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What is an Effective Performance Management System?

Performance management

What com­pris­es an effec­tive per­for­mance man­age­ment sys­tem? What is a per­for­mance man­age­ment cycle and how can it moti­vate great performance?

Per­for­mance man­age­ment isn’t an easy field to nav­i­gate. It’s con­stant­ly evolv­ing, hence the need for an effec­tive per­for­mance man­age­ment sys­tem. New per­for­mance man­age­ment trends emerge every year and, unfor­tu­nate­ly, all too often, human resource depart­ments get it com­plete­ly wrong.

This leads to employ­ees left feel­ing deflat­ed, unmo­ti­vat­ed and unen­gaged. Man­agers are frus­trat­ed at the poor lev­els of team and indi­vid­ual employ­ee per­for­mance. Thank­ful­ly, more and more com­pa­nies are now wak­ing up to the impor­tance (and result­ing ben­e­fits) of effec­tive per­for­mance man­age­ment sys­tems. The first step towards revi­tal­is­ing and improv­ing your exist­ing per­for­mance process­es is to under­stand what an effec­tive per­for­mance man­age­ment sys­tem is.

To do this, we will address the fol­low­ing ques­tions through­out this article:

What Is Per­for­mance Man­age­ment? (Per­for­mance Man­age­ment Defined)

When dis­cussing per­for­mance man­age­ment, many peo­ple will imme­di­ate­ly think of the annu­al per­for­mance review process. But the per­for­mance appraisal is only one com­po­nent of what is con­sid­ered to be per­for­mance man­age­ment. One of the best def­i­n­i­tions of per­for­mance man­age­ment is pro­vid­ed by Michael Arm­strong in his Hand­book of Per­for­mance Man­age­ment, which care­ful­ly and plain­ly lays out the Arm­strong per­for­mance man­age­ment cycle:

Per­for­mance man­age­ment is the con­tin­u­ous process of improv­ing per­for­mance by set­ting indi­vid­ual and team goals which are aligned to the strate­gic goals of the organ­i­sa­tion, plan­ning per­for­mance to achieve the goals, review­ing and assess­ing progress, and devel­op­ing the knowl­edge, skills, and abil­i­ties of peo­ple.”

A key point here is that per­for­mance man­age­ment is a con­tin­u­ous process — not a once-a-year one-off” activ­i­ty. Qual­i­ty per­for­mance man­age­ment should, there­fore, bring togeth­er a num­ber of dif­fer­ent, inte­grat­ed activ­i­ties to form an ongo­ing​”per­for­mance man­age­ment cycle”, as shown below.

What Are the Stages of the Per­for­mance Man­age­ment Cycle?

Performance Management Cycle

The first stage of Arm­strong’s per­for­mance man­age­ment cycle is the​“Plan­ning” phase for the forth­com­ing peri­od. Plan­ning should involve:

  • Agree­ing on SMART objec­tives

  • A per­son­al devel­op­ment plan

  • Actions to be tak­en in the com­ing months

  • A review of the employee’s job require­ments, updat­ing the role pro­file where necessary.

His­tor­i­cal­ly, organ­i­sa­tions tend­ed to car­ry out this plan­ning stage once a year. How­ev­er, with the busi­ness envi­ron­ment becom­ing increas­ing­ly agile and fast-mov­ing, many organ­i­sa­tions are adapt­ing their process­es to set​“near-term” objec­tives every three months. The organisation’s goals and val­ues should feed into per­for­mance plan­ning to ensure that indi­vid­ual per­for­mance aligns with the over­all strat­e­gy of the organ­i­sa­tion. Specif­i­cal­ly, each SMART objec­tive should con­tribute to achiev­ing one or more of the organisation’s goals. 

Per­son­al devel­op­ment plan­ning, mean­while, should con­sid­er what behav­iours, skills or knowl­edge the indi­vid­ual needs to devel­op to suc­cess­ful­ly achieve their objec­tives and uphold the organisation’s values.

Tra­di­tion­al­ly, organ­i­sa­tions have placed a lot of their empha­sis on the​“Review” part of the cycle — often because a per­for­mance assess­ment is required for reward­ pur­pos­es. How­ev­er, we have always advised that it is the​“Act” and​“Track” stages that are the most impor­tant. These stages are where per­for­mance is actu­al­ly deliv­ered and results achieved. Indi­vid­u­als need to be encour­aged to sched­ule in reg­u­lar time to work on achiev­ing their objec­tives and per­son­al devel­op­ment plans.

Sim­i­lar­ly, man­agers need to be check­ing in with their staff reg­u­lar­ly. They must give fre­quent, effec­tive feed­back and use coach­ing skills to help their team mem­bers over­come chal­lenges and iden­ti­fy oppor­tu­ni­ties for learn­ing and per­for­mance improve­ment. If this is left until an end-of-year review, it is too late — objec­tives and devel­op­ment plans may end up only par­tial­ly achieved.

