What Is Performance Management?

As the business landscape evolves in response to new trends and technologies, so must performance management approaches. To stay ahead of the curve, you must be proactive and adapt your methods

In recent years, performance reviews have focused on more feedback and coaching, with staff actively involved in their progress. This helps employees stay engaged and motivated, ensuring they continually grow and develop. There’s also an increasing use of data and analytics to track progress and identify areas for performance improvement. With a proactive, data-driven approach to performance management, you can increase the chances of your employees operating at their best.

What is performance management?

Performance management is the strategic and systematic process of improving employee performance by setting clear expectations and providing ongoing feedback and development opportunities. This type of management is cyclical and replaces the once-a-year annual performance review or evaluation. Performance management meetings typically occur between a supervisor and a subordinate. Companies can choose different ways to implement their performance management frameworks.

The performance management cycle

The performance management cycle is an ongoing process. Human resources (HR) often consists of four main phases: planning, monitoring, evaluating and reviewing, and rewarding and adjusting. Following a systematic approach establishes a repeatable mechanism for ongoing staff performance enhancement.

1. Planning

The first phase, planning, involves setting SMART (specific, measurable, achievable, relevant, time-bound) goals and objectives for the upcoming performance period. This is done in collaboration with your employee and considers their strengths, weaknesses, and areas of improvement.

2. Monitoring

The second phase, monitoring, involves tracking employee progress towards the goals and objectives set in the planning phase. Check-ins and performance reviews help monitor this step.

3. Evaluating

The third phase, evaluating, involves assessing the employee's overall performance for the entire cycle. This includes looking at their successes and areas they can improve.

4. Adjusting and rewarding

The fourth and final phase, adjusting and rewarding, involves changing the goals and objectives for the next performance cycle based on learnings from the previous one. This ensures the process constantly evolves and grows along with your employees. 

You also want to reward employees so that everyone is happy. The reward can be financial, positional, recognition-based, or increased responsibility. When you personalise rewards based on what’s important to the staff member, you’ll typically maximise their motivation.

A modern performance management approach

Organisations increasingly recognise that annual appraisals are no longer an effective way to measure and manage employee performance. Many organisations are moving away from the traditional appraisal process, focusing on feedback and development. Successful strategies require a culture of trust and transparency. Staff need to be brought within the process to collaborate in performance management. Here are some modern performance approaches: 

• 360-degree feedback: One popular alternative to annual appraisals is using 360-degree feedback. This involves collecting feedback from an employee's colleagues, direct reports, and clients to get a well-rounded view of their performance. Feedback like this is valuable when helping employees identify improvement areas and set development goals.

• Individual career planning: Employees are increasingly encouraged to chart their career courses and take responsibility for their development. This helps the staff seek ways to improve their skills, become more valuable, and create a learning-focused work culture. 

• Coaching: Another popular alternative to annual appraisals is coaching. This involves regularly working with a coach or mentor to improve performance and attain goals. Coaching is an effective tool to help employees develop new skills and behaviours. You can tailor coaching to meet individual needs.

• Check-ins: Check-ins are another tool you can use instead of annual appraisals. These involve regular, informal conversations with your employees to check progress, give feedback, and provide support. They focus on high-frequency changes in behaviour and attitudes.

Best practices

When you design and implement performance management in your company, you’ll be more successful if you follow best practices. Remember, many employees want open communication. They value opportunities to get feedback and learn. The following are areas you might consider as you build your process:

• Align performance with company goals: A significant goal of performance management is ensuring your employees work towards your company's goals and objectives. You’ll align performance management by analysing and understanding roles and responsibilities and how they are part of the bigger picture. 

• Pursue continuous accountability: Employees should continually be held accountable for their performance rather than just an annual review. Regular check-ins and feedback sessions can assess qualitative and quantitative performance metrics. Reviews focus on relevant outcomes, actionable interventions, and specific goals rather than a set of formulaic questions.

• Establish excellent communication channels: Performance management should involve excellent communication between managers and employees. This includes giving clear instructions, timely feedback, and openness to hearing about concerns or issues.

• Use performance management software: Many software programs can help you with performance management by tracking goals and progress, providing feedback and coaching, and managing employee records.

• Set clear goals: Team and individual goals must be clear, measurable, and achievable to be effective. You’ll also plan goals that align with your company's overall objectives.

• Incorporate learning and development opportunities: A key to performance management is providing your staff with avenues to improve their skills and knowledge. This can include formal training programmes, informal mentoring, and coaching relationships.

Learn more about performance management.

Performance management is a continuous process of setting goals, providing feedback, and offering development opportunities to improve employee performance and align it with your company's objectives. Modern approaches emphasise frequent check-ins, coaching, and employee involvement to create a culture of growth and development.

Many routes exist to help you learn about performance management, and one of the most accessible is convenient online learning. Courses include content about identifying and assessing factors that affect performance, designing and implementing interventions to improve performance, and evaluating the effectiveness of those interventions. 

You might consider the Managing Employee Performance Course, part of the Human Resource Management: HR for People Managers Specialisation offered by the University of Minnesota.