Everything you need to know about performance management

Nowadays, increasing importance is put on outcomes when it comes to employment. Bosses and senior management have specific performance expectations to meet company goals, especially their strategic objectives.

The employee then is expected to meet those company objectives. But what if they don’t? What if they have not been properly aligned with the strategic goals of the company and are not fully aware of what business results should look like?

In this article, we are going to delve deeper into performance management and address all of the aforementioned questions above. After reading this article, you should come to realize how important it is to take career development opportunities into account, keep certain performance standards, and provide constructive feedback through an honest annual review.

We will also explore:

• What is performance management?
• Why is performance management important?
• Why do companies fail at performance management?
• How to succeed in performance management?
• Performance management tools

What is performance management?

According to Armstrong and Baron, employee performance management can be defined as:

‘ A systematic process for improving performance by developing the performance of individuals and teams.’

Based on this definition we can observe that a company is an entity that is composed of, ideally, engaged employees whose performance contributes to the overall business success.

There are, however, more definitions and ways to understand this phenomenon. Another way to conceptualize performance management is to think of it as a ‘process for establishing a shared understanding about what is to be achieved, and how it is to be achieved; an approach to managing people which increases the probability of achieving job-related success.’

All in all, performance management can be understood as a tool or process which aids in monitoring, developing, improving, providing continuous feedback, appraising employees, and rewarding good performance. It aims to foster an environment wherein each individual performs to the best of their ability and is aligned with the overall organizational objectives.

Why is performance management important?

There are multiple reasons why performance management is key to effective workforce management. Below we’ve listed a few examples:

1. Performance management aids your usual tools like key performance indicators (KPIs) and prepares employees for a future performance appraisal. It is significantly easier to talk through what an employee has or has not achieved last year when they are completely aware of what ought to have been done and how certain outcomes or lack thereof affect the whole company. When the annual performance appraisal comes, it’s no longer a stressful verdict but rather a synopsis, outlining what everybody is already aware of.
2. Performance management makes your company a much more welcoming place with less work-related stress. Employees will know that they always get timely feedback when something goes awry and what’s assessed is their continuous performance, not a one-off situation. They will feel taken care of rather than left alone just to be judged at the end of the quarter. A proper performance plan together with development plans makes the job much more stable as far as expectations are concerned.

3. When combined with proper workforce planning, employees will see the management as people who care about their training and development opportunities, and their performance isn’t just a thing they do well or not. It’s a cross-organizational process that involves upskilling or reskilling in order to boost performance in the areas that have been identified as improvable. This is particularly important as almost half of the workforce will need reskilling by 2025, according to the Future of Jobs Report 2020.

Why do companies fail at performance management?

It all sounds great in theory, but not all companies are able to implement proper continuous performance management. Nobody said that managing employee performance is easy! Let’s explore some of the reasons why they may fail.

First, their goals might be unclear or unrealistic. It’s difficult to complete a task if its requirements are vague or it’s impossible to do. Some companies think that if the goals are too easy to achieve then it defeats the point – you need to be reaching for the stars. The opposite happens in practice. Employees are severely demotivated, as they feel like no matter how much they do is not enough.

Goals should be transparent, clear, and achievable. Instead of establishing a singular top-end goal, why not have multiple objectives that can be conquered one by one. Mismatching duties with a job description is another issue that falls under this umbrella.

In addition, managers don’t really know how to guide the team. Not all managers are born with the ability to assess, help develop, and monitor performance – and that’s okay. The biggest downfall is that businesses expect them to know it already rather than focus on training managers to acquire those skills. Professional development applies to employees but also to managers.

On top of that, a ton of predictions and requirements are highly subjective and arbitrary. While the best way is to conduct evidence-based research to know objectively what’s needed and what the external realities are like, management sometimes simply guesses when setting up KPIs for a given quarter. It is imperative that managers utilize internal findings but also external environments into consideration when crafting a strategy.

How to succeed in performance management?

Now that it is clear what performance management is, let’s analyze what elements need to be taken into account to ensure that your continuous performance management process is successful.

Performance management programs cannot be just a process. It has to lead to outcomes that are measurable and managers and employees have to be able to act upon it.

