Effective performance management is essential for any business. When it is not managed effectively, it can be detrimental to business success, for instance:
• There will be lower productivity
• Poor customer service
• Damage the reputation of the business
• Expose the company to legal risk
It is vital for any business to have an effective performance management process in place and that it is implemented at all levels within the organisation, regardless of job type, grade or seniority.
In this month’s Hot Topic, we discuss performance management in general and how an effective process can be implemented at different levels within the business.
What is performance management?
To understand the tools needed for effective performance management we need to establish what is meant by performance management.
Have you for instance, ever felt that you are not really getting the best from your employees? Or have you wondered how you could improve the performance of your business by improving the performance of your people?
Performance management is about an ongoing process which helps you to manage the performance and development of individuals to achieve optimum levels of organisational performance.
For performance management to be effective, there needs to be a system that has the commitment of the senior team and be aligned to strategic priorities, as well as the business and people plan. Managers across the entire business must also take it on board as they will be largely responsible for implementing the system and bringing about a culture of continuous improvement.
Effective performance management is not a one-time event; it’s an ongoing journey that requires dedication and continuous improvement. By prioritising clear communication, constructive feedback, employee development, and recognition, you can create a performance-driven culture that drives success at all levels, and ultimately leading the business to greater success. It is a reminder that investing in your people is an investment in the organisation’s future.
The importance of a having a performance management system
The purpose of a performance management system is to enable the business to set, deliver, measure, monitor and review performance at all levels; departmental, team and individual.
As mentioned, it needs to have the commitment of the senior team and be aligned to strategic priorities with line managers also taking responsibility for its implementing. In essence, an effective performance management system should cover:
– methods by which you can improve the performance of a department, team or employee, to optimise effectiveness
– development plans so that staff can develop their skills and capability in areas which will benefit the department and organisation
– a process for managing poor performers.
Tailoring performance management
When managing performance, the core principles remain consistent regardless of the level you are managing. That said, managing performance of an Administrator and a Senior Manager will not look the same, there will be a requirement to tailor the approach to performance management to different levels within the business.
You can see below how the approach to effective performance management changes depending upon the level in the business the job holder is:
Entry-Level: Focus on onboarding, basic skills development, and clear performance expectations. Regular feedback and coaching are crucial in this formative stage.
Mid-Level: Emphasize goal setting, accountability, and development opportunities that align with career aspirations. Empower them with ownership and decision-making.
Senior-Level: Focus on strategic alignment, leadership development, and mentorship opportunities. Regular performance discussions should address broader organizational objectives and impact.
Tools for effective performance management
The core principles of performance management are the same, regardless of the level at which it is being carried out. In this section, we explore the various tools that together help drive high performance, and we highlight how they can be varied depending upon the level the individual operates at within the business.
To drive successful performance within the business, the performance management system would include:
Vision, mission, strategy, goals and objectives
Performance management must be aligned to the strategic direction of the business. In order therefore to determine whether an individual (or team) is performing, then there needs to be a framework in which to assess the performance against. Ultimately, this will be the business’ vision, mission, strategy, goals, and objectives.
These key business tools provide direction and so gives the leaders, managers, and employees a clear line of sight for where the business is going in the future. It is vital therefore that individual goals are aligned with departmental and business objectives.
The benefits of have objectives, at business, departmental, team and individual level is that they provide structure for directing performance, they enable the monitoring of performance as well as identify training and development needs and clarify expectations. All of which leads to improved performance.
Job description and person specification
Aligned to the organisational goals, there needs to be the right skills and capabilities in the right roles. Job descriptions and person specifications are key tools to provide clarity to the job holder regarding what is expected of them, and the skill set required to perform in the role.
Sometimes there is confusion between job descriptions and person specifications. A job description, as the name indicates, describes the work which the job holder has to carry out. It outlines tasks, duties and responsibilities. The person specification describes the characteristics, skills, abilities, experience etc which the job holder needs to carry out the duties outlined in the job description.
Both documents are crucial in the overall management of performance.
Appraisal process
An appraisal process is a fundamental business tool in which to assess employee performance (although can also incorporate departmental assessment). It allows the line manager to measure the person’s performance against previously agreed goals and objectives and for new ones to be set.
The process incorporates the main appraisal discussion which would occur on an annual basis. There will be a halfway review of performance at 6 months, with recommended monthly 121s taking place.
Monitoring performance
Monitoring performance is fundamental and doesn’t just take place during an annual or half year appraisal review. This is something that should be part of day-to-day line management. Doing so then enables the business to respond promptly in addressing any underperformance and invoke capability procedures where necessary.
Feedback
It is vital that you establish a culture of regular, constructive feedback. It requires more than the formal review process that are part of an appraisal process, there needs to be informal avenues too to be able to feedback; positive or constructive. It is crucial for feedback to have the greatest impact, that it takes place timely.
Performance capability
Poor performance is often a capability issue, and it is important to be mindful that it can be caused by either an inability to perform to the requirements of the role, perhaps because of a lack of skill, or it can be caused by ill-health, and so it prevents the person from performing to the required standard. It is important to remember this when entering discussions to explore reasons for under performance.
Capability, or lack of capability, is a potentially fair reason for dismissal. You can read more about this in our knowledge base article ‘managing poor performance’. However, for there to be a fair dismissal, an employer must follow a fair and reasonable process, and this begins from the outset, when the underperformance is first identified.
The key to improving poor performance is often communication. Frequent and effective communication and coaching will usually ensure that performance does not become an issue. However persistent shortfalls in performance may require formal action.
