The Hidden Signs You Need a Performance Management Process

"Coaching between a manager and a subordinate should occur day-to-day, and not be reserved for a once-a-year event." Forbes.

Performance Management. It’s something you hear about a lot, and yet how many businesses understand what it entails and when it should be introduced or reviewed? And it’s not just about ensuring that traditional annual appraisals occur because there’s so much more to an effective performance management plan. After all, it’s a continuous cycle and involves numerous initiatives.

So, whether you’re introducing performance management or reviewing what you already have in place, it’s vital to allow managers to observe, review and give feedback on team and individual performance and empower your people to improve and develop.

How do you know if you need performance management?

There are obvious signs that should make you consider introducing performance management or re-evaluating what you have in place. Some of these can be measured using simple people analytics, including turnover, productivity, and sickness.

But then there are the less apparent factors. These include employee engagement, development, and motivation, all of which can be measured and discussed in a successful performance management cycle but are difficult to ‘see’.

Why do you need performance management?

Performance and engagement go hand in hand, and one without the other won’t lead to optimal business success. So, for example, if your people are performing effectively and you can measure this, but you don’t measure their engagement, and it turns out they’re really unhappy, it’s unlikely that strong performance will be sustainable, and turnover could be on the cards.

Alternatively, you could have happy and engaged people, but if you’re not measuring individual performance, how can you know if some employees need training or development?

Therefore, consider some of these factors when you plan performance management:

• Growth – as a business headcount grows, keeping track of employee performance becomes more challenging. In addition, as layers form in a company and managers manage other managers and team leaders manage other teams, there’s limited scope to know how individuals and teams perform.
• High performance – when the numbers grow, it becomes essential to understand how your people are performing to achieve optimal business success and ensure your people are being developed, engaged and receiving the employee experience they expected. So, not only is performance management vital for business success, but you need a strategy in place that includes goals and measures, engages, rewards, and develops your people to enable them to perform at their best.
• Engagement – performance management shows your people you listen to them and support them by gaining feedback and offering individuals training and development opportunities. As a result, you may see increased motivation, retention, performance, wellbeing, and happiness!
• Retention – if turnover is high or increasing, consider why this is. It’s helpful to look at exit interview feedback on why individuals leave or assess why there are terminations for poor performance. Performance management also allows you to spot and discuss serious performance issues and manage them before they become severe.

Measure performance AND employee engagement

With the Great Resignation still simmering, you must understand how your people perform and view their development. By listening to feedback from employees about their personal growth and career aspirations, you may be able to retain those who have itchy feet to go in search of a more ‘understanding’ employer.

For example, a recent survey reported that two-thirds of UK workers are looking for a change in their careers over the next year as many seek a ‘more progressive approach towards working’. And it’s not just about a drastic career change; those planning to move companies but retain a similar role have increased from 5% to 8% since July 2020. So, while there may be nothing you can do to keep some employees, a vigilant and organized performance management process might help you retain others.

What should the performance management cycle include?

An effective cycle should include several performance management techniques to gain success, so if you don’t have these implemented in your business, it might be a sign that your performance management process needs updating:

• Objectives and key results (OKRs) – OKRs don’t need to be set once a year during an appraisal and then forgotten. Instead, they collaboratively set challenging long-term goals for individuals or teams against short-term goals. They are measurable and engaging as progress should be regularly measured and discussed. Essentially, they are a way to show how daily or short-term goals fit with the longer-term objective. Such OKRs should drive motivation by showing individuals and teams how they can contribute day-to-day to the company goals.
• Reviews or appraisals – are a review of an individual’s performance since their last appraisal or over a set period. Each company will have its own review template, system, or process, but such reviews are important to establish and discuss objectives, gain 360-degree feedback (from managers and colleagues) and give individuals the opportunity to feedback about their role and development needs. Conversations with managers during the review meeting (however you organise this in the hybrid world of work) should focus on the individual’s growth and development. But feedback and discussion must not just occur once a year; they must be ongoing.
• Employee surveys – you need to know what your people think! And gathering feedback in an employee engagement survey once every few years is not enough. Annual or pulse surveys can be carried out regularly to measure work and company satisfaction, wellbeing, motivation, and an insight into the company culture. Employee feedback is powerful and often a way of gaining information that employees wouldn’t share face to face!
• Training and development – shouldn’t just be discussed once a year in an appraisal meeting. It should be a continuous process involving a plan that can be reviewed to ensure that your people are developing throughout their employment. And although there might be obvious training needs and tracks for specific roles, it’s also about understanding what development is important to each person.
• Technology – in the world of increased remote or hybrid working, technology is essential to establish and maintain a performance management process. Systems must be user-friendly, engaging, cost-effective, and allow open conversation and feedback without being an intimidating barrier, and LMS systems also need to be incorporated.

Each business is individual

Deloitte decided to scrap appraisals for good just over five years ago after 58% of their executives said their current performance management process did not drive high performance or employee engagement. Furthermore, they found that their existing appraisal process (including form completion, meetings, and ratings creation) took almost 2 million hours a year across the company! Therefore, performance management techniques and procedures will differ for each business.

A performance management process is an integral aspect of the business and employee experience. Whatever tools you include, you should approach it as a continuous process that inspires and monitors your people. The best results will take buy-in and commitment from you, your managers, and employees and your culture and values will influence how you manage it. If you’re reinventing your current process, then take the opportunity to be modern rather than following traditional routes, which are often out of touch with the people you want as employees.