Why is Performance Management Important?

What is per­for­mance man­age­ment and why do so many busi­ness­es con­sid­er it an impor­tant ele­ment of their tal­ent strat­e­gy? It’s all about the ben­e­fits it can pro­vide employ­ees and your abil­i­ty to man­age and devel­op them.

CEOs, direc­tors, influ­encers and big names in busi­ness reg­u­lar preach the impor­tance of per­for­mance man­age­ment — the act of engag­ing with an employ­ee to review their ongo­ing work­place per­for­mance and devel­op­ment. The process of per­for­mance man­age­ment com­bines infor­ma­tion gath­ered through the mon­i­tor­ing of goal com­ple­tion, feed­back and dis­cus­sions. By analysing suc­cess­es, strengths, learn­ings from mis­takes and poten­tial for growth and devel­op­ment, busi­ness­es can devel­op tal­ent, enhance work­ing per­for­mance and weed out problems.

Con­tin­u­ous Per­for­mance Man­age­ment vs. Annu­al Appraisals

There are cur­rent­ly two main approach­es for man­ag­ing tal­ent progression:

1. Con­tin­u­ous per­for­mance management
2. Annu­al appraisals

Many busi­ness­es, 65% in fact, are still using annu­al appraisals over con­tin­u­ous per­for­mance man­age­ment. This tra­di­tion­al approach entails a one or twice a year for­mal review where­by an employee’s per­for­mance over the last 6 – 12 months is assessed and future tar­gets or objec­tives are set.

Con­verse­ly, con­tin­u­ous per­for­mance man­age­ment involves reg­u­lar check-in meet­ings com­bined with fre­quent real-time feed­back with the aim of improv­ing per­for­mance on an ongo­ing basis.

Annu­al appraisals are dying off in favour of con­tin­u­ous per­for­mance man­age­ment. Despite the num­ber of com­pa­nies still using year­ly reviews, the num­bers are rapid­ly tum­bling as busi­ness­es recog­nise the prob­lems inher­ent with annu­al appraisals and move to new ways of man­ag­ing their talent.

But why is per­for­mance man­age­ment impor­tant at all? Do you real­ly need to be keep­ing such a close eye on what your work­ers are doing?

Why is Per­for­mance Man­age­ment Impor­tant? The Unde­ni­able Ben­e­fits of Con­tin­u­ous Feed­back Processes

Reward and Recognition

Reward­ing and recog­nis­ing your employ­ees can be huge­ly ben­e­fi­cial to your busi­ness. A sur­vey by Amer­i­can Express revealed a third of com­pa­nies believe reward and recog­ni­tion sys­tems result in bet­ter staff reten­tion, while half also attribute greater moti­va­tion to offer­ing incentives.

Yet mean­ing­ful reward and recog­ni­tion sys­tems can only oper­ate in busi­ness­es where there is an accu­rate and vis­i­ble process of per­for­mance feed­back and dis­cus­sions. Con­tin­u­ous per­for­mance man­age­ment enables man­age­ment to iden­ti­fy activ­i­ty wor­thy of praise or reward. It allows them to see when employ­ees go above-and-beyond, track progress against goals and per­son­al devel­op­ment and make informed deci­sions about addi­tion­al com­pen­sa­tion, such as pay-ris­es or bonuses.

Mean­ing­ful reward sys­tems are immense­ly impor­tant for employ­ee hap­pi­ness. Here are a few key sta­tis­tics to consider:

• 83% of employ­ees that work in an envi­ron­ment with good reward and recog­ni­tion struc­tures say they are con­tent in their posi­tion.
• 69% of work­ers will work hard­er if they know their work is val­ued and appre­ci­at­ed.
• Busi­ness­es that have effec­tive reward struc­tures enjoy an almost 50% rise in employ­ee engage­ment.

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Boost Engage­ment and Productivity

Engaged employ­ees stay longer, active­ly involve them­selves in the work­place and pro­duce bet­ter results. Keep­ing an employ­ee engaged is key to boost­ing pro­duc­tiv­i­ty and max­imis­ing ROI. Per­for­mance man­age­ment, done well, is a vital tool for hav­ing engaged employees.

But how?

Con­tin­u­ous per­for­mance man­age­ment cre­ates an ongo­ing dia­logue and an atmos­phere of trust, sup­port and encour­age­ment. It helps devel­op a rela­tion­ship between employ­ee and com­pa­ny. If an employ­ee is aware that their man­ag­er and the busi­ness cares about what they are doing and is ded­i­cat­ed to help­ing them not only do it bet­ter but progress in their career, they are far more like­ly to engage with the company.

Con­sid­er a busi­ness where man­agers only speak to their employ­ees once a year about their progress. For most of the time, the employ­ee is not con­nect­ed to the direc­tion of the com­pa­ny or team. There is lit­tle con­se­quence, need or ben­e­fit to engag­ing. How­ev­er, when a com­pa­ny is con­sis­tent­ly engag­ing with its employ­ees, encour­ag­ing them to grow, and set­ting goals that stretch and devel­op them, there is gen­uine con­nec­tion and increased like­li­hood of ​‘dis­cre­tionary effort’.

Cre­ate Devel­op­ment Strategies

Con­tin­u­ous per­for­mance man­age­ment means you are proac­tive­ly devel­op­ing employ­ees. You are reg­u­lar­ly dis­cusss­ing their strengths and what skills or behav­iours need devel­op­ment. By com­bin­ing this with flex­i­ble per­son­al devel­op­ment objec­tives, busi­ness­es can cul­ti­vate tal­ent in a way that is sim­ply not pos­si­ble with once or twice a year appraisals.

Use the infor­ma­tion you col­lect, and the dis­cus­sions you have, to grow tal­ent through strate­gies that not only play to employ­ees’ strengths, but also reflect the direc­tion the busi­ness is head­ing. Hav­ing a con­sis­tent under­stand­ing of your employ­ees’ abil­i­ties, along with an agile plat­form that allows you to reg­u­lar­ly shift pri­or­i­ties and focus on new areas of devel­op­ment, pro­duces an envi­ron­ment where your work­ers are con­stant­ly mov­ing for­ward, while doing so in a direc­tion that is ulti­mate­ly pro­vid­ing the max­i­mum pos­si­ble ben­e­fit to your company.

By fail­ing to con­sid­er the impor­tance of per­for­mance man­age­ment, the employ­ee-busi­ness focus can become mis­aligned, goals can become irrel­e­vant and employ­ee poten­tial can be squandered.

Ensure Work­place Clarity

It is sur­pris­ing and rather wor­ry­ing to hear that stud­ies have shown that around 50% of employ­ees aren’t clear on exact­ly what their role with­in the work­place is or what goals they are try­ing to achieve.

This is anoth­er rea­son why effec­tive per­for­mance man­age­ment is so impor­tant as it can elim­i­nate employ­ee ambi­gu­i­ty and con­fu­sion. Hav­ing reg­u­lar, future-focused con­ver­sa­tions through con­tin­u­ous review process­es helps to ensure that employ­ees are clear on every­thing that they are sup­posed to be doing and what is expect­ed of them. The process also ensures that man­age­ment in touch with the work that is being deliv­ered and are able to iden­ti­fy when per­for­mance is drop­ping off as a result of lack of job clarity.

Per­for­mance man­age­ment is vital but easy to over-com­pli­cate. Sim­pli­fy your per­for­mance man­age­ment sys­tems with Clear Review’s inno­v­a­tive soft­ware pur­pose-built for agile goals, con­tin­u­ous feed­back and mean­ing­ful conversations.