Understanding Performance Management Process and Best Practices

When an organization is struggling to achieve its goals, you might want to take a look at its performance management process. Performance Management evolves rapidly, and if it’s not taken care of, the repercussions can be vastly dreadful. 

Table of Contents:

1. What is Performance Management?
2. Performance Management Process Steps
3. Performance Management Best Practices

All organizations want to thrive and be successful, but success needs hard work. One of the main areas to focus on should always be performance management, not just to track performance, but because new performance management trends unfold every year, and if we’re not careful, we could end up with unsatisfactory results and doing double the amount of work just to catch up. 

Unfortunately, performance management is a process that not every organization understands and it’s frequently misapplied. So, the first thing you need to do is understand how the performance management system looks and how it’s supposed to work.

What is Performance Management?

A lot of people immediately think of ‘employee performance reviews’ when hearing the term performance management. But the fact is that the performance review process or performance appraisal is just a part of what performance management actually entails. Michael Armstrong’s definition of “performance management” describes it best:

​“Per­for­mance man­age­ment is the con­tin­u­ous process of improv­ing per­for­mance by set­ting indi­vid­ual and team goals which are aligned to the strate­gic goals of the organ­i­za­tion, plan­ning per­for­mance to achieve the goals, review­ing and assess­ing progress, and devel­op­ing the knowl­edge, skills, and abil­i­ties of peo­ple.”

Or to shorten it, performance management is the process of continuous feedback and communication between managers and employees to guarantee the achievement of the organization’s strategic objectives.

The performance management process focuses on observing and monitoring what employees contribute to the objectives of an organization, determining areas for improvement throughout the process. It also involves different methods, activities, and tools to enable managers to evaluate team and individual employee performance, to improve productivity and alignment across an organization.

Performance Management Process Steps

As stated, the performance management system or process is focused on overall performance improvement related to organizational objectives. Leaders and team members have the opportunity to understand how their individual efforts contribute to their team and improve everyone's abilities, driving positive outcomes.

So, the performance management system steps to follow are:

1. Planning

Like every other smart process, you can’t just dive in without having a clear idea of what you’re looking to accomplish. The first step of the performance management system is to identify the objectives that will benefit the organization, and then clarify roles and expectations for each employee.

Each employee has to know upfront what’s expected of them and it’s also important for them to understand how their work is essential to the bigger picture. Define clear roles and tasks for your team members, use the SMART goals framework to clearly set expectations. If each individual employee knows they’re an integral part of the team’s and organization’s success, they’ll feel motivated and inspired to perform outstandingly. 

2. Monitoring

The second step of the performance management process is to monitor employee performance on a regular basis. This is where ongoing performance management shines. With the right tools, you can track your team’s performance in real-time and make the appropriate modifications if needed. Here is where you can identify opportunities for performance improvement or spot areas that are not working as expected.

Our OKRs and KPIs features both allow you to monitor performance continuously and set them up according to your needs on how the goals must be accomplished. By tracking individual performance and making adjustments as the development of the objectives go, you’ll increase the chances for collective long-term success.

3. Increasing Competencies

In this phase, you should use the data you obtained while monitoring to improve the performance of your employees. Now that you have identified those opportunities to support your team members, you can use a number of tools to increase their skills, like:

• Refresher courses or training sessions
• Mentoring programs
• Provide assignments that help improve their knowledge
• Supervision sessions 

Since the goal of performance management is to achieve goals collectively, it cannot be successful without individual results, so here is where you must review how to help individuals achieve their goals.

 

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4. Rating and Rewarding

Performance reviews happen usually once a year, but during the performance management system, employees must be rated periodically. Give your employees feedback in a timely manner, be consistent and specific. Feedback needs to be focused on the action, not exactly the person, and it has to be descriptive and detailed. Whether your feedback is positive or negative, the purpose of it is to help your employees and your team their relation to the expected levels of performance.

Rewarding good performance is essential to the performance management process. Just a “thank you” goes a long way, but you can recognize their efforts on a bigger scale. Humans are keen on positive reinforcement, so when you recognize and reward your employees, they feel motivated to repeat those positive behaviors and aim to do their best.

Performance Management Best Practices

Here are three best practices or components of an effective performance management process to keep in mind:

• Goal Setting

Goals have to be set the right way, and they must be meaningful and understandable. You can’t just set goals for the sake of it or because you think “they might help”. Employees need to have context as to why each individual goal matters and how they are contributing to larger organizational objectives. If employees truly understand their roles and goals, they’ll see why their job matters, driving motivation and engagement.

Goal setting should involve meeting with employees and being transparent about the company goals, direction, and obstacles. Being involved in these matters will allow employees to create additional goals to complement the assigned objectives and help them make decisions to achieve their goals in the best way possible. Let your employees feel they have ownership of their work and decisions and trust that they’ll do their best to benefit their team and the company.

• Open Communication and Collaboration

Employees want (and deserve) their leaders to be open and authentic. No one likes to be kept in the dark when their companies are going through tough times. Real communication builds healthy relationships and helps provide 360-degree feedback.

Continuous monitoring helps initiate conversations regarding any employee performance issues. If there’s something negative that needs to be shared, it’s somewhat easier when communication is transparent within an organization. A culture of communication is an organization-wide responsibility that starts with leadership positions and trickles down to all departments. 

Open communication is not just about constructive feedback, but it also includes sharing with your employees what’s expected of them, coaching them to reach their maximum potential, and revealing the rewards in place for successful goal achievement.

• Continuous Monitoring

Remember you don’t have to wait for the next employee performance evaluation or performance appraisal to tell your employees what they should improve and what they’ve done right. Continuous monitoring refers to tracking employee performance and monitoring the output and outcomes an employee delivers. It also refers to reviewing employees’ sentiment, through observation and interactions, in order to assess the mood of your team. This way you can address specific problems and will identify them as soon as they occur. 

Using an effective performance management software you’ll be able to monitor your team’s sentiment and start conversations with your employees, showing them you care about their wellbeing as much as you care about their performance. 

 

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Without a foundation of assurance that everyone is on the same page, a performance management system will never help employees reach their full potential and an organization won’t achieve its big picture goals. With the alignment of an effective performance management process with managers that have people skills, you’ll be on your way to getting a highly motivated workforce and the best business outcomes.