Performance management is a tool Managers use to align the employees' performance to the company's goals. It aims to tailor an environment where everyone working for the business can do their best.
A well-designed performance management cycle optimizes the work process. It ensures it is efficient and effective.
A good performance management program syncs the management's vision to the employees' expectations. What each business should ideally aim toward is to let its workers know:
- What their obligations to the company are
- What career growth opportunities lay ahead of them
- How they can progress within the company's structure
The performance management program puts each employee in the broader context of the company's work process. Note that there isn't one perfect performance management tool. Each business has its unique characteristics and needs. Moreover, attaining an ideal standard is rarely achievable. A good manager will work toward an enhancement of their management style. With hard work and planning, they can bring the organization a little closer to said idealized model each day.
Performance Management vs. Year-End Review
Performance management programs differ from the classical year-end review. The former takes into account each interaction with an employee. The performance management models deem every such interaction valuable in achieving the end-goals. The latter relies on a summary of the employee's accomplishments at the end of each review cycle. It is far less accurate. There is empirical evidence year-end reviews aren't as effective in the modern dynamic business landscape as they used to be.
A Good Business Practice
Managers who know how to use performance management tools and programs employ them to:
- Adjust workflow
- Make recommendations for the employees and the business structure
- Help employees achieve their goals
By doing so, performance management helps companies work at their optimal capacity. It minimizes losses and helps live up to clients' expectations. As a result, both overall company morale and profit margins soar.
Why Does Performance Management Work?
Performance management emphasizes the importance of personal accountability. This process goes both ways. The employer, as well as the employees, have obligations they need to cover. Among the most valuable aspects of the model is that it helps define these obligations. Thus everyone knows the rules and how they are supposed to follow them. When everyone knows what the expectations for their job are, it becomes easier to achieve their goals. Businesses that use the performance management system have less stress at the workplace in most cases. Employees don't feel the need to go beyond their call of duty to impress the employer. Managers don't have to worry about communication with under-performing workers. Both groups know when things are or aren't going as expected when the system works.
How is Performance Management Conducted?
Performance management programs use a variety of tools to accomplish this goal. They create and measure objectives and take note of milestones the business achieves. They are most valuable in creating a clear picture of what the company's optimal performance is. Once they do that, managers can tailor a plan to reach that performance.
What is a Performance Management Cycle?
It is the continuous effort to enhance the workflow at a company. Performance management is a flexible process. There isn't any other way since the system aims at helping unique businesses optimize their performance. However, there are four distinct stages each good performance management program contains.
Synching Employee's Activities to the Company's Vision
This stage aims to acquaint the workers with the overall company's goals. Then, it is up to the manager to explain how each employee fits in the business's structure. In this way, employees better understand their goals and the steps they can take to achieve them.
Defining Job-Performance Relationship
The process answers the following questions for each employee:
- What does their job produce in terms of goods and services?
- How does their work affect the company?
- How should they interact with their colleagues, managers, and clients?
The answers to these questions determine the procedures employees follow. In a broader sense, they also clarify the work process and allow for a more transparent and efficient workflow.
Creating a Job-Development Plan
Communication is the key to a good performance management plan. That is why both managers and employees have a say in defining the job's duties. According to the performance management model, businesses should listen to their employees' opinions on the work process. Likewise, owners and managers should also listen to what employees think they contribute to overall success—defining the relationship between each job and the company's success help tailor a business development plan that benefits all sides.
The performance management model relies on constant communication between management and employees. The evaluation cycles are more frequent and efficient than the traditional year-end review. Monthly or even weekly meetings are best.
The Benefits of a Performance Management Cycle
Performance management cycles work miracles when it comes to boosting a company's success. Such can be accomplished by increasing the employees' engagement in the day-to-day work process. As a result, the company's performance improves, and so benefits the workers, who see the potential for growth in the company's structure.
They increase productivity by synching individual and overall company goals.
How can you tell if your performance management cycle works? Just see if the communication between management and employees has become better. Do you receive more feedback, and do you see your employees more motivated to grow? If the answer to these questions is yes, you have found a performance management model that works for your business.
The Best Performance Management Cycle Practices
When tailoring your performance management program, have in mind the four stages all guidelines and software tools use:
Pay close attention to each stage. Poor performance in any of these can result in the model breaking down.
The Planning Stage
The planning stage will help you define the unique aspects of your performance management plan. It is the place to set up your company's goals. You need to find the relationship between what your business is doing and its employees' place in the picture. Learn what your workforce is trying to accomplish. Do your business targets and employees' goals align? At that stage, you have to create a plan for the long-term development of your company. Don't lose sight of the short-term objectives, as well. The planning stage is when you need to write clear definitions of each job position in the organization. Outline the duties and targets your employees need to achieve.
The Monitoring Stage
This part is also known as "Acting" or "Performing." That is the stage when each of your employees focuses on their day-to-day obligations. This is when you need to monitor how they are doing. During the monitoring stage, you will get a clear picture of whether your initial plan is working as expected. Each performance management cycle takes less time than a year-end review cycle. Thus, the monitoring stage is the time to concentrate on your short-term business goals.
If your performance management plan includes training, the monitoring stage is when it happens.
