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What Is the Purpose of Performance Management?

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Human resource depart­ments invest a lot of time and effort into per­fect­ing their per­for­mance man­age­ment process­es. But what is the pur­pose of per­for­mance man­age­ment and what rela­tion­ship does it have to busi­ness objec­tives? Below we’ll explore twelve uses of per­for­mance man­age­ment to the mod­ern business.

Accord­ing to John Lock­ett in his 1992 book Effec­tive Per­for­mance Man­age­ment: A Strate­gic Guide to Get­ting the Best From Peo­ple, per­for­mance man­age­ment is a sys­tem that aims to devel­op indi­vid­u­als with the required com­mit­ment, skills and com­pe­ten­cies for work­ing towards shared mean­ing­ful objec­tives with­in an organ­i­sa­tion­al framework.

It would be sim­ple if we could define the pur­pose of per­for­mance man­age­ment in one sen­tence (as Lock­ett aims to above) but, in real­i­ty, per­for­mance man­age­ment is much more involved and com­plex. The field of per­for­mance man­age­ment is flu­id. It’s con­stant­ly evolv­ing and as the years go by, its pur­pos­es change and adapt to employ­ee and busi­ness needs.

You’ll notice that Lockett’s def­i­n­i­tion of per­for­mance man­age­ment is very much about what the employ­ee can do for the organ­i­sa­tion. These days, the focus has shift­ed due to fac­tors such as tal­ent short­ages and advance­ments in the fields of psy­chol­o­gy and moti­va­tion. Today, the pur­pose of per­for­mance man­age­ment is equal­ly about what the com­pa­ny can do for the employ­ee: to keep them engaged, con­tent and productive.

Giv­en that per­for­mance man­age­ment is such an impor­tant and intri­cate field, we have gone in-depth and looked at it from many dif­fer­ent angles. Below, we’ll explore what we believe to be the twelve main pur­pos­es of per­for­mance man­age­ment and how they improve employ­ee engage­ment, organ­i­sa­tion­al and indi­vid­ual performance.

1. To Pro­vide Mean­ing­ful, Ongo­ing Feedback

Real-time feed­back is one clear exam­ple of how per­for­mance man­age­ment sys­tems have become more for­ward think­ing. Tra­di­tion­al­ly, feed­back was fair­ly lim­it­ed. Employ­ees would receive it dur­ing an annu­al per­for­mance review while being for­mal­ly judged and appraised on their past per­for­mance. This usu­al­ly hap­pened at the same time that bonus­es and pay were being decid­ed — mak­ing the exchange of feed­back strained, uncom­fort­able and unproductive.

Feed­back is far more effec­tive when deliv­ered prompt­ly. One of the most impor­tant pur­pos­es of per­for­mance man­age­ment today is to give and request feed­back reg­u­lar­ly, regard­less of whether it is pos­i­tive or con­struc­tive in nature. All feed­back is pro­gres­sive and should be deliv­ered as soon as pos­si­ble — this is increas­ing­ly impor­tant to employ­ees.

2. To Encour­age Team­work, Col­lab­o­ra­tion and Communication

HR lead­ers often look for ways to cre­ate a sense of com­mu­ni­ty and team­work with­in their organ­i­sa­tions. This leads to improved com­mu­ni­ca­tion and col­lab­o­ra­tion, which is good for busi­ness per­for­mance. Com­pa­nies can go about this in dif­fer­ent ways, but many utilise a mix­ture of social activ­i­ties and access to the right tech­nol­o­gy. Col­lab­o­ra­tion tools such as Slack pro­vide the capac­i­ty for real-time com­mu­ni­ca­tion, while team-build­ing exer­cis­es and after-work social activ­i­ties help to devel­op a sense of togeth­er­ness and team spirit.

3. To Ensure Every­one Is Achiev­ing Their SMART Goals

Goal-set­ting has always been an impor­tant focus for per­for­mance man­age­ment. It’s essen­tial that employ­ees under­stand what is required of them. Unfor­tu­nate­ly, it’s been shown that only about half of employ­ees actu­al­ly under­stand their goals. If employ­ees aren’t entire­ly clear on their aims, they’ll strug­gle to achieve goals and sur­pass expectations. 

Goal com­ple­tion is the respon­si­bil­i­ty of the employ­ee, the man­ag­er and the human resources depart­ment. Goals should be set reg­u­lar­ly and should be short-term — it’s been shown that short-term goals are incred­i­bly effec­tive, even more so than long-term goals. HR should ensure these goals are set and that man­ag­er and employ­ee meet fre­quent­ly to dis­cuss their progress.

4. …While Mak­ing Sure Goals Are Rel­e­vant and Fur­ther­ing Organ­i­sa­tion­al Objectives

Employ­ees shouldn’t sim­ply under­stand their own goals — they need con­text on how those goals feed into over­all com­pa­ny strat­e­gy. Not only will this help with their dai­ly deci­sion-mak­ing, but an under­stand­ing of com­pa­ny objec­tives and how their roles feed into the direc­tion of the com­pa­ny will give employ­ees a sense of mean­ing and pur­pose — some­thing they are des­per­ate­ly seek­ing in their careers.

5. To Pro­vide Con­tin­u­ous Support

As men­tioned in our per­for­mance man­age­ment trends of 2019 blog post, the mod­ern com­pa­ny needs to be con­cerned with so much more than cold, hard busi­ness results. Organ­i­sa­tions need to be social enter­pris­es, rather than pure­ly busi­ness enter­pris­es. They need to care about employ­ee well-being and employ­ee men­tal health. This can involve putting well­ness pro­grammes in place, but it also means demon­strat­ing to your employ­ees that they can come to you to dis­cuss any issues that are affect­ing their performance.

