Performance Management System: Processes and Cycle Explained!

Performance Management

Performance management is not an easy field to master. It is constantly evolving, necessitating the use of an effective management system. Every year, new performance management trends emerge, and all too often, human resources get it wrong. Employees are left feeling deflated, unmotivated, and unengaged, while managers are irritated by poor levels of team and individual employee performance. Fortunately, more and more companies are recognizing the importance (and resulting benefits) of an effective performance management system and the cycle. The first step toward revitalizing and improving your existing performance process is to understand what an effective performance management system is. To accomplish this, we shall answer the following questions;

What Is Performance Management?

Performance management is a corporate management tool that assists managers in monitoring and evaluating employees’ work. The purpose of performance management is to create an atmosphere in which people can perform to the best of their ability to deliver the highest-quality work most efficiently and effectively.

A systematic performance-management program helps managers and employees agree on expectations, goals, and career progression, as well as how individuals’ work connects with the company’s broader vision. In general, performance management considers individuals within the context of the larger workplace system. In theory, you want the absolute performance standard, but this is thought to be unreachable.

What Are the Stages of the Performance Management Cycle?

The first stage of the per­for­mance man­age­ment cycle is the “Plan­ning” phase. Planning should include the following elements:

  • Agreeing on SMART objectives
  • A personal devel­op­ment plan
  • Actions to be taken in the coming months
  • A review of the employee’s job requirements, with an update to the role profile if needed.

Historically, organ­i­sa­tions would carry out this plan­ning step once a year. However, as the business envi­ron­ment becomes more nimble and fast-moving, many organ­i­sa­tions are adapt­ing their processes to create “near-term” objec­tives every three months. The goals and values of the organization should be fed into per­for­mance plan­ning to ensure that individual per­for­mance aligns with the overall strat­e­gy of the organ­i­sa­tion. Specifically, each SMART objec­tive should contribute to the achievement of one or more of the organization’s goals.

Organizations have placed a lot of emphasis on the “Review” section of the performance management cycle — typically because a per­for­mance assess­ment is necessary for reward­ purposes. However, we have always advised that the “Act” and “Track” stages are the most important. These are the stages at which per­for­mance is delivered and outcomes are obtained. Individuals must be encouraged to set aside regular time to work on their goals and personal devel­op­ment plans. Similarly, man­agers should check in with their workers regularly. They must provide frequent, effec­tive feedback and use coach­ing skills to assist their team mem­bers in over­com­ing chal­lenges and iden­ti­fying oppor­tu­ni­ties for learn­ing and improve­ment. If this is left until the end of the year, it is too late – objectives and development goals may only be partially met.

Performance Management Cycle

There are no arrows between the four stages in the preceding per­for­mance man­age­ment cycle. This is because, in reality, the stages do not follow one another. Act and Track should be done consistently throughout the year. Reviews can take place at any moment, and planning can take place several times throughout the year, you can revisit it as the needs of the business change.

What Does the New Con­tinu­ous Per­for­mance Man­age­ment Cycle Look Like?

This phi­los­o­phy of con­tin­u­ous per­for­mance man­age­ment has been adopted by lead­ing organ­i­sa­tions such as Microsoft, Deloitte, Adobe, and Gen­eral Elec­tric since 2015. All of these household brands have abandoned traditional once-a-year performance reviews in favor of regular “check-ins” and frequent (even real-time) feedback.

These regular per­for­mance dis­cus­sions are typically devel­op­men­tal and future-focused. They provide team mem­bers the chance to explore what went well and how they replicate the suc­cess again, any chal­lenges they are encountering and how they can be over­come — and agree on measures that both the indi­vid­ual and man­ag­er must do to devel­op the indi­vid­ual and further improve their per­for­mance. Such check-ins are also a wonderful way to address employ­ee devel­op­ment while also offer­ing train­ing oppor­tu­ni­ties and reg­u­lar­ly rein­forcing per­for­mance expecta­tions.

What Are the Basic Elements Required for Effec­tive Per­for­mance Man­age­ment Process?

There are a few basic ele­ments involved in cre­at­ing an effec­tive per­for­mance man­age­ment process, which includes:

#1. Setting Goals

You must set goals correctly. They must be meaningful and understood. Employees should understand why these indi­vid­ual goals are important and how they contribute to the organization’s goals. Employees will care considerably more about their responsibilities and be a lot more engaged if they realize — and truly understand — why their job is important.

Goal setting should be a collaborative process. Whereas goals used to trickle down from higher-ups in an organization, modern com­pa­nies are align­ing goals upwards. So goal set­ting should include meet­ing with employ­ees and being open about com­pa­ny goals, direction, and obsta­cles. Armed with this infor­ma­tion, employ­ees can cre­ate objectives that com­ple­ment organ­i­sa­tion­al objec­tives and make daily deci­sions to further these objec­tives.

Furthermore, when employees are put in the driver’s seat and permitted to devel­op their own goals (before having them authorized by their line man­ag­er), they feel a greater feeling of auton­o­my and own­er­ship over their job. This invariably leads to better employee performance.

#2. Trans­par­ent com­mu­ni­ca­tion and col­lab­o­ra­tion

Employ­ees want — and deserve — their managers and leaders to be honest and authentic at all times. They don’t want to be in the dark while their companies are struggling. So, they wish to be up to date on current events. They also desire real-time com­mu­ni­ca­tion while developing healthy relationships with their coworkers and managers. This will necessitate regular feedback and open discussion — even if such com­mu­ni­ca­tion is difficult or uncomfortable.

#3. Employee Recog­ni­tion

An effective per­for­mance man­age­ment sys­tem should prioritize employee recog­ni­tion and reward. Employees should feel valued and appreciated for the work they accomplish and the effort they put in. If employee recog­ni­tion is not a top priority, it will most likely harm your voluntary turnover.

