The past five years have seen an increasingly vocal opposition to the traditional performance appraisal process. Detractors call annual reviews “pointless,” “insulting,” and “dead.” Much of the corporate world agrees that employee performance assessment is antiquated and inefficient.
But what alternatives are there?
Performance management is an option that many industries are adopting. "Managing performance" might sound like what you’ve been doing all along. But it’s actually a specific process that includes steps not usually found in the traditional performance appraisal process.
In the interest of understanding performance management, let’s start by outlining a better definition.
What Performance Management Is (And Is Not)
Some companies use “performance management” to describe their employee appraisal and review system. But that’s not what performance management is.
It’s not another word for annual reviews. It’s not a tool for managing reviews or employee performance.
It’s an entire framework for managing employees and helping them perform at their best. But it also seeks to give employees the best experience possible, because happier employees are more productive, more creative, and less likely to miss work.
Effective performance management starts before hiring an employee and continues through the exit interview. Every step of the way is carefully planned and optimized for both the company and the employee.
An Ongoing Process
Performance management differs from standard reviews in that it’s an ongoing process. It doesn’t happen at regular intervals throughout the year. (Though performance reviews are a part of the process).
Instead, performance management is a way of encouraging employees to excel on a day-to-day basis. It never stops. The process guides managers to better support their employees.
Because it’s not a specific tool, performance management processes are unique to companies. You’ll have to create your own version of performance management before putting it into place.
However, there are a few things that all effective performance management programs do well.
1. Start the Process Early
If you want your employees to perform at their best, you need an effective plan. And that starts before you hire a new employee. Proper hiring practices help you determine who’s likely to be a success in your company.
Before you start the hiring process, you need clear expectations and responsibilities set out for new employees. That means writing a clear, detailed job description. Include the day-to-day responsibilities of the position, expected education and qualifications, pay, and advancement opportunities.
(For more advice on how to craft great job descriptions, check out 10 Tips for Crafting Highly Effective Job Descriptions at CIO.)
After crafting a job description, you still have a lot of work to do. You'll have to choose interview techniques. Decide on assessments. Evaluate applicants. And, finally, make the hire.Want to make the best hiring decision? Here are four practices that successful organizations use when they hire:
- Automated resume screening and search
- Assessments that predict whether candidates are motivated by the factors associated with a particular job or a company's values and ways of doing things
- Job interviews in which candidates are asked to describe specific examples of their skills
- Simulations that gauge specific job-related abilities and skills
Not every company will be able to afford to put all these ideas into practice. But you can get at the ideas behind them for free. For example, if you don’t want to run a motivation assessment ask employees about their own values and motivations during an interview.
With this information on hand, you’ll make a better hiring decision. Hiring the right people is the first step in successful performance management.
2. Set Expectations During Onboarding
The best performance managers work with their employees to ensure success. They don’t just set performance goals. Instead, they account for employees’ skills, circumstances, and responsibilities.
Laying the groundwork for performance management is best done during onboarding and training. Instituting these practices in the middle of someone’s tenure at your company is possible, but more difficult.
Make sure that performance management goals are clearly communicated during onboarding. These early goals don’t need to be tied to specific metrics—that will come later. At this stage, it’s important that employees simply understand that they’re expected to take part in this two-way system.
When you’re starting to put your performance management program into place, it might be difficult to communicate expectations. That’s okay. At this point, your goal is to let employees know that this system, which may be unfamiliar to them, will improve both the performance of the company and the lives of its employees.
(Side note: it’s easy to lose sight of the fact that performance management isn’t just about getting the most out of employees, but also about helping them be successful and happy. It’s a crucial piece of the process, so don’t lose sight of it.)
3. Encourage Participation in Goal-Setting
Every organization has goals. Within those organizations, groups and departments have their own targets. But performance management encourages managers and employees to set individual goals, as well.
This process is more complicated than setting a goal for an employee based on what’s perceived to be their most important metric. London, Mone, and Scott (2004) point out that many organizations aren’t building their goal-setting programs on the principles of organizational psychology and human resource management.
Research shows that the most successful goal-setting programs share four factors:
- Employees are involved in goal-setting
- Goals are challenging and specific
- Managers explain the reasons behind goals
- Feedback on goals is provided
This goal-setting process takes longer than a simple “Mary should aim to sell $100,000 of product this quarter.” It asks more of the manager and the employee. But research has shown that these factors contribute to better performance.
In preparation for goal-setting, managers and employees should re-read the company’s mission and values statements, review their job descriptions and departmental goals, and identify significant changes in company goals or direction.
Then the manager and employee work together to set measurable, attainable goals for the next performance period.
This sounds like a lot of work—and it is. But effective, research-based goal-setting has positive effects on employee engagement and performance. Increased employee engagement is also linked to better performance, making this exercise doubly worth the time and effort.