How to measure performance management effectiveness

Organ­i­sa­tions invest a sig­nif­i­cant amount of time (and mon­ey) into per­for­mance man­age­ment activ­i­ties. Consider Deloitte, where 65,000 employees spent a staggering 2 million hours annually on performance reviews, before their per­for­mance man­age­ment revamp. Similarly, CEB reported that managers dedicate an average of 210 hours each year to these tasks and spend millions of dollars on reviews alone. Yet so many of us, man­agers and employ­ees alike, are dis­sat­is­fied with the qual­i­ty and effec­tive­ness of our per­for­mance man­age­ment systems.

Does this sound all too famil­iar? In this blog, we explore how to effec­tive­ly imple­ment per­for­mance mea­sure­ment to keep your com­pa­ny and your employ­ees on track.

Research and bench­mark best practice

If you are going to assess the qual­i­ty of your per­for­mance man­age­ment sys­tem objec­tive­ly, an impor­tant first step is to under­stand what ​excel­lent looks like for your business.

Spend some time read­ing the lat­est research into per­for­mance man­age­ment trends and best prac­tice. Look at some case stud­ies of organ­i­sa­tions who have suc­ceed­ed after revi­tal­is­ing their per­for­mance man­age­ment sys­tem.

Be clear on your organisation’s goals

Recent research in performance management highlights several key principles: the importance of regular, future-focused check-ins, the need for frequent feedback, and the practice of separating performance measurement from developmental discussions.

Ultimately, the effectiveness of your performance management process hinges on what your organisation aims to achieve. Therefore, it is crucial to clearly define your performance management goals. This requires open discussion and agreement with senior leadership to ensure alignment and success. A sur­vey con­duct­ed by eRe­ward in 2014 found the most com­mon goals for per­for­mance man­age­ment were:

• to improve organ­i­sa­tion­al performance
• to align indi­vid­ual and organ­i­sa­tion­al objectives
• to devel­op a per­for­mance culture
• to improve indi­vid­ual performance
• to align indi­vid­ual behav­iour to organ­i­sa­tion­al values
• to pro­vide the basis for per­son­al development
• to inform per­for­mance pay decisions

Estab­lish­ing your suc­cess measures

Once you are clear of the goals of your per­for­mance man­age­ment sys­tem, the next step is to estab­lish what suc­cess should look like for each one. Here are some suc­cess mea­sures for a selec­tion of the com­mon per­for­mance man­age­ment goals above. These show you how to mea­sure the effec­tive­ness of your sys­tem against your per­for­mance man­age­ment goals:

In addi­tion to agree­ing on suc­cess mea­sures relat­ed to spe­cif­ic per­for­mance goals, it is impor­tant to define some mea­sures for your per­for­mance man­age­ment process­es (i.e. the actu­al mechan­ics). You’ll want to know how easy your employ­ees and man­agers find the process­es and tools they use, how time-con­­­sum­ing they are, how well they are imple­ment­ed, what pro­por­tion of peo­ple are fol­low­ing the process­es and whether peo­ple are demon­strat­ing the nec­es­sary per­for­mance man­age­ment skills.

Eval­u­ating your per­for­mance man­age­ment system

Evaluating your performance management system is pivotal once you've established success measures. To gain a comprehensive understanding of its effectiveness and identify areas for improvement, it’s essential to gather both qualitative and quantitative data. Relying solely on quantitative figures, like company profitability or employee engagement levels, might not accurately reflect the impact of performance management due to other influencing factors. Here are some effective methods to collect valuable data:

• Conduct dedicated surveys with a selection of employees and managers to gather insights on their experiences and how the performance management process has contributed to achieving goals.
• Incorporate specific performance management-related questions into existing employee attitude surveys.
• Carry out interviews with a sample of employees and managers to delve into their personal experiences with performance management.
• Organize focus groups to facilitate discussions and collect diverse perspectives.
• Extract data and reports from your online performance management system, if available.
• Review a sample of objectives and personal development plans to assess their quality

These methods will help create a well-rounded picture of your performance management system's efficacy.

How to take actionable steps based on your results

Once you’ve analysed the results, you should have a clear idea of how effec­tive your per­for­mance man­age­ment process­es are and which aspects could be improved. If the results are not as good as you had hoped, don’t be dis­heart­ened as you are not alone. A 2014 study found only 8% of com­pa­nies report­ed that their per­for­mance man­age­ment process dri­ves high lev­els of val­ue. More recent­ly, two-thirds of organ­i­sa­tions sug­gest­ed their per­for­mance man­age­ment sys­tem was inef­fec­tive. There’s def­i­nite­ly room for improvement.

The key to improv­ing your per­for­mance man­age­ment is to involve a vari­ety of senior man­agers, man­agers and employ­ees in dis­cus­sions on how to make improve­ments. This will help you to get buy-in to the improved process and greater own­er­ship from those who have to imple­ment it. 

Enhance your performance management system with OneAdvanced

To elevate your performance management processes, consider these five steps:

1. Consolidate results and improvement areas into a clear presentation for broader understanding beyond HR.
2. Engage senior management with the findings to secure their backing and gather their insights for enhancements.
3. Conduct focus groups with diverse managers and employees to discuss outcomes and gather improvement suggestions.
4. Formulate an action plan addressing identified issues and share it with senior management and focus groups for feedback.
5. Refine the action plan based on feedback and implement the agreed changes.

While involving your team in the process redesign is crucial, expert guidance can fill in the gaps. OneAdvanced brings industry-leading practices and the latest trends to your performance management strategy. We've assisted countless organisations in transitioning from outdated annual appraisals to a more dynamic approach, fostering meaningful conversations and encouraging outstanding performance.

Discover how our performance management software can transform your organisation. Reach out to us today and join the many who have trusted OneAdvanced to support and enhance their performance management initiatives. Let us help you achieve excellence.