Performance Management –A Definitive Guide

Objective Of Performance Management

Performance management started off as a way to determine and justify the compensation of every employee. Through this, managers used to find clear demarcation as to who is eligible

While one purpose of using performance management system is determining the compensation, it is not the only basis.

An even important objective for doing performance management is to solve this one real business problem: optimising performance of employees

An even important objective for doing performance management is to solve this one real business problem: optimising performance of employees

Why?

Because Business performance ∝ Employee performance

What this means?

Goals and the ways to achieve them may differ from company to company. The new purpose/ But, the objective for one and all would remain the same, i.e. to improve performance.

The necessary steps to achieve the aforementioned objectives are:

But, why is all this so crucial and what are its direct benefits for your business?

Why Is Performance Management Important?

Performance management is important because employees can only help you achieve your business goals efficiently when they have a clearer picture of their goals and how those are helping in the achievement of the big business objectives.

How does this help?

A performance management software is often used to set goals and measure them. With its help, not only are you able to monitor and give right feedback but even provide employees the chance to improve their performance / early on. Such systems aid companies in meeting the transforming needs of performance management process.

As per McKinsey, performance management is important because when you measure, it ensures that it gets done!

The 5 Benefits of Performance Management

Engagement and productivity go on the rise

When employees are clear about the goals set and how they can be achieved, they start delivering way more efficiently. The incentivised plan to reward and share feedback with employees helps keep them engaged and more focused toward their goals. This transforms the employees into a productive maven at work, like you always want them to be.

Business outcomes become more achievable

The success of your business will always be dominantly decided by the profits you make and expansion you do. The way to achieve these goes through employees- they run your business. When employees are engaged and kept happy with monetary and non-monetary benefits they start investing their skills in your business even more- they see personal gains in terms of growth, learning and money!

When organizations successfully engage their customers and their employees, they experience a 240% boost in performance-related business outcomes compared with an organization with neither engaged employees nor engaged customers – Gallup

Sound Employee Development Strategy

Performance management really helps you in seeing the future leaders. With clear goal setting, as a manager/ employer you get to measure the performance and skills of each team member. To further develop the employees by boosting their performance in real time, a mobile app can be used to easily give reward points and appreciation badges to the overachievers in just a few clicks. In other words, it truly empowers you to grow and groom your people so that their skills can be put to best use and greater benefit of your organisation.

Potential Growth

Performance management process also gives you a chance to identify and promote your growing talents so that they hold on to you. This way you don’t just end up reducing hiring costs immensely but also establish your company as one of the best places to work for. Moreover, this also motivates your employees to keep outlanding their last best performance.

Better Team building

Building a strong team is quintessential for the long term success of your company. If performance management is done right, it can enable you to identify the coaches, enablers, mentors and collaborators- collectively the right blend to build the A team. Knowing your teams’ strength and helping them work on their weaknesses with the help of performance management system also gets the work done faster and better. Such teams love working together, have best product knowledge- you reduce hiring costs and get the job done perfectly- isn’t this a win win for you?

Through 2022, 75% of organizations with frontline decision-making teams reflecting a diverse and inclusive culture will exceed their financial targets. Besides, gender-diverse and inclusive teams have already outperformed gender-homogenous, less inclusive teams by 50%, on average. -Gallup

But as they say nothing comes easy. Keeping a score aka managing performance is so important yet hard? Let’s look at few of the challenges

Challenges Of Performance Management

Poor Metrics

When you don’t end up choosing the right metrics to measure performance or when they are not in alignment with what the organisation is looking to achieve, the problem begins! A few examples would look like –

This rather than thriving, sabotages your business success.

According to Forbes, ‘companies that set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results.’

Irrelevant and Unrealistic Targets

A host of factors like size,location, growth of the company have a role to play when you set goals for employees. Employers tend to set goals that are not even relevant or seem achievable to the individuals they have been assigned to. Not including the employees in the discussion when targets are set is one of the many reasons for this. Getting a buy in and then shaping your expectations is a prerequisite. A few examples of this would look like:

No or Little Feedback

Metrics are an active measure of performance and daily tasks. Standup meeting, review, tool box, shift huddle and like help to keep employees focused and encouraged. The plan-do-check-act feedback loop is necessary to keep the employees updated on their work with regular/ frequent feedback. Through the same, they can learn from their mistakes and pick what worked best.

Research has found that employees who receive regular feedback on their strengths are on average 8.9% more profitable (Gallup).

Lack of Transparency

Employees like to see how their work and goals are helping the organisation achieve its goals. But, quite often the link between individual efforts and business outcomes gets blur as metrics and targets spread through the organisation. When targets are buffered or are not knit in a single thread that connects their goals and the business goals, they are never clear of their work or enthusiastic enough to achieve them. Absence of a seamlessly integrated HR software could also be a possible reason behind the gap.

