What is performance management? What are the benefits and importance of performance management? Find out how performance management improves levels of employee engagement and company productivity.
CEOs, company directors, influencers and big names in business regularly preach the importance of effective 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, learning from mistakes and by examining potential for growth and development, businesses can develop talent, enhance individual performance and weed out problems — but this is easier said than done.
There are a number of performance management processes, tools and approaches companies can take to monitor performance and inspire employees. An effective performance management system requires commitment and dedication from not only the human resources department but from managers and employees. Below, we’ll explore why we should have appraisals at work, how performance management is changing and the overall importance of performance management to business success.
Why Do We Have Appraisals at Work?
Every company wants its ranks filled with enthusiastic, ambitious employees who perform their roles perfectly and who always exceed expectations. The reality, however, is that human beings are flawed. Some days, we might be motivated to perform, while on others, we might encounter problems and obstacles that impede our progress and productivity.
Answering the question of why we have appraisals at work is not easy, because the answer will change depending on the organisation. However, ideally, a forward-thinking company will have performance reviews in place to show employees they have support, to offer training and development and to deliver reward and recognition. When performed regularly, performance reviews also allow companies the opportunity to pick up on serious performance problems, meaning they can be set right immediately, rather than escalating into more complex problems.
Continuous performance Management vs. Annual Appraisals
As mentioned, there is more than one way to approach performance management. Currently, there are two main approaches when it comes to evaluating performance and managing talent progression:
- Continuous performance management (otherwise known as Agile Performance Management)
- Annual appraisals
65% of companies are still using annual appraisals over a continuous performance management system. This traditional approach of annual performance reviews entails a time-consuming formal review that takes place once or twice a year. In this review, an employee’s performance over the last six to twelve months is assessed and future targets or objectives are set. Although they remain fairly prevalent, annual performance appraisals are not an effective performance management process — they are also pretty universally detested by managers and employees alike, given the extensive paperwork involved and the formal, backwards-looking nature of the reviews.
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. Agile performance management has taken off in recent years, as technology advances and our understanding of human psychology and motivation has improved. Furthermore, businesses are recognising the problems inherent with annual appraisals and are keen to 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? What are the business benefits of continuous performance management?
Exploring the Importance of Performance Management and Continuous Feedback
Below we’ll cover the benefits and importance of performance management with regards to productivity and employee engagement. We’ll explore how performance management can help with employee retention, recruitment and productivity while helping to accomplish strategic objectives.
Performance Management Encourages Employee 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.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 and efforts worthy of praise or reward (which in turn promotes a growth mindset among your team members).
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.
Performance Management Helps to Boost Employee Engagement and Productivity
Engaged employees stay longer, actively involve themselves in the workplace and produce better results. Improving levels of employee engagement is key to boosting productivity and maximising ROI. Performance management, done well, is a vital tool for having engaged employees.
But how can we use performance management to improve levels of employee engagement?
Continuous performance management creates an ongoing dialogue and an atmosphere of trust, support and encouragement — and 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, is dedicated to helping them do it better — and 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”.
Performance Management Helps to Create Development Strategies
Continuous performance management means you are proactively developing employees by covering their development needs. With regular catch-ups, you can pursue continuous improvement, as you frequently meet to discuss each employee’s performance, possible development opportunities and development plans. 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 about an employee’s past performance and current efforts, 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, 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 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 squandered.
Performance Management Allows for the Exchange of Feedback
Importance of feedback in performance management cannot be overstated. Employees want feedback — and they want it regularly. They need (and deserve) to know how they are performing and how they can improve. Furthermore, they should have the opportunity to give their feedback on their company and management. This is the only way company processes can evolve and become more streamlined.
Performance Management Creates Clarification Concerning SMART Goals
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.
Lack of clarity is another reason why effective performance management is so important. It can eliminate ambiguity and confusion about goal setting. 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. Continuous performance management also encourages employees to be more involved, giving them the autonomy to set goals that are relevant to them, their strengths and organisational goals, which will provide employees with added ownership and motivation.
The process also ensures that management is in touch with the work that is being delivered and able to identify when performance is dropping off as a result of lack of job clarity.
These are just a few reasons why performance management is as essential now as it ever was. Of course, some tools are motivational and techniques (such as stack ranking) that will leave your employees demotivated and disengaged. It’s important to remain up-to-date with performance management trends and to frequently interact with your employees to find out how you can improve your performance management system to get the most out of your team.
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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.