Notice that in the above per­for­mance man­age­ment cycle, there are no arrows between the four stages. This is because, in real­i­ty, the stages do not flow one after the oth­er. Act and Track should be con­tin­u­ous through­out the year. Reviews may take place at any point, and plan­ning may take place sev­er­al times dur­ing the year and be re-vis­it­ed as the needs of the busi­ness change.

What Does the New Con­tin­u­ous Per­for­mance Man­age­ment Cycle Look Like?

Since 2015, this phi­los­o­phy of con­tin­u­ous per­for­mance man­age­ment has been adopt­ed by lead­ing organ­i­sa­tions such as Deloitte, Adobe and Gen­er­al Elec­tric. All these major names have ditched the tra­di­tion­al once-a-year per­for­mance appraisals in favour of reg­u­lar​”check-ins” and fre­quent (or real-time) feedback. 

These reg­u­lar per­for­mance dis­cus­sions are typ­i­cal­ly devel­op­men­tal and future-focused. They pro­vide team mem­bers with an oppor­tu­ni­ty through­out the year to explore what has gone well and how suc­cess can be repli­cat­ed, any chal­lenges faced and how they may be over­come — and to agree on actions both the indi­vid­ual and man­ag­er need to take to devel­op the indi­vid­ual and fur­ther improve their per­for­mance. Such check-ins are also a great oppor­tu­ni­ty to address employ­ee devel­op­ment while offer­ing train­ing oppor­tu­ni­ties and reg­u­lar­ly rein­forc­ing per­for­mance expec­ta­tions.

Here is how this Con­tin­u­ous Per­for­mance Man­age­ment process typ­i­cal­ly looks in lead­ing organisations:

Per­for­mance Man­age­ment Process: The Basic Ele­ments Nec­es­sary for Effec­tive Per­for­mance Management

There are a few basic ele­ments involved in build­ing an effec­tive per­for­mance man­age­ment frame­work, including:

Set­ting Goals

You need to set goals the right way. They need to be mean­ing­ful and under­stood. Employ­ees should have con­text as to why these indi­vid­ual goals mat­ter and how they are fur­ther­ing organ­i­sa­tion­al objec­tives. Employ­ees will care much more about their roles and be much more engaged when they know — and tru­ly under­stand — how their job matters. 

Goal set­ting is and should be a col­lab­o­ra­tive process, which involves meet­ing with employ­ees and being trans­par­ent about com­pa­ny goals, direc­tion and obsta­cles. Armed with this infor­ma­tion, employ­ees can cre­ate goals which com­ple­ment organ­i­sa­tion­al objec­tives and make dai­ly deci­sions to fur­ther these objec­tives. Fur­ther­more, when employ­ees are put in the dri­ver’s seat and allowed to devel­op their own goals (before hav­ing them approved by their line man­ag­er), they expe­ri­ence a height­ened sense of auton­o­my and own­er­ship over their work. Inevitably, this results in improved employ­ee performance.

Trans­par­ent Com­mu­ni­ca­tion and Collaboration 

Employ­ees want — and deserve — their man­agers and lead­ers to be open and authen­tic at all times. They don’t want to be kept in the dark when their com­pa­nies are going through hard times, espe­cial­ly in the midst of a COVID-19 pan­dem­ic. They want to be kept abreast of per­ti­nent infor­ma­tion. On top of this, they want real-time com­mu­ni­ca­tion while build­ing healthy rela­tion­ships with their col­leagues and man­agers. This will involve reg­u­lar feed­back and hon­est dis­cus­sion — even when such com­mu­ni­ca­tion is dif­fi­cult or uncomfortable. 

Employ­ee Recognition 

An effec­tive per­for­mance man­age­ment sys­tem should pri­ori­tise employ­ee recog­ni­tion and reward. Employ­ees should feel val­ued and appre­ci­at­ed for the work they do and the effort they put in. If employ­ee recog­ni­tion is not a pri­or­i­ty, this will most like­ly have a neg­a­tive bear­ing on your vol­un­tary turnover.

Hon­est and reg­u­lar feed­back and reviews are need­ed — the more fre­quent and pre­cise the feed­back, the bet­ter indi­vid­ual per­for­mance. It’s that sim­ple. Employ­ees want reg­u­lar insights into their work, and the bet­ter-informed employ­ees are regard­ing their per­for­mance, the bet­ter able they are to improve and excel.

Employ­ee Development 

No ambi­tious top per­former wants to remain at a com­pa­ny long-term with­out hon­ing and devel­op­ing skills. Advance­ment and devel­op­ment are impor­tant to employ­ees — not to men­tion, com­pa­nies stand to ben­e­fit when employ­ees are more skilled and capable.

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So What Exact­ly Is Effec­tive Employ­ee Per­for­mance Management?