360 feedback
A 360-degree appraisal is a tool which can be useful in supporting an employee’s development by providing a wider range of feedback to the employee than a standard appraisal review, thus helping to reinforce/change behaviour to improve performance in the job/future career development.
360-degree appraisal can be a powerful tool to support the development of your employees. You could consider a simple in-house version initially to gauge employee interest or have it as an ‘add-on’ to your standard performance reviews for key staff, and then progress to a more complex tool from an external provider for particular needs. As with all new initiatives, it is always advisable to pilot it with a small group of employees first, then review it prior to rolling it out more widely. Thereafter it should be regularly monitored, its effectiveness evaluated and be adapted as necessary.
Reward and recognition program
Reward and recognition are also two important areas that can positively impact on performance. Paying people fairly and competitively and linking financial rewards to individual performance whenever possible, as well as using incentives and bonuses can encourage and reward superior performance.
However, given the current economic climate it is even more important to remember that non-financial reward can be equally powerful: recognition from management can be a real motivator, or being appreciated publicly, being asked to participate in special projects, or by creating clear career development paths, where promotion is seen as a reward for outstanding performance (as well as the capability or potential to do the next job).
Personal development plans (PDPs)
A PDP is a tool for improving performance. It is probably more commonly associated when dealing with under performance. Where in this situation, it is a valuable tool to help the employee get from A to B in what is expected of them in their role.
However, it can also be a really useful tool to drive high engagement and performance.
Employee engagement
The more engaged the workforce, the greater performance. We know that employee engagement leads to improved productivity, better customer service, less absenteeism, and reduced staff turnover.
Adapting the approach to the level the job holder has within the business:
- Tools: Onboarding software, skills assessment platforms, gamified learning modules.
- Implementation: Focus on clear onboarding processes, frequent check-ins with supervisors, and bite-sized training modules to develop technical and soft skills. Utilize gamification to make learning engaging and track progress effectively.
Mid-Level:
- Tools: Goal-setting apps, performance dashboards, 360-degree feedback platforms.
- Implementation: Empower employees to set their own goals aligned with departmental objectives, use dashboards to track progress and self-evaluate, and leverage 360-degree feedback for comprehensive performance insights. Encourage peer-to-peer coaching and mentoring opportunities.
Senior-Level:
- Tools: Strategic planning software, leadership development programs, executive coaching platforms.
- Implementation: Focus on strategic alignment, utilising tools to track progress against organizational goals. Invest in leadership development programs and provide access to executive coaching for personalized guidance. Conduct regular performance reviews with a strong focus on impact and strategic contribution.
Bearing the above in mind, we would also recommend:
- customising your approach by allowing some flexibility for individual preferences within each level. For example, some mid-level employees might prefer traditional performance reviews, while others might thrive with more frequent check-ins.
- Leverage technology to streamline processes, facilitate feedback, and track progress across all levels. Make sure chosen tools are user-friendly and accessible to everyone.
- Provide comprehensive training on using the performance management tools effectively. Regularly communicate expectations and ensure everyone understands the purpose and benefits of the system.
- As your business evolves, so should your performance management approach. Regularly evaluate the effectiveness of your tools and strategies and be prepared to adapt them based on evolving needs and feedback.
By tailoring performance management tools and strategies to different levels, you can create a system that effectively supports the growth and development of all your employees, ultimately leading to a more engaged, productive, and successful business.
Managing high performers
A high performing business achieves superior results, whether it is regarding customer satisfaction, employee retention, better financial and non-financial results and competitiveness over a sustained period of time.
There are many similar traits in a business that is high performing, whether it is empowering employee’s reinforcing positive behaviour, collecting feedback and most importantly, highly effective leadership skills.
Those businesses that are high performing, recognise that their people are their most important asset and so invest in its employment practices that are used throughout the employment lifecycle in order to attract, retain and develop the best talent. Reward and recognition play a crucial part in driving high performance, such as:
- Using skill-based pay to ensure the right people with the right skills are in the right place at the right time
- Ensuring there is competitive pay to attract and retain the best skilled employees in the market
- Rewarding employees for developing their competencies and careers
- Individual and team-based rewards
- Incentive plans.
Managing middle of the road performers
All too often these employees are forgotten. They are not high-achievers, and they carry out their roles effectively. However, it is just as important to ensure that, if desired, they have access to development opportunities and can see a clear career path that they can follow or other opportunities within your business that they could consider if they were developed in that direction.
These employees are the bread and butter of any organisation but if there is no possibility of being able to move upwards or sidewards and undertake other roles, it is likely that some of them will move elsewhere, resulting in the loss of good employees and the need to recruit replacements.
So, identify suitable development paths for these employees, or alternatively consider how you can add more variety, breadth, or satisfaction to their existing roles, thus providing them with continued motivation to succeed.
Executive performance
Performance management at Executive level has a different focus. Tools such as objective setting and strategic planning remain fundamental, but effective performance is not only about achieving objectives. Being an effective Leader requires the individual to be effective at delegation, motivation, in developing their team, are emotionally intelligence and have a strong ability to communicate and influence.
Usually at this level, a way in which to assess the effectiveness of performance is by the development of key performance indicators. These are indicators that provide great insight into how the business is performing and therefore steers the Leadership team in determining what to do to affect change. KPI’s are metrics that are used to track and assess business processes and performance. They can relate to:
- Net or gross revenues
- Net or gross profits
- Gross margin
- Customer satisfaction
- Product complaints
- Conversion rates
- Employee engagement score
Further Information
A free accompanying webinar for this topic is taking place Thursday 15 January 2024 at 10am. You can register for this event here.
