How do you measure the effectiveness of your performance management processes? Below, we explore how to effectively measure organisational performance to keep your company and your employees on track.
Organisations invest a significant amount of time (and therefore money) in performance management activities. Indeed, before their performance management revamp, Deloitte calculated their 65,000 employees were spending a total of 2 million hours a year completing forms, holding meetings and assigning and analysing ratings. CEB found managers spent an average of 210 hours per year on performance management, finding that a company of 10,000 people spent $35 million a year on performance reviews alone. Yet so many of us — managers and employees alike — are dissatisfied with the quality and effectiveness of our performance management systems.
If this sounds familiar, it’s time you took action and began measuring the effectiveness of your performance management system.
Below, we outline five steps that will have you on the road to measuring performance in a meaningful way.
Step 1 — Do Your Research and Benchmark Best Practice
If you are going to assess the quality of your performance management system objectively, an important first step is to understand what”excellent” looks like for your business.
Spend some time reading the latest research into performance management trends and best practice. Look at some case studies of organisations who have succeeded after revitalising their performance management system. To help with this, we’ve created a free eBook on effective performance management, which summarises a wide variety of research and case studies into an easily digestible guide.Want to see how our Performance Management Software works?
Step 2 — Be Clear on Your Organisation’s Goals for performance Management
A number of guiding principles have come to light in recent research into performance management — such as the importance of having regular future-focused “check-ins”, giving frequent feedback and decoupling performance measurement from developmental performance discussions. But how effective your performance management process is will ultimately depend on what you are looking to get from it.
For this reason, it’s essential to be 100% clear on what your organisation’s goals for performance management are. This is something that should be discussed and agreed with your senior leadership.
A survey conducted by eReward in 2014 found the most common goals for performance management were:
- to improve organisational performance
- to align individual and organisational objectives
- to develop a performance culture
- to improve individual performance
- to align individual behaviour to organisational values
- to provide the basis for personal development
- to inform performance pay decisions
Step 3 — How to Measure Organisational performance: Establishing Your Success Measures
Once you are clear of the goals of your performance management system, the next step is to establish what success should look like for each one. Here are some success measures for a selection of the common performance management goals above, to show you how to measure the effectiveness of your system against your performance management goals:
Performance Management Goal
Example Success Measures
Improve organisational / team performance
Improve individual performance
Encourage performance development
Increase employee motivation and engagement
Inform performance pay decisions
In addition to agreeing on success measures related to specific performance goals, it is important to define some measures for your performance management processes (i.e. the actual mechanics). You’ll want to know how easy your employees and managers find the processes and tools they use, how time-consuming they are, how well they are implemented, what proportion of people are following the processes and whether people are demonstrating the necessary performance management skills.
Step 4 — Evaluation of Your performance Management System
Once you have established your success measures, it’s time to start collating data and evaluating.
To truly know how effective your performance management is — and to understand how to improve it — you will need a combination of both qualitative and quantitative data. Looking at quantitative figures such as company or team profitability or employee engagement levels in isolation will not help you to understand the direct impact performance management had on them — other factors will also be at play. Methods of getting useful qualitative and quantitative performance management data include:
- Carrying out a dedicated survey of a selection of employees and managers on their views and experiences of the performance management process and tools and how they have contributed to achieving the desired goals
- Asking specific questions relating to performance management in your existing employee attitude surveys
- Conducting interviews with a sample of employees and managers about their experiences of performance management
- Focus groups
- Extracting data and reports from your online performance management system (if you have one)
- Reviewing a sample of objectives and personal development plans for quality
Step 5 — Take Action on the Results
Once you’ve analysed the results, you should have a clear idea of how effective your performance management processes are and which aspects could be improved. If the results are not as good as you had hoped, don’t be disheartened as you are not alone. A 2014 study found only 8% of companies reported that their performance management process drives high levels of value. More recently, two-thirds of organisations suggested their performance management system was ineffective. There’s definitely room for improvement.
The key to improving your performance management is to involve a variety of senior managers, managers and employees in discussions on how to make improvements. This will help you to get buy-in to the improved process and greater ownership from those who have to implement it.
How to Improve Your Performance Management System
Here are five suggested steps to improving your performance management processes:
- Summarise the results and areas for improvement into a presentation that can be easily digested by those outside of HR.
- Consult senior management on the results. Obtain their support for making changes and seek their ideas for how to make improvements.
- Run focus groups with a variety of managers and employees from different areas of the organisation. Discuss the results with them and ask for their suggestions for improvement.
- Decide on what actions should be taken to address the issues discussed and draw up a proposed action plan. Discuss this with your senior management and manager/employee focus groups to get their feedback.
- Make any required amendments to the action plan based on the feedback received, then implement the plan.
While involving people in the redesign of your performance management processes is essential, they probably won’t be able to provide all the answers. Sometimes you’ll need to present them with options based upon best practice from outside of the organisation. For this reason, you should make it a priority to remain up-to-date with performance management trends, knowing that the field of HR is ever-evolving.
We have helped hundreds of organisations improve their performance management systems by moving away from annual appraisals. We can help you improve conversations and encourage great performance in your organisation. Get in touch today to discuss how our performance management software can help you.