A guide to getting performance management right

Discover how to create an effective performance management process, and engage employees and managers with performance

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Discover how to create an effective performance management process, and engage employees and managers with performance

To create a sense of purpose, you need to align your employees’ performance with your organisation’s strategic goals – something that’s often achieved through performance management. However, performance management is not a one-size fit all process. Jonny Gifford, senior adviser for organisational behaviour at the CIPD, says “there are a range of factors in performance management to try and get right as performance management is not a single technique.” To effectively manage employee performance, employers and managers first need to understand what a good performance management process involves, as well as the benefits and challenges associated with managing performance.

What is performance management?

HRM author Michael Armstrong defines performance management as “the continuous process of improving performance by setting individual and team goals which are aligned to the strategic goals of the organisation, planning performance to achieve the goals, reviewing and assessing progress, and developing the knowledge, skills, and abilities of people.”

According to CIPHR HR consultant Laurie Mahmood, performance management is about “organisations putting processes and tools in place to ensure that they get the most out of their employees. These processes and tools should help monitor and improve individuals’ performance at work and ensure it aligns strategically with the organisation’s goals and targets.”

Performance management isn’t to be confused with talent management, which is the process of attracting, developing, engaging, and retaining talent.

The positive side of performance management

For some managers and employees, performance management may be focused on under-achievement and areas where there is room for improvement. But, says Gwenan West, CIPHR’s head of people, “performance management isn’t always just telling employees what they’re doing wrong. It’s also about making sure that they are fulfilled in their role and that they have goals and objectives that will keep them interested and engaged.”

If managers take the time to focus on performance management and ask employees how they are doing and what objectives they want to work towards – and share details of the support the company can offer – Courtney Ayerst, CIPHR HR consultant, says “performance management can then be seen as a positive process and as something that helps employees develop.”

She points out: “Performance management is always a positive process, but when it isn’t managed correctly by managers and employers, and managers don’t regularly check in with how employees are performing, it can end up focusing on poor performance, resulting in a negative experience for employees.”

Benefits of good performance management

Aligns staff performance with company goals

If your organisation has a strategic goal of improving customer satisfaction, for example, managers should make sure employees’ performance contributes to achieving this goal.

Highlights staff training needs

Informal catchups give you the chance to ask employees what objectives they may be struggling to meet, and whether they think they have the right skills to perform well. You can then identify training needs and put a plan of action in place for employees to receive relevant training.

Creates opportunities for career progression

The performance review process allows you to identify employees who are meeting their objectives, performing well, and who, as a result, deserve a promotion, salary increase, or bonus.

Helps retain staff

“Performance management allows you to know your employees better, know their capabilities and if they are being used to their full capacity,” says West.

“If they aren’t being used to their full capacity, they’ll be less engaged at work. Use performance management conversations as an opportunity to ask about their aims and what they want to work towards. You can then discuss and agree relevant goals and training and development opportunities – all of which will increase employee satisfaction, engagement and retention.”

CIPHR HR consultant Shirley Bousfield adds: “investing time in improving employee performance shows your people that you are dedicated to helping them develop and grow, which can motivate them to stay at your organisation.”

Steps to good performance management

A performance management strategy should follow these six key steps.

1. Make performance management continuous

“Best practice for effective performance management is to make it part of day-to-day management,” says Bousfield.

“Managers should be continuously checking in with employees by dropping them a message or having a quick meeting and dealing with any obstacles that get in the way of employees achieving their objectives or learning new skills.”

Bousefield adds: “By making it a continuous process, there’s less chance of employees straying away from their goals and objectives, and less chance of you having to make performance management meetings a time to discuss and attempt to rectify negative performance.”

2. Put benchmarks in place

Managers can help employees understand what it is they should be working towards by putting performance benchmarks in place.

Benchmarks are standards for an employee’s work and performance that the organisation and managers can use as the foundation of performance evaluation. Once benchmarks are set, employees know what they need to work towards.

Setting performance benchmarks involves collecting information on how well you’re doing in terms of outcomes and comparing these outcomes internally or externally. This can also refer to functional performance benchmarking, such as benchmarking the performance of the HR team by using metrics such as employee net promoter scores or staff engagement surveys.

3. Set SMART objectives

The SMART acronym is a tool designed to help organisations and individuals set objectives in an effective and productive manner.

Specific – outline in a clear statement precisely what is required.

Measurable – include a measure to enable organisations to monitor progress and to know when the objective has been achieved.

Achievable (or agreed) – design objectives to be challenging, but ensure that failure is not built into objectives. Objectives should be agreed by managers and employees to ensure commitment to them.

