Performance Management: The Complete Guide

Learn about performance management and how it helps employees create better goals and enables organizations to implement new strategies to achieve business success.


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Performance Management: Definition

Performance management is defined as an ongoing process which aims at identifying, measuring and developing the performance of individual employees at the workplace. The process requires constant communication between managers and his/her team members.

Performance management’s entire objective is connected with the overall mission and goals of an organization and how an individual can add value to it. It provides feedback, accountability, and documentation for the performances of individuals.

There are two key elements in performance management:

  • Continuous observation and communication
  • Align it to the organization’s mission and goals

Performance management is not the same as performance appraisal. Performance management relies on the detailed perusal of how an organization’s employees have historically performed and if there are any efforts from the employees’ end to improve their performance in the future.

If you are an effective manager, you wouldn’t just give feedback, you will also ask for one. That is how the process will be effective for all. Same is not with performance appraisals, it is a one time process and usually conducted on a yearly basis. Performance management helps managers understand the needs of their employees and how best to fulfill them.

Components of Performance Management

There is no thumb rule for a performance management system, every organization may have a different take on it. Many organizations have been able to develop an effective system over their years of operation. Remember there is not just one way of doing things. Depending on the organization’s goals and mission, the system may vary.

In a typical world, a performance management system includes the following components:

1. Review from the manager or supervisor

This is a process where an employee can access his/her strengths and weaknesses, training needs, etc. based on the review provided by the manager. It is essential to do a SWOT analysis here, as the manager’s evaluation can be used to identify areas that align with the organization’s goal and mission.

2. 360-degree feedback:

360-degree feedback is probably the most important component of performance management and also the most valuable addition. It is a method where an employee receives feedback from his/her manager, peers, subordinates, top level management and also gives feedback to self. This gives an employee a comprehensive overview of their strengths along with their weaknesses. It is a method that encourages constructive feedback and is being increasingly practiced by organizations as a part of the performance management system.

3. Employee engagement surveys

Conducting an employee engagement survey in your organization is an effective way of understanding what matters the most to the employees. As the name suggests the primary reason to conduct this survey is to get an insight into the levels of engagement or disengagement of the employees. There is no set way of measuring employee engagement, however with the dedicated frameworks designed by Workforce, you can now analyze and measure the end-to-end process. The report in-turn highlight areas of improvement and development for the employees.

4. Pulse Review

Pulse review as the name suggests measures the pulse of the organization. It is an awesome tool to collect feedback that empowers and encourages employees to celebrate their strengths and identify their areas of development. Pulse review app designed by QuestionPro Workforce is one such tool that simplifies dialogues and facilitates the sharing of feedback amongst the employees.

5. Goal setting and Alignment

This again is a hugely important component for any organization. Research suggests setting SMART goals lead to higher performance than setting no goals. Therefore, the bottom line is to set goals and achieve more. That’s not all, goal alignment is equally important and is a process that will encourage your employees to work collectively towards the common goal of the organization. Your performance management should be designed to set, track and complete individual and team goals.

Performance Management Process

Performance management is a process to show appreciation to your employees. It is not a process to get back at your employees for something that they might have done in the past. This is not the time to dig graves.

If you search “performance management” on google you will roughly find 1,76,00,00,000 results in under a minute, all these primarily talk about a four-step model: Plan, Act, Monitor, and Review. All these four steps are perfect opportunities to show appreciation. Here is how...

  1. Plan: Although planning may not look like a great opportunity to appreciate your employees, however, this is an awesome time to break the ice. Have a sincere conversation with them regarding how they can help achieve the overall goal of the organization and how they can benefit from the entire process. It is important for an organization to have faith in its employees, but it is equally important for the employees to have faith in the organization. Having someone believe that their abilities are powerful truly is a sincere form of appreciation.
  2. Act: There are so many employees who constantly feel that they are not given enough feedback and that really doesn’t solve the purpose. Employees complain about not having enough communication with the managers during the projects, they say they either hear from them during the start and then towards the end of the project. And this exactly is a missed opportunity, because you have lost the chance to communicate effectively and walk them through every step during the project. The key here is to act!
  3. Monitor: The word monitor sounds a bit strict! It sounds like the principal of an institution is out for an inspection and makes sure nobody steps out of the line at any given point in time. Relax! Running an organization is not the same as running an institution where you need to discipline kids to make them realize their mistakes. Here you are dealing with adults and it is important to observe than monitor. A manager who can use this step judiciously has actually made sure the retention of employees. It is a great place to talk about the energy, commitment level, on goal achievements, etc. with employees.
  4. Review: This is the final step in the process. In today’s world, reviews are mostly result oriented, which is good, but this is also a process where you can have an effective conversation with your employees and access what was accomplished in a certain time frame. This is a great step to celebrate an employee. This will bring calmness at the time of stress. Appreciate an employee for his/her qualities.

Purpose of Performance Management

Performance management is often a misunderstood concept, most organizations tend to confuse it with performance appraisal. But there is much more to it. Performance management is about getting results. It is about helping people identify their areas of strength and potential improvement scope.

It is an approach to achieving a shared goal. Performance management is not only about managing individual achievements but also that of the teams. A performance management system is used to identify, measure, celebrate an employees success at work. It serves the following purpose:

  1. Continuous feedback: Performance management is a mechanism for continuous feedback for personal and career development. It must be able to convey to the employees how they have performed. It is also advisable that these goals and targets are mutually decided between the employees and their managers. This mechanism is all about effective and open communication.
  2. Development needs of an employee: An organization where effective communication is given importance is able to understand the developmental needs of its employees. Developmental needs could be as simple as getting trained for a new tool or software, but at times it is essential.
  3. Employee Engagement: Ongoing employee development encourages them to perform better at work and also increase employee engagement while contributing to overall business success. The levels of satisfaction and retention of such employees are high, which means the employees are happy and are motivated for a continued association with the organization.
  4. Align strategy: A well-designed performance management process helps employees organize themselves better. This process helps the employees understand how their performance helps to improve the overall business success of the organization. It is important for the employees o to know what is expected of them to be able to perform better.

Advantages of Performance Management

Following are the advantages of performance management:

  • This process encourages performance-based conversations. Managers get busy with their daily activities but it is important to communicate with the team on a timely basis. This process encourages communication. Managers will need to provide feedback on a constant basis to achieve collective goals.
  • Since this process is not only organizational development but also personal development, there is targeted staff development. If done right this helps carve a greater path to success for both, employees and the organization.
  • This process helps identify under-performers. It helps in smooth transition if the relationship needs to be terminated from the organization’s end.
  • Since this process is documented the historical records of all the meetings is noted and stored for future references.

Disdvantages of Performance Management

  • The process is time-consuming. It is recommended that a manager spends a few hours writing performance reviews for each employee. It can be quite hectic and boring at the same time.
  • It depends on an employee how they take this process. Some might get completely discouraged after the process. It is essential that managers point out the absolute necessary areas of development.
  • It is difficult to keep biases out of the system unless the process is extremely structured. Understanding natural biases is an important aspect of fair evaluation.