8 Performance Management Best Practices
The performance management process in most organizations tends to be broken. From a study conducted by Wakefield Research:
“While 94 percent of executives are confident that employees are satisfied with their company’s performance review process, the reality is most employees feel the process is outdated (61 percent) because it’s too generic (22 percent) or too infrequent (6 percent), and often incomplete (62 percent).“
We can do better! In this article, I’ll cover some performance management best practices to help ensure your performance management process is working as it should.
What Is Performance Management?
Performance management is an ongoing process that helps organizations align employee performance with broader organizational goals and objectives. It involves setting expectations, providing regular feedback, evaluating performance, and developing employees to improve their skills and productivity.
The ultimate goal is to create a high-performing workforce that helps the company achieve its strategic objectives while fostering employee engagement and growth. Effective performance management will:
- Align individual work with organizational goals, driving strategic success.
- Improve employee engagement and retention through regular feedback and recognition.
- Boost productivity and efficiency by setting clear expectations and priorities.
- Foster continuous improvement with ongoing feedback and development.
- Enable objective decision-making based on measurable performance data.
- Identify development needs and provide targeted support for growth.
- Promote accountability by clarifying roles and responsibilities.
- Support organizational agility by allowing for timely adjustments to goals.
- Facilitate teamwork and collaboration by aligning individual and team objectives.
8 Performance Management Best Practices
With the above objectives in mind, here are some best practices to ensure optimum performance management in your organization.
1. Set clear, measurable goals
Setting clear and measurable goals is crucial in performance management because it ensures that workers 1) understand what is expected of them and 2) how their work aligns with the organization's broader objectives.
A structured approach to goal-setting helps to track progress and identify areas where improvements or adjustments are needed.
Using a structured framework like SMART goals helps in defining objectives that are:
- Specific: Clear and well-defined, so that employees know exactly what needs to be done.
- Measurable: Quantifiable criteria that help to track progress and determine when a goal is achieved.
- Achievable: Realistic, based on the employee’s abilities and resources, while still challenging.
- Relevant: Directly related to the employee’s role and the company’s priorities.
- Time-bound: Set within a specific time frame to create urgency and focus.
You can use Liz Lockhart Lance’s excellent article on cascading goals to help you set and track team and individual goals that align with strategic objectives.
2. Switch to continuous performance management
One of the criticisms of traditional performance management is over-reliance on the annual performance review.
As leadership coach Matt Gould puts it, “Feedback is a gift” and the majority of people place a high value on regular feedback.
Continuous performance management (CPM) is a modern approach to employee appraisal and development that focuses on ongoing communication and feedback between managers and employees.
It’s a departure from traditional performance management systems, which often rely on annual performance reviews, toward a system of ongoing, regular feedback that’s instructive, constructive, and celebratory.
Eric Grant does a deeper dive in his excellent article linked above, but here are a few pinters to help make the switch:
- Regular and consistent check-ins between managers and their reports
- Bi-annual performance reviews (at least)
- Clear goal setting (as mentioned above)
3. Use 360-degree feedback
360-degree feedback is a performance management technique that helps employees better understand how they’re perceived and valued by others in their organization across levels and departments.
This is achieved by collecting confidential, anonymous feedback from managers, peers, and direct reports.
In this process, individuals are typically asked to identify 4-10 people they feel they work closely with and would be able to give an effective review of their performance.
These people, in addition to the employee’s manager and any direct reports, are then asked to complete a 360-degree feedback questionnaire.
Using 360-degree feedback provides a comprehensive and balanced view of employee performance by gathering insights from multiple sources, promoting self-awareness, development, and accountability.
4. Create an environment of psychological safety
Often overlooked, psychological safety is crucial for effective performance management because it creates an environment where employees feel comfortable sharing their thoughts, concerns, and feedback without fear of negative consequences.
In such an environment, people are more likely to engage in open, honest conversations related to performance, enabling them to express their challenges, ask for and give help, and seek clarification on expectations.
This openness fosters a culture of collaboration and continuous improvement, where workers feel supported in taking risks, experimenting with new ideas, and learning from mistakes without fear of punishment.
5. Provide training for managers and employees
Quite a lot of people become managers with very little support or training. It’s a difficult and important role, so manager training is vital for effective performance management because it equips managers, especially new ones, with the skills and knowledge needed to set clear expectations, provide effective feedback, and engage employees in meaningful development conversations i.e. coaching.
6. Recognize and reward good performance
Recognizing and rewarding good performance is another often overlooked but critical aspect of effective performance management because it, let’s face it, who doesn’t appreciate a little recognition every now and again?
If used right, recognition and rewards reinforce positive behaviors and achievements, motivating employees to maintain or improve their performance and increasing the likelihood they’ll stay.
Some pointers:
- Be consistent
- Show your personality
- Ensure a transparent process.
For more, check out our article on building an effective employee recognition program and our breakdown of the best employee recognition software.
7. Utilize the right tools
There are many tools that can be used to measure and enhance performance. At the most basic level, performance management can take place on paper, through an online form, or in a simple database.
These methods are potentially effective, but they don’t scale well. If you’re a team of three, it probably makes sense not to over-engineer a performance management system.
But, if you’re a group of ten or more, it’s time to consider what tools might help to enable your performance management process to be more consistent, fair, and effective.
If you’re just getting started, consider what can help managers in your organization provide feedback early and often, with documentation and clarity for employees.
Templates are a great way to start adding value to managers trying to practice good performance management.
Next, you might consider ensuring performance standards are known and documented across the organization such that they can be referenced in the organization-wide review process.
Beyond setting expectations and giving managers tools to facilitate employee performance management, there are many performance management software tools that can help make the processes more effective and efficient.
Key features include:
- Goal setting and tracking: Helps employees and managers to set, monitor, and update performance goals.
- Continuous feedback tools: Facilitates real-time feedback between managers, peers, and teams.
- Performance reviews: Supports customizable performance review cycles, including self-assessments and 360-degree feedback.
- Feedback, analytics, and reporting: Provides insight to help capture feedback, identify trends, and make informed decisions around performance management
- Employee development plans: Facilitates the creation and monitoring of personalized development and training plans.
8. Be consistent, open and transparent
Ensuring consistency and fairness in performance management means applying the same evaluation criteria, processes, and standards across all employees, regardless of their role or level.
This uniformity is essential for creating an equitable system where everyone feels they are being assessed on a level playing field.
Maintaining clear and standardized guidelines helps avoid favoritism, bias, or discrepancies that might undermine the integrity of the process.
Next Steps For Your Performance Management
Now that we’ve gone over some of the best practices when it comes to performance management, where can you go from here?
Firstly, you want to gain a clear understanding of where your performance management system currently stands.
Don’t go to executives about it—go to the frontlines, the employees on the receiving end of performance appraisals etc. You’ll gain a much better understanding of where you need to improve your performance management system.
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