Realistic (or relevant)- focus on outcomes rather than the means of achieving them.

Time-bound – agree on the date by which the outcome must be achieved.

4. Focus on your performance metrics

To find out how employees are performing in relation to their objectives and the benchmarks that have been introduced, you need to measure performance in the most effective way possible.

According to Indeed, there are four types of key performance metrics that you should track:

  • Business performance metrics – track and assess specific processes within a business, such as sales, marketing, and profitability
  • Sales metrics – measure an individual’s or a team’s performance on the sales of products or services
  • Project management performance metrics – measure the effectiveness and profitability of a project
  • Employee performance metrics – assess employees’ productivity and efficiency in reaching established benchmarks that contribute to the overall growth of a business

Depending on an organisation’s size and sector, it may use some or all of these types of metrics; there is no standard template for performance management benchmarks. In the care sector, for example, “organisations have to demonstrate compliance, so good and bad employee performance will look different to how it’s measured in a private company that may focus largely on sales and business performance metrics,” says Mahmood.

You should also make sure that the performance metrics put in place by your company are realistic and relevant to the tasks and activities your people carry out; Gallup research has found that only 21% of employees strongly agree that they have performance metrics that are within their control.

5. Have open conversations with employees

Good performance management relies on strong communication between managers and employees, and this communication should start off as informal conversations, says West.

“You should never go straight into a formal performance management step – it should be dealt with informally first.

“Managers and employees should have a conversation about what measurements are not being met, and, in these one-to-one meetings or catch-ups, you should ask employees what support they need to help them their achieve goals and objectives, and if there are any obstacles preventing them from performing to the best of their ability.”

If, after an agreed period, an employee’s performance doesn’t improve, West recommends “moving to a more formal process where you put a performance improvement plan in place that sets out your expectations, the support measures you’ll be putting in place, and what you expect to be happening at certain periods in time.”

6. Track performance management

Having the correct systems in place to record conversations around performance management and to track performance is crucial.

West says: “The key to effective conversations around performance management is to make sure records are being kept. If, for example, an employee turns to you and says you haven’t discussed certain objectives with them, you want to have the ability to refer them to records which state the date you last spoke to each other about performance management, and what you covered.”

To track these conversations, you should look at investing in performance management tools. Software such as CIPHR’s talent management software can help you track progress against objectives, report on the progress of employee and organisational objectives, identify and anticipate staff training needs, and more.

With talent management software, Mahmood says performance management can be easier to handle. “If you’re having a catch-up with employees, you can just go into the system, look at their performance management record, add notes to their existing objectives or add new objectives. Employees can also have access to this and can keep track of what objectives they need to be working on and by when.”

Performance management challenges

Lack of training and time

Managers may not be trained up on performance management and may not know how to handle the performance management process for their direct reports.

“Senior leadership teams must ask themselves if they have efficiently prepared managers to handle performance management,” says Ayerst. “Do managers know what performance management conversations look like and what to cover when talking with employees? Are managers being properly performance managed themselves? Successful performance management depends on good leadership and role modelling behaviours.”

Managers may also struggle to manage performance if they have too many direct reports. Bousfield says: “Organisations must review their management structure and check that managers do not have too many direct reports (a number which depends on the business structure). If they do, regular performance management catch-ups are less feasible and could lead to managers being overwhelmed.”

If you think you have too many direct reports and are unable to give enough time and effort to the performance management of your employees, raise your concerns with your own manager.

Remote working

In the UK, the number of daily active users of Zoom reached a peak of roughly 1.7 million towards the end of November 2020. Remote working has meant face-to-face meetings have been replaced by virtual meetings, and employees have had to jump on Zoom or Microsoft Teams to have performance management conversations instead.

“Managers need to make sure they set time aside to speak to employees and discuss their performance,” says West. “If you aren’t seeing employees in the office, it’s easy for a few weeks to go past without talking to each other, so managers must prioritise calls with their employees and keep these virtual meetings consistent so that employees know they always have a dedicated time to talk about their performance.”

Tracking performance management

Having the correct systems in place to track performance management isn’t always easy for organisations.

Some organisations may not know what software to use or how to start the search in the first place, so managers, HR teams and senior leadership should take the time to research the different solutions and weigh up the pros and cons.

By investing in relevant tools and overcoming the other challenges that may rise when managing employees’ performance, you can make sure that performance management becomes an integral part of your organisation’s culture, and that your employees are engaged and supported at work.

Want to find out more about CIPHR’s talent management software? Request a demo here.