Hav­ing all of the ele­ments of the per­for­mance man­age­ment cycle in place is very impor­tant, but this will not nec­es­sar­i­ly lead to effec­tive per­for­mance man­age­ment for your organ­i­sa­tion. There are many oth­er fac­tors in play, such as:

  • Hav­ing buy-in from lead­er­ship and senior man­age­ment to per­for­mance management

  • Ensur­ing the per­for­mance man­age­ment cycle is con­tin­u­ous and not an annu­al process

  • Ensur­ing per­for­mance con­ver­sa­tions and reviews are mean­ing­ful and not​”tick-box” exercises

  • Imple­ment­ing easy to use per­for­mance man­age­ment soft­ware which sup­ports effec­tive per­for­mance man­age­ment and gives you vis­i­bil­i­ty of per­for­mance man­age­ment activity

  • The skills and will­ing­ness of your man­agers to deliv­er effec­tive per­for­mance man­age­ment on a day-to-day basis.

What Makes Per­for­mance Man­age­ment Sys­tems Inef­fec­tive and Uninspiring?

Trag­i­cal­ly, only around 14% of organ­i­sa­tions report being hap­py with their cur­rent per­for­mance man­age­ment sys­tems. If you’re not vig­i­lant, per­for­mance man­age­ment process­es can often become inef­fi­cient and coun­ter­pro­duc­tive.

Below are a few ways this can happen:

Your Sys­tem Isn’t Fair or Accurate 

This often occurs when annu­al reviews are favoured over more con­tin­u­ous per­for­mance man­age­ment. After all, how can an employ­ee be fair­ly and accu­rate­ly assessed and treat­ed when their entire year’s per­for­mance is sum­marised in one sit­ting? Can man­agers remem­ber all per­ti­nent events from as far as a year ago — and how will the employ­ee receive the appro­pri­ate lev­els of feed­back, moti­va­tion, sup­port and recog­ni­tion? In fact — how can the annu­al review be fair if there is no exist­ing and trust­ing rela­tion­ship between employ­ee and manager?

Man­agers Treat­ing Employ­ee Per­for­mance Man­age­ment as a Box-Tick­ing” Exercise 

This hap­pens when man­agers go through the motions, per­form reviews and give feed­back, but they are sim­ply pay­ing lip ser­vice to the process. These man­agers might take a use­ful tool, such as per­son­al devel­op­ment objec­tives, and do the bare min­i­mum with employ­ees, with­out revis­it­ing and revis­ing them. This is a huge warn­ing sign of an inef­fi­cient per­for­mance man­age­ment sys­tem. If your man­agers are checked-out, your employ­ees will soon fol­low suit.

Paper and Pen Sys­tems are Still Being Used

Busi­ness­es these days can grow so quick­ly that paper-and-pen sys­tems become redun­dant. These days, tech­nol­o­gy is more afford­able, sim­pler and more acces­si­ble than ever before. To be tru­ly effec­tive, com­pa­nies need to invest more in easy-to-use, stream­lined technology.

Your sys­tem is focused more on appraisal than on coach­ing — one way to get employ­ees to dread per­for­mance dis­cus­sions is to make them feel they are going to be judged by their man­ag­er every time they have a con­ver­sa­tion. Rather than tear­ing employ­ees down, man­agers should be a coach. They should be sup­port­ive and encour­ag­ing, rather than dic­ta­to­r­i­al and impatient.

What Can Clear Review Employ­ee Per­for­mance Man­age­ment Soft­ware Do for My Company?

Clear Review is a sim­ple, pow­er­ful cloud-based employ­ee per­for­mance man­age­ment soft­ware that enables mean­ing­ful, reg­u­lar con­ver­sa­tions. Our plat­form helps achieve the ulti­mate goal of high-per­­for­­mance com­pa­ny cul­ture by cre­at­ing a light-touch frame­work of devel­op­men­tal dis­cus­sions, which are sup­port­ed by agile goals and real-time feedback.

Clear Review facil­i­tates devel­op­men­tal check-ins, helps man­agers and employ­ees col­lab­o­rate to set (and track) agile goals and pro­vides the capac­i­ty for real-time feed­back. Fur­ther­more, our soft­ware has a​“tal­ent snap­shot” fea­ture, which enables man­agers to pro­vide per­for­mance insights in min­utes, with­out the ardu­ous, admin­is­tra­tive burden.

Take your first step today with Clear Review and book a free per­for­mance man­age­ment soft­ware demo with us today.

Download the eBook to find out how to make Continuous Performance Management successful

If you’d like to learn more about how to make your performance management system more effective and productive while embedding val­ue-adding, effec­tive per­for­mance man­age­ment process­es into your organ­i­sa­tion, check out our free eBook on suc­ceed­ing with Per­for­mance Man­age­ment.

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