Chapter 2

Back to Basics: The Five Principles of Effective Performance Management

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What is the pur­pose of per­for­mance management?

Most organ­i­sa­tions have some form of employ­ee per­for­mance man­age­ment or per­for­mance appraisal process. Yet how many of us have gen­uine­ly con­sid­ered why we do per­for­mance man­age­ment? What is it real­ly about? It is vital that we ask our­selves this ques­tion if we are going to make per­for­mance man­age­ment a success.

Few of us would dis­agree that the fun­da­men­tal pur­pose of per­for­mance man­age­ment should be to improve the per­for­mance and engage­ment of employ­ees. Yet, as we estab­lished in Part 1 of this eBook, this core objec­tive has often been large­ly neglect­ed in a desire to mea­sure and rate employ­ee per­for­mance in order to facil­i­tate deci­sions about pay and pro­mo­tions, or to iden­ti­fy poor per­form­ers and hold them account­able. Iron­i­cal­ly, such a focus has cul­mi­nat­ed in a sit­u­a­tion where annu­al per­for­mance appraisals fre­quent­ly end up decreas­ing employ­ee per­for­mance rather than improv­ing it.

The five key prin­ci­ples of effec­tive per­for­mance management

So if per­for­mance man­age­ment should real­ly be about improv­ing employ­ee per­for­mance and engage­ment, let’s con­sid­er what the key ingre­di­ents of this are:

1. Aligned, Near-Term SMART Objectives

For employ­ees to per­form to the best of their abil­i­ties, they need to under­stand in clear terms what is expect­ed of them. Fur­ther­more, for organ­i­sa­tions to suc­ceed, they need all their employ­ees to con­tribute to the over­all goals of the organ­i­sa­tion. The most effec­tive way to achieve this is for each employ­ee to agree SMART Objec­tives with their man­ag­er that are aligned to the organisation’s goals.

SMART Objec­tives are not a new con­cept. How­ev­er, organ­i­sa­tions have tra­di­tion­al­ly tend­ed to ask their employ­ees to set long-term SMART objec­tives on an annu­al basis. The prob­lem with this is that the objec­tives often become irrel­e­vant as the busi­ness changes and they take so long to com­plete that employ­ees lose moti­va­tion. Because of this, for­ward-think­ing organ­i­sa­tions are now encour­ag­ing their staff to work on near-term objec­tives, typ­i­cal­ly with a 1 – 4 months time frame.

Researchers have found that SMART objec­tives are more like­ly to be achieved if the employ­ee takes own­er­ship of set­ting their own objec­tives rather than being dic­tat­ed to from above. Whilst the man­ag­er clear­ly needs to be involved in this process, Lin­da Hill, Pro­fes­sor of Busi­ness Admin­is­tra­tion at Har­vard Busi­ness School advis­es that

A manager’s job is to pro­vide sup­port­ive auton­o­my’ that’s appro­pri­ate to the person’s lev­el of capability.”

2. Fre­quent Feedback

When it comes to review­ing per­for­mance, research has shown that the biggest fac­tor in improv­ing per­for­mance is giv­ing employ­ees effec­tive and fre­quent feed­back. A Cor­po­rate Exec­u­tive Board (CEB) Study found that giv­ing fair and accu­rate feed­back dur­ing per­for­mance reviews improved per­for­mance by a mas­sive 39%.

Yet feed­back is most pow­er­ful when giv­en fre­quent­ly and in-the-moment’, rather than at for­mal per­for­mance reviews or via a 360 degree feed­back process. A study report­ed by con­sul­tan­cy Mind Gym found that get­ting fort­night­ly feed­back is the opti­mum fre­quen­cy for peo­ple to per­form at their best.

3. Reg­u­lar Sup­port from Manager

For employ­ees to suc­ceed in their roles and gen­uine­ly improve their per­for­mance, they need sup­port from their man­ag­er, and they need it reg­u­lar­ly. A once or twice-a-year per­for­mance appraisal sim­ply doesn’t cut it. A 2015 sur­vey by TriNet found that 9 out of 10 mil­len­ni­al employ­ees would feel more con­fi­dent in their role if they could have more fre­quent per­for­mance con­ver­sa­tions with their manager.

Anoth­er glob­al study by Gallup found that employ­ees whose man­agers have reg­u­lar per­for­mance dis­cus­sions with them are almost 3 times as like­ly to be engaged. This is huge­ly pow­er­ful con­sid­er­ing that high­ly engaged employ­ees per­form bet­ter, are far more pro­duc­tive and can deliv­er 22% high­er pro­duc­tiv­i­ty for your organisation.

Of course it’s not just about the fre­quen­cy of per­for­mance con­ver­sa­tions, but also the qual­i­ty. We need to edu­cate and train line man­agers to have one-to-ones that sup­port employ­ees to over­come bar­ri­ers to suc­cess, focus on the future as well as the past and which result in clear action points for both parties.

4. Employ­ee Recognition

For employ­ee per­for­mance and engage­ment to be main­tained, we need to recog­nise employ­ees’ suc­cess­es. And there are sig­nif­i­cant rewards for organ­i­sa­tions who make employ­ee recog­ni­tion a pri­or­i­ty. A study by Bersin & Asso­ciates found that com­pa­nies that prac­tice a high-recog­ni­tion” cul­ture have 30% low­er vol­un­tary turnover than aver­age, and tend to out­per­form their peers in a vari­ety of oth­er metrics.

Whilst organ­i­sa­tions have put sig­nif­i­cant time and effort over the last decade into per­fect­ing their per­for­mance relat­ed reward process­es, giv­ing a reg­u­lar thank you” has been shown to be much more pow­er­ful than a bonus or pay rise. Today’s employ­ees want to be acknowl­edged for their achieve­ments and have their suc­cess­es cel­e­brat­ed, so we need to incor­po­rate process­es that encour­age this into our per­for­mance management.

5. Per­son­al and Career Development

Dis­cussing and agree­ing per­son­al devel­op­ment and career plans with employ­ees is often paid lip ser­vice to in per­for­mance reviews, espe­cial­ly where the pri­or­i­ty is placed on assess­ing and rat­ing per­for­mance. Indeed, research has found that only 8 per­cent of organ­i­sa­tions’ devel­op­ment plans are effec­tive.

Yet, com­pa­nies who don’t put aside reg­u­lar time to dis­cuss employ­ee devel­op­ment are at risk of los­ing their key tal­ent – enter­pris­ing employ­ees will go else­where to find a com­pa­ny who does.

Per­son­al devel­op­ment is also essen­tial for increas­ing employ­ee engage­ment – AON’s 2015 Engage­ment sur­vey found that Learn­ing & Devel­op­ment is one of the top 5 dri­vers of employ­ee engage­ment globally.


In this sec­ond part of our eBook, we have estab­lished that the pur­pose of per­for­mance man­age­ment should be to improve employ­ee per­for­mance and engage­ment. We have also con­sid­ered five key prin­ci­ples of per­for­mance man­age­ment involved in achiev­ing this. In Part 3, we’ll be explor­ing the key com­po­nents of our rec­om­mend­ed Con­tin­u­ous Per­for­mance Man­age­ment framework.