Performance management has evolved in recent years. Many organizations have moved from traditional models—rooted in the annual review—to more modern approaches. Discussing performance in real time has many benefits, but just changing the cadence isn’t enough.
The right approach, process, and tools make it possible to drive employee and team performance for business success.
The best performance management programs humanize performance, empower managers as coaches, and keep performance and growth top of mind.
In this blog, we’ll help you better understand what performance management is, why it matters to your business, and how to build an effective performance management program.
Performance management is the process an organization uses to motivate, measure, and develop performance of its individuals and teams to support the organization's goals and objectives. Performance management can focus on the performance of the organization overall, teams or departments within the organization, or an employee’s individual job performance.
Performance management is defined as an ongoing, communication process in which managers help employees by:
Effective modern-day performance management is a strategic approach that weaves together touch points throughout the employee experience and aims to improve and motivate employee performance.
Your employees have unique responsibilities, strengths, contributions, and experiences that help (and sometimes hinder) performance. How they go about achieving their goals might look a little different.
Performance management impacts employee performance by ensuring employees have clear goals and priorities, an understanding of where their performance falls, and frequent feedback and coaching from their managers.
Many businesses have shifted from rigid organizational hierarchies to more effective and agile team-based models and cultures. Team performance increases accountability and ownership of individual performance through transparent, aligned, and shared goals.
Performance management impacts team performance by helping people leaders build positive relationships between team members and create a culture of feedback that motivates employees to work better together.
Workplaces need to bring people, processes, and systems together to get work done. When individuals and teams understand how and why their contributions impact organizational outcomes, they’ll be more likely to continue contributing to business success.
Performance management impacts organizational performance by helping businesses promote transparency, alignment, and collaboration so that all employees and teams are working together to reach a common goal.
Performance management has taken many shapes over the years. And traditional approaches across organizations usually followed this framework:
Employees were categorized as high, middle, or low performance workers, and contributions were measured by output versus outcomes. These systems were built to suit workplaces at the turn of the 20th century—but work environments were much different then.
As businesses have evolved over time, so has performance management. Today, organizations are leveraging their talent as a competitive advantage and prioritizing innovation and critical thinking over execution.
This evolution has inspired a shift from annual appraisals and goal management to continuous performance conversations and feedback. A continuous approach allows leaders to capture real-time data and coach toward ongoing progress.
Peter Cappelli, Director of the Center for Human Resources at The Wharton School of Business at the University of Pennsylvania, outlines three reasons for adopting a continuous performance management approach.
As millennials continue to monopolize the workforce, businesses will be forced to create cultures that encourage employees to design their own paths to success. Continuous performance management gives managers the opportunity to coach employees in real-time and reflect on current work to help determine where they should focus going forward.
High performing teams are made of talented employees who feel supported by their managers, peers, and senior leadership. While individual goals are important, team goals help businesses grow and drive ongoing performance for the long-term.
The future of work is unpredictable. To stay the course, organizations need access to technology and systems that help their:
A study by Harvard Business Review Analytic Services found that more than half of business leaders chose productivity as a primary business goal for their organization's investments in performance management, employee engagement, and development. Yet only 31% say they’ve actually improved productivity as a direct result. This is where performance management comes in.
Better performance across the organization means a better chance at hitting organizational goals and achieving key business outcomes. When performance is measured and discussed continuously, it builds engagement and vice versa. Put simply, when employers prioritize collaborative, transparent, and supportive performance management practices, employees are more engaged and ultimately more successful.
It’s clear that performance management is an essential part of business success. There are many reasons for performance management. When designed and implemented correctly, your performance management cycle has the power to:
Besides the people who make up your organization and the process or system you use to manage performance, an effective program is made up of the following key elements.
Like other workplace initiatives, performance management is not solely an HR function. Performance management programs require ownership and involvement of all employees in order to be effective. Buy-in should start with senior leadership, but that’s not where it ends. Make sure you explain the unique benefits and components of the program to employees, managers, and leaders.
If you’re moving toward a model of continuous conversations, it’s important that both managers and employees are delivering on what’s expected of them. Ownership is only the first step. To create shared accountability:
Communication is critical to successful implementation and adoption of any talent initiative. Leaders, managers, employees, and HR business partners (or communities) should understand the intent of your program and how they contribute to its success. Customize your message and be sure to communicate frequently and consistently.
