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
- For a bonus of how much
- Or a salary hike.
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:
- Developing roles, expectations and goals of the employees
- Continuously working on improving their competencies
- Making a sound reward program that can incentivise their accomplishments
- Incorporating automated solutions for managers to track and assess team performance
Note:
All these are interlinked. If one would not be done properly, others would be impacted too.
But, why is all this so crucial and what are its direct benefits for your business?
#PMBestPractices
Construct a performance-aligned culture- One great way to lead is to lead by example. So, when you expect your team to perform in alignment with your business goals and values, you must reflect it in your culture too.
For example-
One way to create a more harmonious work environment is to not just ask them to do teamwork but also involve them and really listen to their ideas when you start working on a new project or idea!
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?
- The process really motivates the employees to do their job well
- It also shows them a clear path to direct their actions toward
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
- Increase Engagement + Productivity
- Achieve Business Outcomes
- Make Development Strategy
- See Potential Growth
- Build Better Teams
- 5 Benefits
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!
Tip :
Set small milestones and monetary/ non-monetary rewards to accomplish a bigger goal, it can increase employees’ motivation to perform their best by 85%
Featured Resource:
Get exclusive access to Performance Management Checklist, and Policy Templates
ACCESS NOW
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.
Tip :
Boost team performance by pairing complementary leaders. This type of partnering can increase leaders’ skill preparedness by 54%.
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.
Tip :
High quality peer input and feedback has a great impact on your employees’ performance, it can boost growth by 14%.
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?
Tip :
Diversity and inclusion builds better high- performance teams. Look for “cognitive” diversity, which is mixing people together with different thinking styles, habits and perspectives
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
#PMBestPractices
Monitor progress towards performance targets It is always the best step to review the Key Performance Indicators after sometime especially when you are a startup trying out new ideas every other day. You can use analytics and metrics to check if the goals set are achievable, and aligned to the overall business goal, if not, make the necessary interventions in the plan early on
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 –
- Service centers that measure how quickly staff handles calls then wonder why employees don’t spend ample time to completely resolve a customer’s issue.
- Organizations that focus on individual performance to assess employee success are then dismayed when they observe a lack of teamwork and collaboration.
- Sales divisions that measure employees purely on top-line growth are then surprised to see how unprofitable newly -acquired accounts are.
- Human resources departments that measure recruiters on candidate “yields” from job fairs then find many unqualified applicants in their interview pipeline.
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:
- When you are looking to increase brand awareness- taking into account number of purchases made is irrelevant but tracking reach, engagement is relevant
- Keeping a sales target 10x more than the last quarter is unrealistic without a concrete plan in place+ without sales person buy-in
#PMBestPractices
Organize cross-functional workshops Your company can attain new heights of success when your people start working after understanding how their work is supporting the work of other department. Not only will they discover how they can add more value but also find new connections to help them in future. Give and take of inputs from different teams that are impacted by the work can really help employees deliver what suits one and all!
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.
However, when one on one feedback becomes more about policing/ micromanaging than coaching, or feedback is shared once in long, performance management turns into a challenge.
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
- You are looking for leads of growing organisations with 1000+ employees in India so that the sales team can nurture them
- The ultimate business goal is to increase revenue by 3x
#PMBestPractices
Discover goals of your performance management initiatives Knowing exactly what you want is really important to set the right and accomplishable goals. In this regard, asking certain questions like, ‘ Is increasing productivity the most crucial?, ‘Do you wish to groom current employees into leaders or hire new?, ‘Do you want to improve employee retention or engagement at priority?’
Asking such questions will help you identify company goals and thereafter set the right individual performance goals for employees!
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.
- The process when done right focuses immensely on effort. This keeps the employees morale high and helps the manager and employee rationale as to what should be done at high priority, what must be eliminated and what can be put on hold.
- With regular check-ins like feedback, status update, and guiding, the performance management process aids in identifying the problems before they start impacting the business. This process makes work highly flexible as the changes can be made to the project/tasks/goals as and when the need be.
- The process also acts as a constant reminder that performance management is an ongoing process and not an annual affair.
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:
- Improved Flexibility
- Increased Agility
- Culture of Continuous Training
- Constant Performance Tracking over Annual Reviews
- Data and Technology for Better Performance
- Ethics and Transparency on Top List
- Constant Feedback Mechanism
Formal Performance review= Summary of all conversations and updates in between
As per the Gallup Workplace Study, only 22% of employees are engaged and thriving. Clearly, only these 22% deliver strong work performance even when the times are tough. This also means that 78% of the workforce has the potential to perform better if their organisations adopt the right type of management process.
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-
- How will the work impact organisation?
- How should the individual behave with clients and colleagues?
- What services should he deliver?
Performance expectations can be broken down into 2 categories-
- Results
- Actions & behaviors
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.
- Pen them down- Probably the biggest lie we ever tell ourselves is “I will remember everything discussed.” Clearly, we don’t, so it is highly advisable to document every expectation the employee and you agreed on in the planning phase. These will come handy when you’d want to allocate budget and resources.