According to Elaine D. Pulakos, possible outcomes from effective performance management may include:

• Clarifying job responsibilities and expectations
• Enhancing individual and group productivity
• Developing employee capabilities to their fullest extent through effective feedback and coaching
• Driving behavior to align with the organization’s core values, goals, and strategy
• Providing a basis for making operational human capital decisions (e.g., pay)
• Improving communication between employees and managers

Let’s delve deeper into those points.

In order to properly assess individual performance and offer constructive feedback, all the parties involved need to display transparent communication and in honest discussions establish what is expected from the employee. While the employee is surely aware of what needs to be done on a day-to-day basis, they might not realize what the company really wants from them on a higher level. HR teams ought to prioritize such conversations, as they lead to better understanding overall.

On top of that, we want to tie performance management processes to actual productivity outputs. Sometimes they are easily measurable, as the team could be using Story Points in their Scrum team, or maybe the volume and urgency of tickets in IT Support. Employees’ job performance is a function of how they work, where they strive to be, but also what they actually deliver.

Coaching skills are imperative for both managers and employees to have a productive discussion on how performance and skills can be further developed. Some employees may be underutilized with their potential lurking beneath the surface, waiting to be uncovered by management. In some cases, it’d be enough to move an employee internally so better take advantage of their skill pool. Internal mobility is crucial, as it motivates people to stay.

Organizational performance is dependent upon employees’ performance; that’s why the goal-setting process for employees should be aligned with the goal-setting process for the whole company. The way employees perceive the business will affect the way they act. It’s much better to lay the whole situation in front of them to begin with rather than allow them to speculate on what might or might not be happening.

It’s also important to tell your employees how exactly their work affects the output of the business and what role they play as a cog in this machine. If employees know the birds-eye-view perspective, they might undertake initiatives themselves that will also be aligned with the business. It’s much easier for them to be proactive.

Furthermore, a wider perspective combined with receiving constructive feedback and regular performance reviews will allow employees to more consciously make decisions regarding their salary. They will know how well they fare, whether they meet or exceed expectations, and how they affect the overall business success. It turns pay-raise conversations into discussions where we can finally eliminate implicit bias and use actual data and observations.

Last but certainly not least, the whole continuous performance management process is a way to improve communication between managers and employees. If the employee has been made aware of the general business goals and has been aligned with the strategic objectives, and all of that has been done through regular conversations and discussions, the bond strengthens. In the future, the boss will have an easier time laying out what is happening in the company and the employee won’t hesitate when it comes to their perspective on what’s happening in the business.

In order to properly succeed, the company needs performance management software to ensure that the continuous process and performance planning are done correctly, in a transparent manner, and stored in a safe place.

Performance management tools

With all of that in mind, you need to actually use some tools to put the aforementioned elements into practice. As alluded to in the previous section, the best way to go about it is with performance management software.

DevSkiller TalentBoost is a tool that is also an effective performance management system. Within it, HR teams can create a visual view of employees’ development plans. It has a functionality where management can set up a My Career page for each employee and closely monitor their skills. It makes it trivially easy to track whether employees develop in certain areas and which positions they might fit better in, compared to their current ones.

People are complex creatures and so are their skill pools. Some employees might even possess skills that you would never expect them to. This is where TalentBoost skill maps come in. Employees can map out their skills in a plethora of areas, ranging from Cloud and Software Development, through digital marketing and design, to Soft Skills and Project Management.

A successful performance management strategy and an effective performance management system, like TalentBoost, will allow the managers and C-levels to take a look at an employee as a set of skills which can be taken advantage of but also improved and developed. It is possible that an employee might be lacking in their performance purely because their position is misaligned with their current duties.

With a tool that can track progress and track development plans in such an interactive way, employee engagement increases considerably, compared to mundane spreadsheets where each person is treated as another column in the database.

Concluding thoughts

Hitting performance targets and conducting performance appraisals is not easy. However, with a proper tool and a performance management strategy, it can bring a ton of value to the company.

If you would like to learn more about DevSkiller TalentBoost or discuss your performance management plans, then book in a free call with one of our product experts.