For example-

When you tell the employees that they have to increase leads, the team might pick up any way to go about it. Instead, when they are informed

Performance Management Process

Performance management process is a process executed at regular intervals of time in a collaborative and communicative environment. In this, both, the employees and employer get a chance to share their feedback. They come together to plan, monitor, and review the objectives, short+long term goals, job path and their contribution to the company.

Why is Performance Management Process Needed? How it helps?

Here are few ways in which it helps.

Changing Nuances of Performance Management

Performance management is evolving. In the last few years, companies across the globe have dramatically changed the way they manage and develop employee performance.

Here are the seven mega trends that are becoming the “new normal” lately and will certainly go a long way in how employee performance is both measured and developed:

Did You Know?

Performance management process and performance management cycle, both these terms don’t mean the same. Performance management cycle is a part of the performance management process. The performance management cycle follows a 4-step cycle of planning, monitoring, reviewing and rewarding. It is brief and continuous , when the cycle is repeated multiple times in a year performance management process is considered half done. The cycle increases competitiveness, boosts morale and offers better flexibility continuously!

Performance management process= multiple performance management cycles

Performance Management Process

Depending on the cycle, your company follows,i.e. quarterly, bi-annually, monthly or annually, this process is executed. Let’s see what happens during each of these phases.

Phase 1- Planning

The first step in getting performance management process right is planning. Below we share some best practices and guidelines for the same.

Outlining performance expectations

To clear what is expected out of every employee, each one must be told what precisely is expected out of them. The planning to set performance expectations begins at the time of hiring with a job description. However, it goes beyond that as performance expectations are a sum total of many job outcomes that you expect. Answering following questions can help-

Performance expectations can be broken down into 2 categories-

Performance expectations= Results+ Actions & Behavior

Setting SMART Goals Objectives and standards can help get the right results and to identify actions and behaviors you must express performance dimensions.

Did You Know?

Competencies and Performance Dimensions are not the same. Competencies are useful during hiring & development and performance dimensions focus on job and help with review. For instance a performance dimension can be adding s chatbot to the app but the competency would be AI and tech knowledge.

Finalising expectations

Finalising expectations mutually is important to accomplish the performance goals set. Thus, after planning, you must finalise.

Making Development Goals

Taking onus of investing in their professional growth should come naturally when you expect the employees to perform and help you achieve your business goals.

“You must really support them in their journey of becoming the A player from B!” How? It’s Simple:

When your employees see how invested you are in their growth, they work even harder for your business’ growth.

Phase 2- Check-ins

Regular check-ins and feedback are required if you really want to better the performance of your employees.

“As a senior, manager, employer, you are ought to reinforce and recognise strong performance by an employee while encouraging, identifying improvement.”

Let’s look at how it’s done!

Praise in public, criticise in private

To help you get it right, we have a couple of IMPORTANT things to share:

Benefits

Questions you must answer

The golden coaching guidelines

#Focus on behavior and willingness to improve #Activate continuous and active listening to identify and coach the employee in the best manner to solve the problem #Set SMART goals and do regular check-ins

The way to do follow up saga

Phase 3- Reviewing

Performance review is the only step in the performance management process that looks backwards, let’s look at how the year in review can be assessed perfectly!

Reviewing employee performance

Often called a performance appraisal, this is the time when at the end of yearly performance management process, the employees performances are being reviewed. The record maintained while conducting performance management cycles to support the employee and solve their roadblocks by adjusting goals or upskilling is considered.

Reviewing the process

It is extremely important to review and look at not just employee performance but also yours, How well has your performance management process performed?

Here are some questions to start with:

Benefits

Reviewing overall goal completion

One of the main aim should always be to look at how many and how well were the goals accomplished by the employees throughout the year. For the same, every small, short term or large, long term goal should be taken into consideration while also understanding how can they be improved with trainings or interventions by the manager.

Phase 4- Action

This is the last and the most crucial step in the whole process. All the steps you did were in a way required so that the actions you take are justified and fair! Let’s look at the varied actions you can take basis the performance of every employee.

Reward & recognition-

If there is an employee who has shown tremendous growth, enthusiasm and results, she/he must be shown appreciation in monetary terms as well,and the bonus element should be updated in the Payroll Software for calculating new payout. Here are some ways to reward-

Promotion or Performance Improvement Plan

Depending on how the employee performed round the year, these are the two extreme steps that you must take. Clearly, if the performance has been excellent, you promote the employee. But, when it has been way lower than expected, it is the time to put them on PIP. Before that, if not done earlier, make sure you discuss the reasons for unsatisfactory performance.

Benefits

Setting the tone for next year performance

After the right actions have been taken for the employee, you both should take the last chance to understand and address company’s, employee’s , manager’s and teams’ perfections and imperfections. Suggest corrective or improvement actions and brace yourselves to plan for next year in advance.