- Discuss & verify- At this point, it is pivotal to decide how the performance would be verified after goals have been set. Develop qualitative and quantitative expectations in terms of delivery dates, initiatives taken, behavior and more. Some common ways to verify performance are
- Direct observation
- Ratings
- Yes/no checklist
- Critical feedback mails or comments received
Benefits
- Clear and focused feedback
- Zero Ambiguity
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:
- You can organise workshops or cross training, online courses to help them develop skills required for job mastery
- You can work on professional development skills through special project participation
When your employees see how invested you are in their growth, they work even harder for your business’ growth.
ADOBE
The MNC realised that their managers were spending more than 80,000 hours yearly on performance reviews. The reviews were not even doing any good, the employees felt demoralised, as a result, turnover was increasing too. Hence, the leadership team took a leap and implemented a performance management system that firstly trained managers on how to do more check-ins and offer actionable guidance.
Afterwards the system was implemented and management spent less time while being able to do structured check-ins and formal review sessions. It is no more a one way street. Employees are often contacted via pulse surveys to ensure as to how the managers are leading their teams.
The results you ask?
30% cut in turnover due to a well structured PMS that supports frequent check-ins!
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!
- Sharing observation and feedback- For some tasks the result of work is so quick that it becomes a feedback in itself. For instance, the task is to gain 100 new followers in 15 days. Achieving the target doesn’t serve as feedback in itself. But adding critical feedback to it after observing the actions and behavior demonstrated can impact the performance of employee. The same will give him a better insight into his work.
- Coaching: Making the feedback actionable- Coaching is a continuous part of performance management. Basis goals set and the performance, you keep nurturing the employee in an even better perfor
Praise in public, criticise in private
To help you get it right, we have a couple of IMPORTANT things to share:
- The questions you must answer
- The golden coaching guidelines
- The best of ‘what to do in the coaching session?’
- The way to do follow up saga
Benefits
- Better relationship and communication between employee and you
- Higher chances of employees achieving their performance goals
- Infuses motivation and commitment in employees
- The self-esteem sees a massive jump
Questions you must answer
- How do you expect the employee to perform? Is she/he clear of your expectations?
- How would successful results look like to you? Tell the employee What behavior and performance are considered poor/non-satisfactory?
- Let the employee know What hindrances is the employee facing in his work?Are they beyond his control? Can you pool in/ help?
- Has the employee done a similar task before? How has the employee performed before?
- How eager, willing+able is the employee to learn and upskill? Do you end up overburdening the well performing employee than his colleagues?
- Would you rather assign a new task if the performance of employees is unsatisfactory or would you reassign the same task?
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
- Start by addressing the good behavior and actions taken
- Address the challenge or skills/ tasks that have/has scope for improvement. Don’t use attacking or defensive tone
- Ask the employee about their views. Do they agree? Why or why not?
- Discuss with them the steps that can help in overcoming the roadblocks- Training, working on certain habits,etc.
- Take feedback from them as to how you are performing as a manager
- Fix a timeline for completion of the steps decided for improvement
- Keep observing and helping wherever needed
- Upon completion, ask them to share their learnings with you and rate themselves
- Discuss the next workaround
The way to do follow up saga
- Review the previous progress and discussion
- Discuss how no or little improvement in performance is impacting the business
- Indicate the consequences
- Show your confidence in employees
Note
Coaching meetings can be done to recognise good work, highlight poor work ethics, or to discuss plan to improve performance.
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:
- Did it support personal and organisational goals? If not, why?
- What sort of challenges did the employee face?
- Were there any trainings given? If yes, what sort?
- Was the feedback provided by management actionable? If not, why?
- What were the pitfalls? How can the process be made better?
Benefits
- Feel appreciated for the contributions, initiatives
- Learn & improve through specific and constructive feedback
- Stay in the knowhow of current and future performance goals
- Stay involved as a participant in the process
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.
GOOGLE
The trendsetter itself relied on data and analysis for their performance management while training their managers well. When Google was evaluating its performance management system, it also launched a project for evaluating the managers. The same led to a thorough training and development of the managers to set them up for success so that their teams can succeed with their support too!
Besides, they also started using a special system to set goals- They started using Objectives and OKRs to rewire the goal setting process to achieve greater results. This worked so well, that it spread across multiple industries.
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-
- give them badges and reward coins that they can redeem online.
- Give them a salary raise
- Give them a bonus
- Give them shopping vouchers, dinner, trip. staycation
- or anything else they like
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
- Feel worthwhile and optimistic about the job
- Get motivated to work even harder
- Fueled to share new ideas and work on new innovative projects Stay loyal to your company
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.
Problem
51% of employees think annual reviews are highly inaccurate + 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.’
Solution
SET SMART GOALS to avoid conflict and disagreement at the time of performance review. It is crucial for the employees to know what you expect so that they know how they can exceed or meet your expectations. A good way to do it is to set short term goals and keep discussing them frequently. Otherwise, your employees will also fall in this 51% slab!