In today’s fast-paced business landscape, HR departments dedicate considerable resources to refining their performance management strategies. But what is the real essence of performance management, and how does it intertwine with business objectives?
Performance management serves as an essential, dynamic process that cultivates employees' growth, motivates their performance, and aligns it with the company's strategic objectives. This process encompasses a myriad of elements - from feedback, teamwork, goal setting to employee development, and recognition. Furthermore, performance management serves as a platform for career progression. It ensures employees are aware of their career path, the skills they need to acquire, and the milestones they need to achieve.
However, performance management isn't just about driving high performance, setting goals, or identifying development areas. It is also about identifying where corrective actions are needed, supporting leadership coaching, and helping to build a positive workplace environment that nurtures employee wellbeing.
In a nutshell, effective performance management drives higher employee engagement, results in happier employees, and creates a positive ripple effect on the company's bottom-line impact. In this blog we aim to explore the complexity and significance of performance management, and the impact it can have on modern enterprises.
The main purposes of performance management:
To provide meaningful, continuous feedback
Real-time feedback is one clear example of how performance management systems have become more forward thinking. Traditionally, feedback was fairly limited. Employees would receive it during an annual performance review while being formally judged and appraised on their past performance. This usually happened at the same time that bonuses and pay were being decided, making the exchange of feedback strained, uncomfortable and fairly unproductive.
Feedback is far more effective when delivered promptly. One of the most important purposes of performance management today is to give and request feedback regularly, regardless of whether it is positive or constructive in nature. All feedback is progressive and should be delivered as soon as possible, this is increasingly important to employees.
To encourage teamwork, collaboration, and communication
HR leaders often look for ways to create a sense of community and teamwork within their organisations. This leads to improved communication and collaboration, which is good for business performance. Companies can go about this in different ways, but many utilise a mixture of social activities and access to the right technology. Collaboration tools such as Teams can also provide the capacity for real-time communication, while team-building exercises and after-work social activities help to develop a sense of togetherness and team spirit.
To ensure everyone is achieving their SMART goals
Goal-setting has always been an important focus for performance management. It's vital that employees clearly understand what is expected of them to succeed. Surprisingly, only about half of employees fully grasp their objectives. Without this clarity, they may find it challenging to meet and exceed expectations.
Achieving goals is a shared responsibility among employees, managers, and the HR department. Regularly setting short-term goals is proven to be exceptionally effective, even more so than long-term ones. HR should facilitate the establishment of these goals and ensure that managers and employees engage in frequent discussions to track progress and stay aligned.
To ensure goals are relevant and achievable
Employees shouldn’t just simply understand their own goals, they need context on how those goals feed into overall company strategy and the impact that they can make. Not only will this help with their daily decision-making, but an understanding of company objectives and how their roles feed into the direction of the company will give employees a sense of meaning and purpose, something they are desperately seeking in their careers.
To provide continuous support
Modern organisations need to be social enterprises, rather than purely business enterprises. They need to care about employee well-being and employee mental health. This can involve putting wellness programmes in place, but it also means demonstrating to your employees that they can come to you to discuss any issues that are affecting their performance.
Mental health conditions, including stress, anxiety and depression, are increasingly common and they have a direct impact on performance. Companies who are proactive and put measures in place through their performance management systems by ensuring check-ins are regular and incorporate conversations about general health and wellness, are more productive and benefit more from satisfied employees who know they matter to their company.
To identify development areas
One key purpose of performance management is talent management. It is vital to create development plans with all employees. Focusing on development needs means managers and employees can put effective plans in place, leading to individual performance improvement and, ultimately, improved organisational performance. Furthermore, once you make it clear that your company is invested in their personal development and career aspirations, employees will feel like valued and respected members of the team rather than a replaceable cog in the machine, which increased loyalty and employee retention.
To offer recognition and reward
As pointed out by Harvard Business Review, “recognising employees is the simplest way to improve morale and employee engagement”. Recognition is also positively linked to productivity and high performance. Recognition doesn’t have to come at a high price, there are many cost-effective means of acknowledging great effort and accomplishments, and it’s been shown that the greatest way of incentivising employees is with ingrained motivators.
To ensure employees are engaged
Performance management systems are as much about the employee as they are the employer. The term “employee engagement” has become a reoccurring phrase in HR over recent years, with good reason. Companies are now well aware of the many business advantages of engaged employees. They also know how detrimental it can be to have an actively disengaged workforce. One purpose of performance management is to keep up to date with engagement trends, to conduct employee engagement surveys, to enable more regular internal conversations, and to ensure all is being done to keep employees engaged, motivated and happy.
To identify clear career paths for employees
Career progression is important to most employees, and this isn’t set to change with Gen Z, the newest generation to enter the workforce. For this generation, career success is of top importance. While Baby Boomers are more likely to cite family and religion as central to their identity, Gen Z prioritise professional, academic and personal success.
A good performance management system encourages managers to regularly discuss a career plan with their employees while covering what actionable steps the employee needs to take to get there. Remember, if your company is unable to provide top performers with clear routes of progression, they are more likely to jump ship.
To identify when action is needed
Performance management allows team leaders and HR to step in at an early stage to address performance issues. Regular 1-1’s with management and the help of these systems can address when there are any additional training needs, to help support an employee whose performance may have dipped due to personal factors, and to ensure employees really understand their objectives.
Poor performing employees can have a serious impact on the entire organisation and if issues are left unaddressed, they can get out of control. If root causes of performance issues are not addressed, it can lead to decreased productivity, lower morale, increased turnover, disrupted team dynamics, and potential damage to an organisation's reputation. By proactively managing performance, organisations can maintain a productive and engaged workforce.
To determine leadership performance
When a performance management system revolves around a one-or-two-year annual performance appraisal, this doesn’t allow a lot of time for trust and communication to develop between manager and employee. This is a problem, given that a manager has such a significant bearing on employee engagement levels. These days, managers need to be so much more than just anonymous authoritarians, they need to be motivators and coaches to help improve employee performance.
Realistically, not everyone who has been promoted to the position of manager will know how to motivate and encourage employees. This is why your performance management system should offer advice on how to give useful feedback, listen actively, and motivate different personality types.
To improve your bottom line
Modern businesses need to care about employees, but unless your company produces great results it’s not going to thrive and compete long-term. This is why, when done effectively, performance management also helps to improve business performance and business results. It should also reduce turnover, which ultimately improves your company’s bottom line for long-term success.
How can OneAdvanced support you with performance management?
OneAdvanced’s Performance and Talent solution helps organisations enhance their employee experience and drive high performance. Our suite of People Management products help with performance enablement, performance measurement, and employee engagement. This system helps to enable purposeful conversations between employees and managers, helping to manage employee data effectively. Our solutions also enable functionalities such as continuous performance management, goal tracking, a streamlined feedback system, enhanced analytics, agile performance tracking, and new AI assisted innovations to simplify giving and receiving regular feedback.
To find out more about how we can help you please visit our website and book a demo today.