Employees have different ways they like to be motivated, receive feedback, and be recognized. People leaders should take note of these preferences, individualize their approach to employees' matters, and coach them to better behaviors. When employees feel their individual contributions and strengths are valued and understood, they are more likely to be engaged and perform better.
You can’t expect employees to jump into a new program and figure it out on their own. Whether you’re adopting a new philosophy, using a new tool, or setting new expectations, you need consistent training for employees and managers. When training employees, you want to focus on the behaviors and skill sets you want them to understand and adopt. These can include:
Employees perform better when they adopt a growth mindset—a belief that they can always improve and achieve more. When they do, employees:
In a recent survey, 81% of respondents strongly agree that highly engaged employees perform better. And organizations have been capitalizing on improving employee engagement for years. Engagement and pulse surveys allow organizations to collect employee feedback that helps them build better employee experiences. But what about employee performance?
Your performance management program should demonstrate value to your business. When you think about your engagement survey feedback, consider how perceptions have or have not changed toward elements that drive performance—like feedback, career growth, and open and honest communication.
If perceptions have improved, you should attribute those outcomes to your performance process. If not, consider perceptions related to other performance management elements, such as:
Your performance management strategy should empower employees with frequent coaching, feedback, and opportunities to develop their knowledge and skills to help them reach their full potential for individual, team, and business success.
Here are three steps to help guide your performance management process.
In order to design a successful performance management program for the future, you need to assess your past and current experience. Yet only 22% of organizations have updated their performance management approach within the past year. HR leaders must review and update these practices frequently to keep up with industry, marketplace, and workplace trends.
Rather than performance management happening to employees, they should be a critical part of the process through shared goal setting, multidirectional feedback, and continuous conversations.
Annual goals can become quickly dated if organizational changes occur. Keep your biggest business objectives and key results top of mind and updated on a regular basis. Build a process that gives you a detailed view of real-time employee performance so managers can take action and actively retain and develop their team.
How Fossil Transformed Their Performance Management Process
Fossil Group saw immediate progress when it evolved its company-wide performance approach—however upon further analysis it found that 35% of individual goals were misaligned or lacked impact on strategic priorities.
Here’s how they adapted for business success:
> They moved to continuous performance conversations and feedback by implementing informal “check-ins” that could be launched and customized by any employee, at any time.
> They built intuitive goal conversation templates to organically include opportunities to discuss and collaborate on setting clear, aligned, and motivating goals.
> They brought performance conversations full circle by building recognition toolkits for managers and launching an online peer-to-peer recognition program to keep the conversation going.
As businesses continue to transform how they do work, so will their performance management processes. Rather than manage and evaluate employees through annual employee performance reviews, organizations are prioritizing motivation to help their teams reach their potential.
Here are 6 best practices for redesigning performance management to move your program forward.
Continuous performance management is about shifting to a model that positions managers as coaches. This approach lets teams drive performance, while managers and leaders coach along the way.
Annual employee performance reviews are subject to bias because they rely on the memory and recollection of past performance and behavior. More flexible, two-way conversations (or check-ins) allow more frequent, real-time conversations throughout the year where both the employee and people manager shape the agenda and discussion.
One-on-one meetings should happen monthly to allow managers and employees to discuss performance and other important topics frequently. These meetings can cover a variety of topics and should always be:
Performance conversations should be devoted to performance and occur at least quarterly.
Whether feedback is positive or corrective, it shouldn’t have to wait until the end of the year. In fact, 71% of employees prefer immediate feedback and 72% said their performance would improve if their managers provided corrective feedback.
Managers don't always have a direct line of sight into their employees’ performance or developmental needs to provide constructive feedback—which can create bias. Manager-employee feedback is key, but adding peer feedback can help paint a bigger, clear picture of performance.
Employees should seek out 360 feedback and participate in self evaluations. This will help shift everyone in the organization to feel more comfortable sharing feedback and motivating performance.
68% of millennials who feel they’ve had development opportunities at work in the past year plan to stay at their organization for at least another year. Employee development helps managers understand what motivates employees and makes them tick. Not only that, effective development programs can help upskill or reskill employees to become more valuable contributors to team and organizational objectives.
