An effective Performance Management system is a crucial part of any company’s talent management strategy. It is a framework for growth within a company, helping employees structure their careers and lives to help them gain more skills and a higher salary. It measures performance, allowing managers and employees alike to understand what is working and what to improve upon.
Performance management helps people highlight areas of employee productivity such as success, progress, and growth, giving them a mirror to analyze the work they are doing and innovate to work effectively and efficiently. Any performance management strategy needs to include a commitment to ongoing improvement both from an employee perspective and a management perspective. But all of this might seem like something that’s so intangible - so how do we measure the impact and benefits?
Performance management helps people improve results within an organization while helping them understand their work’s impact. It is an ongoing dialogue between managers and employees to understand the other’s perspective and gain insight into different priorities to ensure business success.
Performance management is not just having annual performance reviews and compensation reviews and a laundry list of activities to complete. Thankfully, this attitude starts to die off as companies realize that ongoing conversations and communication help increase employee morale and strengthen manager and employee relationships while helping drive employees to do their best work.
When we look at the ROI or the impact of performance management, we can break this into a few tangible metrics that quantify success and manage our own performance management programs. If you see that some of these metrics are moving in an unappealing way, it might be time to analyze what’s going on and make some changes to refine programming.
One benefit of performance management in companies is more insight and confidence in business strategy. Check-ins and one-on-ones help teams look further into the future to diagnose problems and get ahead of them before becoming detrimental to our performance management strategy. Regular appraisals can assist leadership in identifying top talent and nurturing them into the future leadership team. This succession planning adds an extra layer of stability by reassuring the company that up and coming leaders are highly skilled and knowledgeable about its inner workings, reducing any learning curve from outside hires. It also helps to clarify roles and responsibilities to streamline work processes, thereby assisting people in getting their work done more quickly and efficiently - always good for the bottom line.
One of the main ways that companies measure performance management programs’ impact is by reducing turnover and/or increasing employee retention. When asked about why they leave companies, employees’ number one answer is that the career development opportunities they need to grow and develop are just not available, and they need to seek that career growth elsewhere. Performance management programs help identify those who seek growth opportunities and assist managers in creating development plans that will allow people to upskill and get job satisfaction, either by working on stretch projects, attending classes, or participating in rotational programs to develop a well-rounded understanding of the inner workings of the company.
High turnover hurts a company’s bottom line. The average cost to replace an employee ranges from one and a half to two times a person’s salary, not including the time needed to get them up to speed on how work is done, which usually takes a full year for a new employee to integrate completely. Additionally, high turnover can hurt engagement and your employer brand. Suppose the average tenure of your marketing department is 1.5 years. That means that there are few people with the institutional knowledge needed to grow and innovate within the department. It also translates to a lack of consistency with your customers. By incorporating performance appraisal and recognizing high performers and rewarding them, you develop loyalty that inspires them to stay with the company, knowing that they see a path forward there.
Increased productivity is another benefit of employee performance management programs. One way in which successful performance management is clearly evident is through the goal setting or OKR process, which helps teams clearly outline what they need to achieve with deadlines and clarity around roles and tasks. By using SMART goals to help teams clarify what they need to succeed, you’re implementing a structure that allows people to work more efficiently, therefore they improve employee performance.
It’s also important to implement regular employee feedback when using SMART goals, this also helps managers give more direct and relevant feedback to keep their teams on the right track. When everyone has a roadmap to help them see the path forward, they can focus more on priorities and dedicate less attention to the things that don’t matter. Feedback also helps people innovate and improve, especially when it’s collaborative feedback between managers and employees. It’s always a great idea to talk about perceived strengths and weaknesses to develop a plan to best move forward with both. Employees become more engaged with the process of setting and achieving their goals.
Performance management is also conducive to using time more efficiently. As we mentioned above, goals and OKRs help employees streamline their tasks and develop priorities based on team and company goals. This saves employees and managers time by increasing team efficiency.
What is your company’s performance management process? At the bare minimum, it should include these components:
These assets build the foundation you need to start getting the most out of your programming and start seeing performance management benefits. Let’s take a look at how these individual items come together.
Think about the last time you went on a road trip without any clearly planned directions. It might have been fun and exhilarating for the first few hours, right up until the point where you’re 50 miles away from the nearest gas station with your tank on empty. That’s what it’s like for teams to complete their work without any clear goals or objectives. They complete work for the sake of being busy, instead of doing it to achieve strategic objectives.
Setting employee and team expectations is a crucial talent and performance management strategy. It reduces confusion over roles and responsibilities and sets employees up for success. Managers and employees need to be on the same page to reduce confusion and set team members up for success. Employees and managers should have a written version of expectations that can be referred back to during performance conversations.
One-off performance conversations are a thing of the past. Ongoing check-ins work in tandem with goals to help managers evaluate employee progress and setbacks. Frequent discussions between managers and employees help address problems before they turn into broader issues and give managers time and space to coach their employees and promptly address concerns.
Check-ins should ideally happen quarterly and one-on-ones on a weekly or bi-weekly basis. These conversations are powerful motivators that keep engagement high and offer ample opportunities for feedback to give insight into performance.
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The importance of performance management cannot be overstated - it’s just as much of a business strategy as marketing growth or technology development. Hirebook’s performance management software empowers teams to set goals and have the frequent performance conversations needed to succeed.
Try Hirebook today to leverage OKRs, check-ins, and 1-on-1s to start seeing the benefits of performance management in your company.