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Effective Employee Performance Management in HR

Employee performance management is an essential business tool for all businesses. It has the potential to help companies align their employees, resources, and systems in order to meet their strategic objectives. It can also promote increased employee engagement, performance, and productivity.

Despite this fact, many companies still do not have an effective system in place for managing and tracking the performance of their employees. In fact, according to Gartner, although 65% of organizations provide formal performance feedback, HR performance management still continues to be a largely unsatisfactory experience – for both employees and managers.

Let’s take a look at what performance management is and why implementing an effective system is vital for your business.
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What is Employee Performance Management?

Employee performance management is a corporate management tool that helps companies to monitor and evaluate the performance of their employees. It involves the implementation of processes and activities that focus on skills, resources, and support in order to maintain and improve employee performance in line with an organization’s objectives. This includes a number of initiatives including KPIs and objectives, employee performance reviews, salary reviews, 360-feedback and learning and development.

Traditionally, HR performance management was exclusively based on the concept of annual performance reviews. However, these days many companies are wising up to the benefits of implementing a continuous performance management system. This is where open dialogue, L&D, and feedback are used to encourage employee growth. This helps managers get the most from their teams and motivates employees to thrive in the workplace.

What is Performance Management in HR?

Human resources and performance management go hand in hand. They are both core components of an effective people management strategy. Put simply, they are both built around the concept of training, motivating, and managing employees in order to boost performance and promote professional growth. And this is vital for the success of your business.

The traditional model for conducting HR performance management was designed in the 1970s. With this model, employees would meet with their managers once a year to discuss their progress and performance. This led to a great deal of frustration for both managers and employees. It also resulted in many companies pulling back from the concept of reviewing performance and cries for “no more performance reviews!”

However, a lot has changed since then, especially given the huge shift we have experienced since Covid-19 and the new way of working. Companies are now adapting to more constructive and continuous models for human resource performance management. And they are seeing just how much this new model can benefit their business.

With the new updated model of continuous employee performance management:

  • Managers meet regularly with employees to discuss their strengths and weaknesses (weekly or monthly catch-ups).
  • Employees are regularly invited to give constructive feedback on their own performance and the support they feel they are receiving (360 feedback).
  • Employee learning and development is prioritized.
  • The focus is more on flexible short-term goal setting and the continual review of progress.
  • Collaboration and communication are encouraged at all times.
  • Employee recognition programs are used to engage employees and boost morale.
  • It is much easier to identify and remedy poor performers.

Why is Performance Management Important?

A regular, well-managed performance appraisal benefits employees and employers alike. Let’s take a look at some of the advantages of implementing a system for employee performance management in your business.

Clarifies Expectations and Objectives

HR employee performance management helps you clarify the expectations and objectives of each role within your company. The result of this is that each and every employee understands what’s expected of them, making it much easier for them to fulfil their duties.

To achieve this you need to make sure you set clear SMART goals so that employees know what they need to work towards. You also need to make sure you align their goals and expectations with your overall business objectives.

Highlights Training Needs & Development Opportunities

Implementing a performance management system also makes it much easier for you to identify training needs and potential development opportunities.

By meeting with employees regularly to discuss their performance, you can spot weaknesses and areas for improvement before they have an impact on productivity.

For example, you might find that an employee is missing certain skills, preventing them from performing to the best of their ability. You can then offer them the right training. You might also discover that certain employees are keen to develop their skillset and climb up the ladder in your company. Without regular appraisals, you could potentially miss out on opportunities for career development and promotion.

Increases Retention

Following on from the last point, if you fail to identify and offer development opportunities, you may find that employees get restless and start looking elsewhere for career development. This would result in decreased retention rates and an expensive rise in your turnover expenses.

In contrast, by holding regular appraisals and continuously asking employees for feedback, your employees will feel valued, recognized and heard. This will boost morale and make it far more likely that they will stay at your company for the long haul.

Improves Communication

If you implement a performance improvement plan, you will encourage effective communication at every level of your company. Continuous 360 feedback and regular one-to-ones will help you identify strengths, weaknesses, and issues before they become problematic. Employees and managers will feel encouraged to voice their opinions, making them feel valued.

Boosts Employee Engagement and Motivation

HR performance management creates a culture of communication that drives better employee experiences, motivation, engagement, and overall business success. It also helps employees feel that are on a clear path for development. This results in increased job satisfaction which encourages employees to further better themselves. Plus, happy employees are more productive employees. You’ll quickly find that your overall performance levels rise the more engaged and motivated your employees are.

Supports Workforce Planning

Employee performance management is also a very useful tool for succession and workforce planning.

Firstly, because, as we mentioned already, it helps you spot potential opportunities for development and promotion. You might discover, for example, that one of your lower-level employees has the qualities needed to make an excellent leader with the right guidance and training.

Secondly, discussing current and future workloads with employees can help you identify any requirements for future staff. For example, you might discover that some of your employees are struggling with their workload. This will then allow you to set aside the necessary budget provisions to take on extra staff in the future.
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Encourages Accountability

Another great benefit of employee performance management is that you can use it to encourage autonomy and accountability.

What do we mean by this?

Well, when everyone understands their role and how it fits into the overall mission and goals of your company, they recognize the value that they add to overall business success. This helps them become more accountable for their own performance. In other words, they perform to the best of their ability because they want to succeed, not because they “have to”. And the result of this is that they are usually happier, more committed, more productive, and more loyal than those who are micromanaged.

Enhances Overall Business Performance

Finally, and perhaps most importantly, implementing a process for employee performance management has a positive impact on overall business performance. The more you encourage your employees to thrive and develop their skills, the better they will work and the more motivated they will be to embrace continuous improvement. This adds a wealth of value to your business.

What is the First Step in the Performance Management Process?

So, how do you manage employee performance? Where do you start?

The first step of the employee performance management process is planning. You need to decide how you will manage each step of the process and how often you will conduct your performance appraisals. You need to set clear goals and design KPIs to measure the progress of each individual.

The best way to manage all this is by using an HR performance management program. The right software can help you create, measure and track your goals. You can use software to conduct surveys and collect feedback. You can also use tools to track how each employee’s performance aligns with the company’s overall vision. And then, with the feedback you collect, you can adjust workflows and create action plans to help employees reach their goals.

Ultimately, the most important aspect of HR performance management is communication. You need to hold regular appraisals with each and every employee to find out how they are doing. Regular check-ins will help you keep your finger on the pulse. For your employee performance management appraisals to be effective, though, you need to collect the right information when you meet with your employees.

With Factorial’s free 360 review template you can quickly and easily evaluate what your employees are doing well and where there is room for improvement. Our template covers all the important factors you need to analyze when you conduct your performance reviews. This will provide you with the right feedback so that you can support your employees at each stage of their development, boosting the overall performance of your business.

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