Performance Management in Businesses

Most companies have some type of process in place for giving employees feedback and providing training when necessary. But performance management shouldn't be limited to an annual review. Instead, businesses can use performance management as a framework for providing employees with ongoing feedback and support.

Harvard Business School notes that organizations have long struggled to find a balance between accountability and development. The military's merit-based rating system, in which those who underperform were dismissed, had a major impact on the corporate world. But companies began to realize the value of helping existing employees improve rather than simply replacing them. Today, performance management is used by businesses in every sector to advance their strategic goals.

What Is Performance Management?

Performance management is a framework for evaluating and improving employee job performance, intended to ensure that each employee's work advances the organization's mission. Think of performance management like a toolbox, where each tool is a strategy that managers can use to align employee goals and overarching company goals. These strategies include:

• Evaluation: Managers should track and measure employee performance.

• Reviews: Employees should receive ongoing feedback from their managers on their performance.

• Training: Some employees will need additional support to do their jobs well. Training should be tailored to serve the company's needs and address areas for employee improvement.

• Compensation: Incentives, merit raises, and bonuses can all help motivate current employees.

Performance management helps each employee see how their particular role contributes to the organization's overall success.

Why Is Performance Management Important?

As a strategic approach, performance management seeks to make employees more effective and productive. This, in turn, helps the company meet its strategic goals and become more successful. The benefits of this management system include:

Clarity

Employees can only succeed if they know what is expected of them. A good performance management system sets clear standards and key performance indicators (KPIs) for each role. This ensures employees and managers are on the same page and have a shared definition of success. Employees know their team or department's overall goals and the specific deliverables that they are responsible for.

Objective decision-making

Humans are emotional beings; even the best managers can have unconscious biases or subjective views. An effective performance management system allows leaders to evaluate worker performance objectively, measuring individual efforts against an agreed-upon standard. This helps reduce favoritism, makes the evaluation process more transparent, and helps managers make the best decisions for the company.

Efficacy

Engaging and supporting employees leads to improved productivity, giving businesses an advantage over their competitors. Through ongoing feedback loops, companies can stay nimble, adapting their work in response to shifting markets. Plus, having clear roles and defined performance standards makes the hiring process easier and more effective.

Opportunities for growth

An annual performance review shouldn't include any surprises. Instead, employees should receive feedback on their performance regularly. As they gain clarity on where they are excelling and where they can improve, employees are better able to take charge of their growth and professional development. This, in turn, can boost job satisfaction and retention, and give workers autonomy in defining their career paths.

Expectations for Managers and Employees

A robust performance management system is critical for ensuring a positive relationship between employees and their managers. It establishes a shared set of definitions and ensures that both parties work towards the same goal.

To implement effective performance management, a manager should:

• Provide clear information about an employee's role
• Be transparent about their system or rubric for evaluating performance
• Offer regular positive and constructive feedback to employees
• Make time for one-on-one interactions with each employee
• Advocate for additional training or support when needed

Employees also play a major role in helping a performance management framework succeed. Each employee should:

• Request clarification when job duties or areas for improvement are unclear
• Be receptive to constructive criticism
• Ask for help when needed

Performance management should be dynamic. As an organization grows and changes, leadership teams may need to adjust and refine their strategies.

Implementing Performance Management

If you aren't currently using performance management and want to implement this framework in your organization, start by defining your goals. What is your organization's mission – and what steps do you need to take to achieve it? All the work your employees do should connect back to these goals.

While there is a wide range of performance management models, more popular tools include:

The Balanced Scorecard

The balanced scorecard framework assesses an organization from four perspectives:

• The financial angle
• The customer's perspective
• The company's internal processes
• Their capacity for learning and growth

Using these four areas, a company defines its objectives in each area and maps out how these objectives are interconnected. For example, an organization might need to invest in new technology (learning and growth perspective) to reach a different demographic (customer perspective).

Objectives and Key Results (OKR)

In this model, a manager defines the goals they want an employee to achieve (objectives) and the individual steps or projects they must complete to get there (key results). For example, if their objective is to increase sales, a key result might be researching ten new clients. The OKR model helps workers see how smaller tasks contribute towards a larger goal.

360-Degree Feedback

This framework is similar to OKR but expands the feedback loop beyond a single employee and manager. As the name implies, the 360-degree model collects feedback from everyone an employee works with and anonymizes it. This offers a more comprehensive view of an employee's day-to-day performance and can address issues that a busy manager may not be aware of.

Performance Management with Spider Impact

Take the stress out of performance management with user-friendly business intelligence software. At Spider Strategies, we make it easy to measure and track performance across departments, teams, and individual employees.

Spider Impact is enterprise performance management software that enables you to set standards and provide effective communication within the company. With an interactive dashboard and automated tracking for KPIs, Spider Impact helps you visualize and share performance information to drive improvements. Our platform is used across the private sector, government agencies, and nonprofit organizations. Sign up for a free test drive or demo today.