Performance management is the process of motivating employees to maximize their potential. Employees need ongoing feedback, overperformers need to be engaged and underperformers need a clear improvement plan. We’ll describe performance management from end-to-end with a focus on the processes and tools that work best for small business.
Want an easy way to give regular, structured performance reviews? Zoho People is a popular HR software that lets you offer feedback to your employees, track changes in their performance, and set goals. With Zoho People, employees can also review their peers, detail and highlight their own skill sets, and get ratings from their managers about completed goals. Click here for a free 15-day trial.
What Is Performance Management & How Does It Work?
Performance management is the process used to bring out the best in your employees from the moment you hire them. It involves more than just doing annual performance reviews, although those are often a part of a typical performance management system. It also includes setting goals, measuring performance, providing feedback and coaching.
The image below shows how performance management has been done traditionally vs. how it should be done. As a small business, you may want to set aside any prior bad experiences you’ve had with annual performance reviews and instead look at how performance management should work.
In fact, performance management is considered by HR experts to be a critical driver of business success. However, in many companies, it’s not done well; and in some companies, it’s not done at all. There are several reasons businesses need to have a solid performance management system.
8 Reasons You Need a Performance Management Process
- Performance management motivates employees to perform year round
- Performance management, when done correctly, builds a supportive company culture
- It aligns your business objectives with team and individual employee goals
- It helps new hires, even during probation, understand what you expect of them
- It can strengthen the relationship between management and employees by helping workers understand how they contribute to overall business results
- Performance management allows you to identify the strengths and weaknesses of individual team members and help them grow in the company
- It gives insight into training and development opportunities for your team
- Performance management, when documented, provides legal protection for promotion, discipline or termination actions
Mercer, a well-known HR consultancy, cited the issues that a good performance management system is designed to fix. For example, by setting goals, employees have clear expectations of what they should be working on. By providing coaching, employees build the skills they need to do their best.
Performance Management Costs
The cost of performance management can be as little as $1 per month, per employee, up to thousands of dollars a year when you factor in the labor cost of the time that managers spend coaching employees or the time that HR spends chasing down a formal review process.
The best way to keep your performance management costs low is to embed performance management into your ongoing work processes so that it’s not some intimidating, time-consuming process done once a year — often too late to add value anyhow.
Here are some examples of how to determine the cost of performance management:
Manual Performance Management Systems — $$$$
Businesses that formally structure their performance reviews into paper forms, manual scoring systems, sit down meetings and formalized training may easily spend hundreds of management hours on performance management procedures, copying and sharing documents and meetings.
HR Software that Manages Performance — $$$
Businesses that invest in software to streamline the documentation process, using a paperless system, may save on some labor costs, but will typically require costly HR oversight and system administration. The systems themselves cost $10 to $200 a month and up based on the number of employees you have. Here’s a link to the HR software providers we recommend.
Performance Management/Employee Engagement Software — $$
These systems may cost $1 to $10 per month, per employee but save significantly on the overall labor costs, making performance less of an overhead expense and more part of the workplace. Here’s a link to some of the software providers we recommend for performance management.
Employee Engagement Apps — $
This fresh way of managing performance democratizes feedback by opening it up to all employees in a way that nearly eliminates the need for quarterly and annual reviews. This makes feedback real-time with peer praise based on business criteria. Tools like Slack are free.
Misconceptions About Cost
The mistake many businesses make is looking at performance as a cost, rather than a business investment in the people that make your business successful. Many larger companies have invested in the most expensive performance management systems focused on the forms, ratings, and compensation, only to find they demotivate employees.
Newer, less-expensive software and apps can change that and are affordable to even the smallest of businesses. They allow your employees to provide feedback to one another and focus on ongoing communication and dialog with managers all year long.
Performance Management Providers
Every ilk of performance management provider is available to support your business, from standard performance review forms available as templates to HR consultants willing to help you implement systems and software that provides the forms and processes.
However, newer apps are entering the market to support the discovery by HR professionals that older traditional forms of performance management may not be working as well as they could.
Here are the kinds of providers available to help you manage performance:
Manual Performance Management Systems
Any HR consultant can be hired to help your business implement a manual performance management process. You can do it yourself by simply downloading templates and creating review forms. We’ll take you through a step-by-step process below if you want to set up a do-it-yourself performance management system. However, realize that this will be the most labor-intensive way to manage performance over time, so you may want to look at other options.
HR Software that Manages Performance
Many existing HR software providers have a performance management application as part of their HR suite. The benefit of using HR software if you don’t already use a system to manage the HR aspects of your business is that it can be a good value, providing both HR and performance features.