Men­tal health con­di­tions, includ­ing stress, anx­i­ety and depres­sion, are increas­ing­ly com­mon and they have a direct impact on per­for­mance. Com­pa­nies who are proac­tive and put mea­sures in place through their per­for­mance man­age­ment sys­tems — ensur­ing check-ins are reg­u­lar and incor­po­rate con­ver­sa­tions about health and well­ness, for exam­ple — are more pro­duc­tive and they ben­e­fit from sat­is­fied employ­ees who know they mat­ter to their company.

6. To Iden­ti­fy Devel­op­ment Areas

One key pur­pose of per­for­mance man­age­ment is tal­ent man­age­ment. It is vital to cre­ate devel­op­ment plans with employ­ees. Focus­ing on devel­op­ment needs means man­agers and employ­ees can put effec­tive plans in place, lead­ing to indi­vid­ual per­for­mance improve­ment and, ulti­mate­ly, improved organ­i­sa­tion­al per­for­mance. Fur­ther­more, once you make it clear that your com­pa­ny is invest­ed in their per­son­al devel­op­ment and career aspi­ra­tions, employ­ees will feel like val­ued and respect­ed mem­bers of the team rather than a replace­able cog in the machine. 

7. To Offer Recog­ni­tion and Reward

As point­ed out by Har­vard Busi­ness Review, recog­nis­ing employ­ees is the sim­plest way to improve morale and employ­ee engage­ment”. Recog­ni­tion is also pos­i­tive­ly linked to pro­duc­tiv­i­ty and high per­for­mance. Recog­ni­tion doesn’t have to come at a high price. There are many cost-effec­tive means of acknowl­edg­ing great effort and accom­plish­ments, and it’s been shown that the great­est way of incen­tivis­ing employ­ees is with intrin­sic moti­va­tors.

8. To Make Sure Employ­ees Are Engaged and Happy

Per­for­mance man­age­ment sys­tems are as much about the employ­ee as they are the employ­er. The term employ­ee engage­ment” has become an recur­rent phrase in HR over recent years, with good rea­son. Com­pa­nies are now well aware of the many busi­ness advan­tages of engaged employ­ees. They also know how detri­men­tal it can be to have an active­ly dis­en­gaged employ­ee on staff. One pur­pose of per­for­mance man­age­ment is to keep up-to-date with engage­ment trends, to con­duct employ­ee engage­ment sur­veys and to ensure all is being done to keep employ­ees engaged, moti­vat­ed and happy.

9. To Pro­vide Employ­ees with a Clear Career Path

Career pro­gres­sion is impor­tant to most employ­ees, and this isn’t set to change with Gen­er­a­tion Z, the newest gen­er­a­tion to enter the work­force. For this gen­er­a­tion, career suc­cess is of top impor­tance. While Baby Boomers are more like­ly to cite fam­i­ly and reli­gion as cen­tral to their iden­ti­ty, Gen Z pri­ori­tise pro­fes­sion­al, aca­d­e­m­ic and per­son­al suc­cess.

A good per­for­mance man­age­ment sys­tem encour­ages man­agers to dis­cuss a career plan with their employ­ees while cov­er­ing what the employ­ee needs to do to get there. Remem­ber, if your com­pa­ny is unable to pro­vide top per­form­ers with clear routes of pro­gres­sion, they are more like­ly to jump ship.

10. To Take Cor­rec­tive Actions

Per­for­mance man­age­ment allows man­agers and HR to step in at an ear­ly stage to address per­for­mance issues. Poor per­form­ing employ­ees can have a seri­ous impact on the entire organ­i­sa­tion and if per­for­mance issues are left unad­dressed, they can get out of control. 

For­tu­nate­ly, at Clear Review, we have advice on how to address unmo­ti­vat­ed and under­per­form­ing employ­ees. With any luck, man­agers will be able to get to the root cause of the prob­lem and work with the employ­ee to turn per­for­mance around. 

11. To Deter­mine How Lead­er­ship Can Moti­vate and Coach

When a per­for­mance man­age­ment sys­tem revolves around a one-or-two-year annu­al per­for­mance appraisal, this doesn’t allow a lot of time for trust and com­mu­ni­ca­tion to devel­op between man­ag­er and employ­ee. This is a prob­lem, giv­en that a man­ag­er has such a sig­nif­i­cant bear­ing on employ­ee engage­ment lev­els. These days, man­agers need to be so much more than just anony­mous author­i­tar­i­ans — they need to be moti­va­tors and coach­es to improve employ­ee performance.

Real­is­ti­cal­ly, not every­one who has been pro­mot­ed to the posi­tion of man­ag­er will know how to moti­vate and encour­age employ­ees. This is why your per­for­mance man­age­ment sys­tem should offer advice on how to give use­ful feed­back, lis­ten active­ly and moti­vate dif­fer­ent per­son­al­i­ty types.

12. To Improve Your Bot­tom Line

Mod­ern busi­ness­es need to care about employ­ees, but unless your com­pa­ny pro­duces great results it’s not going to thrive and com­pete long-term. This is why, when done effec­tive­ly, per­for­mance man­age­ment helps to improve busi­ness per­for­mance and busi­ness results. It should also help to reduce turnover, which ulti­mate­ly improves your bot­tom line so your com­pa­ny will stick around for years to come.

Our con­tin­u­ous per­for­mance man­age­ment soft­ware is designed to enable mean­ing­ful con­ver­sa­tions and improve indi­vid­ual, team and com­pa­ny per­for­mance. Book a demo today to find out how we can help you.