What is a performance management system?
Performance management tracks employees’ performance over time and against their goals. It needs to be consistent and measurable. Gone are those traditional awkward yearly appraisal meetings, spreadsheets, and manual inputting. Modern performance management software now uses AI and machine learning to track company-wide performance far more holistically. The best systems rely on an organic culture of feedback, so invest in company-wide feedback systems to capture every last bit.
Employee experience is now recognised as essential to delivering excellent customer service and brand equity. Your performance management system needs to train, develop, track and – most importantly of all – listen to your people and action their feedback.
Some pitfalls of traditional performance management systems
If your company is using more traditional systems to assess your employees’ performance, there are four mistakes it might be making:
- Failing to engage employees: Successful initiatives involve everyone in the company, from the C-suite to the shop floor. When everyone feels they’ve been involved in decision-making, with ample employee feedback, they’ll own the project more. And continuous performance management keeps everyone on track.
- Measuring output over outcome: Output is easy to measure, and appeals to our concept of work ethic. But there’s no point hitting output targets if half your overworked people burn out or leave. Instead, make your outcomes or results ‘desired’ rather than set in stone, and see how your employees’ efforts stack up against those. If they fall short, you need to ask yourself why.
- Clinging to silos: Divided organizations can become dysfunctional, especially when departments have to compete for budget, personnel, or resources; each believes they alone are responsible for outcomes. A more integrated, cross-company performance management system shows where each department’s role aligns with ultimate business goals.
- Making the process too complicated: Less is more with performance management. It’s all too easy to try to measure absolutely everything, then get into a logistical tangle when some objectives are met better than others. Instead, focus on critical business objectives and measure progress against those.
The benefits of a good performance management system
Done properly, a performance management program sets expectations, gathers regular feedback, and helps employees grow, develop and succeed, by:
- Highlighting training needs: Managers can see areas where knowledge and skills need improving, and employees can request future training requirements
- Identifying underperformance: Rather than terminating contracts, you can identify where employees may be struggling, and support and help them
- Boosting morale: Everybody feels good and works harder when they know exactly what they’re doing, are well-resourced, and told they are doing a great job
- Retaining people: High attrition costs businesses dearly. The happier and more fulfilled employees are, the longer they’ll stay – and tell all their friends how great their firm is
- Identifying employees to promote: A fair, consistent process that includes all employees will soon identify those who are suitable for promotion
- Supporting workforce planning: Workloads, job-sharing, and any need for recruiting extra people will be flagged up
- Making employees more autonomous: The best employees are those who can take ownership and responsibility, then just get on with their jobs. When supported by excellent performance management, they can
Types of performance management systems
Traditional appraisal model
This is the old-fashioned way of reviewing employees. At its most basic, it’s 1:1 annual meetings between an HR manager and employee to assess performance and achievements, then set goals, training, and development for the next year. The traditional model may also include:
- Competency evaluation
- Behaviour evaluation
- Sales performance
- Performance ranking
- Grading of an employee’s various performance levels
The problem with this backward-looking model is it holds employees accountable for the whole of the last year’s past performance and behaviour – and may even border on the punitive. There’s nothing that saps morale more than carrying the shortcomings of the previous year – however minor or major – into a new one, under the guise of ‘learning from your mistakes’.
Continuous feedback model
This is the future of performance management. Its focus is on development and shared goals, where every employee is considered an individual whose potential can be maximised. By its real-time nature, continuous feedback is perfect for goal tracking when these are aligned across the whole business, with each department and individual knowing their role and responsibility for achieving them.
The most effective is 360 feedback: employees receive feedback not only from managers, but from peers, reports, and even customers. They can also review themselves, resulting in a 360° view of their strengths, weaknesses, opportunities and threats.
Frequent 360 feedback throughout the year serves a dual purpose:
- It flags up issues as they arise: problems can be rapidly addressed before they blow up into something intractable and morale-sapping
- It boosts morale: when great feedback gets given regularly – daily, even – it provides little nuggets of pleasure than enhances employee experience.
You can clearly see the difference between the outdated traditional and new continuous feedback models:
|Traditional appraisal model||Continuous feedback model|
|Focuses on past performance||Focuses on employees’ future performance|
|Goals and targets set by management||Shared goals, aligned with those of the business|
|Rated by manager’s feedback only||Rated by feedback from peers, customers, direct reports, and managers|
|Assessed annually||Frequent check-ins, feedback at least quarterly|
|HR-led process||Manager/leader-led process|
4 tips for putting an effective performance management system in place
1. Use 360 feedback
This is becoming the future of performance management. As we’ve seen, 360 feedback combines feedback from an employee’s manager, direct reports, team and the employee themselves. The most successful processes are:
- Relevant – aligned to achieve business goals
- Credible – people need to be trained to understand and use them honestly and effectively
- Accountable – 360 insights then need to be used to drive tangible action and change
- Completed – it’s up to management to encourage people to take 360 surveys seriously and complete them
2. Invest in the best performance management system you can afford
There’s no point getting halfway through developing a performance management strategy then deciding to try to fit it into a software system. Start with the system – the best ones, such as Qualtrics EmployeeXM 360 are customisable, with all the basic functions you need, and options to add on ones that are more specific to your business.
Managers, peers, and direct reports can easily and quickly and fill in multi-rater assessments. This will generate a seamless, real-time flow of qualitative development feedback. From this information, employees will know exactly where to focus to develop their own careers, and leaders can use these qualitative reports to make talent management decisions such as career and succession planning, promotions, and transfers.
You’ll be able to:
- Find out which of your necessary leadership, management and role behaviours and objectives are being met
- Identify development opportunities for individual employees and leader
- Highlight areas where you can drive career growth and improved business output/impact
Then build your strategy with your solution.
3. Involve employees
Gone are the days of performance management being only what your boss told you to do. There’s now a manager/employee shared responsibility to do a good job and achieve results. When employees take shared ownership of their performance management, they’re more committed, more motivated and more engaged.
4. Make learning continuous
Few people want to remain static in a job, doing the same thing day in, day out, and not developing – and do you need people like this in your organisation anyway? The best businesses create an environment where their people can develop, by:
- Setting ‘desired’ goals
- Making full use of 360 feedback
- Offering training, coaching, and development activities
- Tracking and measuring development progress
Continuous learning, 360 feedback, and collaborative performance management are the foundation of great employee experience for a forward-thinking company. Get these right and revenue and brand equity will naturally follow.