be best abandoned.

5) Utilise effective performance management software

Software tends to facilitate effective work in most areas of life. When it comes to performance management, software can help to increase productivity, boost communication and improve collaboration between teams. With the capacity for real-time feedback, employees and managers can keep in touch, provide feedback and assistance, access important data and refer to short-term and long-term company objectives.

Any company and employee data is securely stored using the latest data encryption technology, which is backed up to cloud-based storage. If required, this data can easily be downloaded and exported to an Excel spreadsheet, eliminating reliance on sheets of paper that are all too easily misplaced.

Author Bio: Stuart Hearn is a performance management specialist who keeps his head in the cloud when it comes to performance management software. He currently runs Clear Review, an innovative performance management software system.

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