What managers have to do at this stage is offer support and guidance. Make sure to create a healthy work environment. An employee should feel comfortable coming to you or the rest of the management team with questions and concerns. During your one-on-ones with team members, make sure to ask about:
- Changes and support needed
By doing so, you will know how to fine-tune the performance management cycle on the go. That eliminates the need to overhaul the whole program later because something doesn't work.
The Reviewing Stage
In most cases, reviewing happens twice or three times a year. Depending on your business's needs and unique characteristics, you might need to do it more often.
Monitoring involves frequent, short one-on-one meetings with team members. It aims at measuring day-to-day progression. The reviewing measures the overall progress in the given period. One vital thing is that you focus not just on the goals achieved but how your employees do while working toward them.
In addition to self-evaluation, consider using the 360-degree feedback method. In it, employees get feedback for their performance from peers and managers. The collective feedback is the backbone of a functional, effective review.
Discussion topics you might find useful during the reviewing stage include:
- What goals have been achieved?
- What is stopping the team or employee from achieving a certain goal?
- Did the employee receive the support and resources they need to achieve their goal?
- What was the quality of the work done?
- What work practices need change?
- What should remain the same?
The reviewing stage is when your employees would like to hear about their development opportunities. Do they have a chance for a promotion or a pay raise? It is good to be upfront with them on these matters. Tell them what to expect. When employees know what to work on, they become more motivated. The process pays off during the next performance management cycle.
The Rewarding Stage
This step of the performance management plan is about the recognition of good work. The rewarding stage compensates employees for their hard work during the current cycle. The rewards may include:
- Permanent salary increases
- Parking and other public privileges
- Extra vacation time
- Taking part in special projects and assignments during the next performance management cycle
How to Tailor Your Performance Management Procedures?
Managers and HR teams use specialized software to prepare their performance management plans. This is only logical in our day and age. However, you can't rely one hundred percent on pre-tailored plans. Your business has its unique requirements and needs. The people who develop performance management software know this fact. For that reason, all commercially available apps offer great flexibility. They help you fine-tune the performance management plan and prepare the cycles that will work best for your company.
The software enables you to establish a performance management framework in which feedback:
- Arrives at suitable portions
- Relates to specific events, milestones, and occasions
- Occurs frequently
When you achieve this, you have the foundation for the most efficient performance of your business. The framework is the overreaching structure each performance management cycle builds up to.
The Dos and Don'ts of Performance Management
Like any good business practice, there are things you should strive to do at all times and such you'd like to avoid. When it comes to efficient performance management, you will always have to:
Make time for your employees. Carefully plan all reviews, check-ins, and meetings. Leave enough time for emergency sessions as well. Remember that these processes are time and energy-consuming. The overall organization should come from the top-down.
Ensure coaching is available. Managers should ensure their employees have the resources and learning opportunities to become better at their jobs.
Work for the long-term development of your organization. The completion of each performance management cycle marks the beginning of the next. Since no company can be one-hundred percent perfect, there is always room for improvement. Performance management isn't a sprint towards an end goal. It is rather a marathon without a clearly defined finish line.
Having this in mind, the most dangerous performance management mistakes to avoid are:
To set up unclear goals or none at all. Employees that don't have a clear idea of what they are trying to achieve. Muddling up the goals will only hamper workflow and the overall performance.
To not help your employees' development. That is especially true when your general workflow leaves someone feeling they have no room for growth.
To not let go of low-performing employees. It doesn't mean you should fire anyone who fails to achieve their targets during the first or even a couple of performance management cycles. However, if an employee struggles to meet the performance expectations continually, you might want to do something about it. If firing them seems too harsh at the moment, a transfer to another department within the company might be an alternative.
To not reward employees for meeting and exceeding expectations. You need to set up a reward system that reflects the goals achieved. Sometimes small rewards are even worse than none at all. For instance, a branded mug as a prize for exceeding sales expectations by 50% is unlikely to boost morale. As a result, your performance management plan will fail too.
It isn't a stretch to say that performance management enhances transparency in the workplace. This management model creates a healthier environment that makes it easier for employees to thrive. Such models are better for business, as well. Focus on the good performance management practices and forget about the existence of the bad ones. You will notice your company's metrics improve even during the first performance management cycle.
Employer Net Promoter Score (eNPS)
The acronym eNPS stands for Employer Net Promoter Score. Employers use this scoring system to measure the loyalty and satisfaction of employees within the company. The system uses the NetPromoter Score system as its base. The system comes from Satmetrix Systems Inc, Fred Reichheld, and Bain and Company, and it measures customer loyalty.
Having a new employee start work in your business is a big day, not just for the new employee but for everyone else in the organization. An introduction email for a new employee is a great way to get the ball rolling and plays a critical role in the onboarding process.
Supplemental wages are any additional payment the employee receives on top of their salary. Supplemental wages are subject to tax-withholding by the employer, even if the employee submits a Form W-4. The withholdings and tax rates on supplemental wages depend on the state and local laws, as well as the current federal tax laws.
Gross wages are the pay an employee receives before tax and other deductions. In contrast, take-home pay depends on state tax laws, insurance situation, and other deductions. Because of that, gross wages are usually significantly higher than net wages.