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Exploring the Importance of Performance Management

Team building circle with team members putting their hands together.

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:

  1. Con­tin­u­ous per­for­mance man­age­ment (oth­er­wise known as Agile Per­for­mance Management)
  2. 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 com​pa​ny​.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.

Let us help you achieve your organisational goals

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.