#4. Honest and regular feed­back and reviews

The more fre­quent and pre­cise the feed­back, the better the indi­vid­ual per­for­mance. It’s as simple as that. Employ­ees desire regular insights into their job, and the better-informed employ­ees are about their per­for­mance, the better able they are to improve and thrive.

#5. Employ­ee devel­op­ment

No ambitious top per­former wants to stay at a com­pa­ny long-term without hon­ing and devel­op­ing skills. Advance­ment and devel­op­ment are impor­tant to employ­ees — not to mention, com­pa­nies benefit when employ­ees are more skilled and capable.

What Is an Ef­fective Employ­ee Per­for­mance Man­age­ment?

Having all of the ele­ments of the per­for­mance man­age­ment cycle in place is critical, but it does not guar­an­tee effec­tive per­for­mance man­age­ment for your organ­i­sa­tion. There are other more factors at work, including:

  • Obtaining buy-in from the lead­er­ship and senior man­age­ment for per­for­mance man­age­ment
  • Ensure that the performance man­age­ment cycle is continuous and not an annual process
  • Making per­for­mance con­ver­sa­tions and reviews mean­ing­ful rather than “tick-box” exercises
  • Having easy-to-use per­for­mance man­age­ment soft­ware that supports effec­tive per­for­mance man­age­ment and provides visibility into per­for­mance man­age­ment activity.
  • The ability and willingness of your managers to deliver effec­tive per­for­mance man­age­ment on a daily basis.

Real-World Examples of Performance Management

Of all, understanding the theory of performance management is one thing; putting it into practice in a real firm is quite another. Let’s look at some real-world examples of how the performance management process works:

#1. Cargill

Cargill, a Minnesota-based food manufacturer, and distributor with over 150,000 employees, demonstrates that even large corporations may abandon cumbersome performance reviews and implement a new system. They developed their ‘Everyday Performance Management’ system in the process to the most recent study on management discontent with old performance management processes. The system is intended to be ongoing, with daily activity and feedback blended into talks that solve problems rather than rehash past activities.

The Everyday Performance Management system produced overwhelmingly positive results, with 69 percent of employees reporting that they received useful feedback for their professional development and 70 percent reporting that they felt valued as a result of continuous performance discussions with their manager.

#2. Google

It’s no surprise that Google would appear on a list of organizations that use a newer, more innovative management system. This organization has always been a trailblazer, and its performance management process basis is on data and analysis, as well as ensuring that their managers undergo proper training.

When evaluating their performance management system, Google initiated a project dedicated to reviewing its managers, which has resulted in a detailed training and future development process that prepares managers, and thus employees, for success.

They also utilize a goal-setting system that has spread across different industries. They redefine the goal-setting process using their Objectives and Key Outcomes (OKRs) system, with excellent results.

#3. Accenture

Accenture is a major corporation with over 330,000 employees, therefore upgrading their systems requires a significant amount of effort. When they transitioned to their new system, they eliminated almost 90% of the previous process. They are now employing a more fluid performance management process in which employees receive continuous, immediate feedback from management. This has been accompanied by a renewed emphasis on rapid employee development and the development of an internal app for communicating comments.

All of these cases have some things in common. Rather than using a one-size-fits-all strategy, each organization has created a system that works for them. What works for one firm may not work for another; it all relies on the industry, the organization’s speed and adaptability, and the overall objective of the system.

#4. Facebook

Facebook, another Internet trailblazer, has a performance management process that places a strong focus on peer-to-peer feedback. They can utilize that feedback in semi-annual reviews to see how well teams are functioning and to identify where collaboration is occurring – and where it is not. They have also created internal software that provides continuous, real-time input. This assists staff in resolving concerns before they become difficult.

#5. Adobe

Adobe found that managers spent approximately 80,000 hours per year on performance reviews, only to have employees report that they were depressed by the reviews and that turnover was growing as a result.

Seeing a system that only produced negative results, Adobe’s leadership team took a risk and implemented a performance management system that began by training managers on how to perform more frequent check-ins and provide actionable guidance, and then the company gave managers the leeway they needed to effectively lead.

Management was given more leeway in how they arranged check-ins and employee review meetings, as well as more leeway in salary and promotion decisions. They call their employees frequently for ‘pulse surveys,’ which allow the leadership team to ensure that individual managers are effectively managing their teams. One of the many beneficial outcomes has been a 30% reduction in involuntary turnover as a result of a frequent check-in program.

What is the Difference between Performance Management and Performance Appraisal?

With similar titles and often overlapping goals, it’s no surprise that some people can’t tell the difference between performance management and performance reviews.

In truth, performance appraisals are common parts of the performance management process, however, some businesses still rely only on performance appraisals.

The difference between the two is simple: performance appraisals are reactive, whereas performance management is proactive.

A performance evaluation examines all of the employee’s previous actions over a specified time period and scores how well they performed in their role and how many goals they met.

Performance management considers the employee’s existing and future performance, as well as what they can do to improve future performance and meet future goals. Performance management focuses on an employee’s development and training and how it can benefit both the employee and the firm.

A performance appraisal is a formal, operational assignment that is carried out following strict parameters and a quantitative manner. HR is in charge of performance evaluations, with input from management. Performance management is considerably more informal and strategic, directed by management with more flexible input from employees.

Performance Management FAQ’s

What is the first step in the performance mangement process

Planning is the first step in the performance management process.

What is the main purpose of Performance Management

The purpose of performance management, which is essentially communication, is to increase your performance. When individuals execute good work that is aligned with the business objectives, their performance improves.

What are the two types of Performance Management System

For employees, there are two types of performance management systems: Objectives and Key Results (OKR) and HR review-driven systems.

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