Traditional performance management approaches offered compensation (or pay-for-performance) as a way to reward high performers. But today’s workforce isn’t motivated by monetary benefits alone.
While compensation conversations are still important, organizations are separating pay from performance and emphasizing positive feedback and recognition to increase engagement and motivate performance. Recognition should go beyond employees' individual contributions and celebrate the behaviors that support and reinforce your organization's mission, vision, and values.
Organizations are employing workers of all types—from remote to gig and hourly to salary. No matter the makeup of your organization, you need technology that links teams and their performance. With the right digital tools:
A strong program and effective process for performance management are foundational aspects to leveraging your talent for business success. In order to support, enable, and empower your efforts, you need a next-generation performance management system.
Here are the components that make up a successful performance management system and how to put your program and process into action.
Frequent one-on-one meetings allow managers to discuss employee performance and goals throughout the year. They are the foundation of any performance management system, giving managers the opportunity to ask questions, tackle challenges their employees may be facing, discuss organizational changes or decisions, and build a collaborative employee development plan.
Approaching goals with thought and intention allows managers to motivate employees and their teams by promoting and prioritizing the right behaviors. Goals make it easy for employees to know if their performance is on the right track, how they align with the organization’s goals, and illustrate how they contribute to team and business success.
Feedback helps managers narrow in on broader engagement efforts at the individual level by understanding how an employee is impacting their peers and operating within the context of the team. It gives managers the ability to individualize their approach to employee coaching to create a structured path for development, beyond evaluation.
Recognition is central to employees feeling good about the work they do. It motivates and empowers employees to repeat the behaviors that matter most. When meaningful behaviors, achievements, and overall effort is recognized, it illustrates what is valued and celebrated within the organization.
These assessments enable managers to develop interventions to improve their team, engage high performers, provide stretch or growth assignments, or determine areas of improvement. When high performers are recognized for their contributions and provided opportunities to develop and grow, they are more likely to be engaged.
Organizations who influence and nurture their workforce’s desire to learn are at least 30% more likely to be market leaders in their industries. Offering the right learning opportunities for employees can engage employees at each level based on their needs and better support your organizational vision.
Choosing a performance management software that fits your workplace culture is essential to the success of your strategy. When looking for technology to complement your people and team performance management process, you need a solution that can bring elements of an effective system together.
Look for a provider that isn’t limited to standalone systems or tools. Instead search for one that supports and propels organizational growth.
Here are 6 performance management software features you should look for.
HR is responsible for a lot when it comes to employee performance. Make sure your new performance management system integrates with not only your existing HRIS, but other systems and databases to remove the administrative burden of getting started.
For a performance management program to be welcomed and adapted by your employees, it has to feel like a natural part of your organizational culture. That means your performance management software should be customizable to fit the needs of your organization so that it becomes ingrained and integrated with other processes and traditions.
Busy schedules are a big obstacle when it comes to effective and continuous performance management processes. Look for software with in-tool and email notifications that notify and surface important insights and actions to managers.
Help employees of every level track and motivate performance no matter where they work (and when). Make sure your performance management software can be accessed from computers, tablets, and mobile devices.
The best performance management software allows you to integrate all your performance tools in one place—including goals, 1:1s, recognition, feedback, and talent reviews. Find a software that allows users to access them all with one, simple login to decrease hassle and increase usage.
A user-friendly performance management system is great, but if your software partner isn’t accessible, responsive, and friendly when you (or your employees) have questions, then it’s not the system for you. Look for a vendor that provides a dedicated support team, resources and templates, and keeps you informed on the latest trends and research.
The state of performance management is always evolving—and will likely be at the top of many business leader and HR agendas for the foreseeable future. To continuously achieve business success, organizations will need to adapt and adjust their approach to attract and retain high-performing employees.
Changing focus from annual performance reviews to continuous performance conversations and creating a process that drives employee engagement, employee and team performance, and business success will help:
Employees understand why their contributions matter and how to make a bigger impact
Managers coach successful teams by providing continuous feedback and building aligned goals
Leaders tie performance metrics to business outcomes to build a competitive workforce
To learn more about leveraging performance management to drive employee, team, and business success download this new report, The Business Case for Modern Performance Management.