The challenge with using an existing HR software to manage your employees’ performance is that it may not have the customization features you desire and often is based on a more traditional notion of performance management — one that relies heavily on performance reviews and ratings.
Zoho People is a good example of HR software we recommend that provides robust performance management tools for just a few dollars a month per employee. It integrates with the entire Zoho suite of products, to streamline all your business software from finances to CRM. Try it for free.
Performance Management and Employee Engagement Software
Performance management and employee engagement software are starting to bridge the gap between old-fashioned performance management approaches — structured reviews and ratings — and newer feedback tools that allow for ad hoc peer feedback and ongoing one-on-one manager meetings. These tools are designed to manage performance as part of daily business operations, and many of them will integrate with your existing HR and payroll software and other apps.
We’ve provided a full article on best performance management software that ranges in price from $1 to $10 per month, per employee.
Employee Engagement Apps
Newer apps have been developed that focus on managing and motivating employee performance with recognition and rewards as part of feedback and dialog. They appear to be getting rave reviews from businesses that have moved away from formalized performance reviews and ratings and replaced them with peer feedback, praise and dialog. Some even offer gamification and rewards, where employees can earn badges and cash bonuses from their peers. Examples of this newer genre are Bonusly, Motivosity, 15Five and Tipi.
Performance Management Process Features
The traditional performance management loop consists of the following steps:
Plan —> Act —> Monitor —> Evaluate —> Recognize
These steps remain valid, whether you formalize the process into paper forms or merely manage the steps like recognition via email or with a team collaboration tool like Slack.
Performance management operates like a continuous feedback loop, and there may be some overlap from step to step. Most businesses plan performance management cycles on an annual basis using steps similar to the five described below.
Let’s look at each step in detail:
The first step of successful performance management is to plan. Planning consists of coming up with the goals you want to achieve at the company, team and individual level and the time frame for achieving them. In fact, if your business takes time each year to build a strategic plan with company-wide objectives, that’s the place to start — at the top.
Most businesses set goals on a monthly, quarterly or other time frame and check in on progress weekly or monthly. Team and individuals goals usually are set at the same pace and in alignment with the company goals in order to keep things simple. Whatever time frame you choose for company goal setting, we recommend that you set team and individual goals at the same intervals.
Your company, team and individual goals should be Specific, Measurable, Achievable, Realistic and Time-based (SMART). A good example of a SMART goal is “John will achieve a 3 percent increase in Facebook advertising click-through traffic by April 1, 90 days from now.” A bad example is “John needs to improve our Facebook advertising campaign.”
To make sure that everyone is driving in the same direction, you should come up with the strategic goals you have for the company as a whole first, Then, base your team and individual goals off of those.
Goals that are company-wide — or organization-wide — can be oriented to both business performance and softer skills like teamwork and communications. To come up with your company-wide goals think about where you want your business to be at the end of the goal cycle as well as what is realistic, what weaknesses your business might have and need to improve upon and what strengths your company has that you want to keep growing.
Good examples of SMART company goals would be increasing revenue by 10 percent during the next 6 months or perhaps implementing a project management system company-wide to improve communication and accountability on projects that will result in a 1-week faster delivery time to clients.
Bad examples would be to say simply “ABC Company will increase revenues” and “ABC Company will implement a project management system.”
Now that you have your company goals, think about how individual departments and teams will help to achieve those goals. For example, if your company goal is to increase revenue by 10 percent, then what do your team or teams need to accomplish specifically in order to get there?
Examples of SMART team goals would be that the sales team will target to upsell 10 percent more customers by changing their follow-up time to every 2 weeks instead of 4 weeks or that the accounting team will reduce accounts receivables that are in arrears by 50 percent within 90 days. Bad examples would be that the sales team will upsell more customers and that the accounting team will fix accounts receivable.
Now that you have your company and team goals, think about what each individual needs to do in order to help achieve those goals at the team and company level. Connecting individual goals to company goals can be incredibly important to your individual employee’s happiness at your company. You can read some more about that research here.
Going back to our example of increasing company revenue by 10 percent, we can then translate specific individual goals to align with that. Think about how office workers who answer the phones and talk to customers every day would have different goals than employees on the marketing team. Identify how each can contribute to push the company goals forward.
Examples of good SMART individual goals would be for your office manager to answer all calls within three rings in order to eliminate missed client calls or for your social media manager to increase social media interaction results by 30 percent without increasing spending during the next 6 months.
Examples of bad SMART individual goals would be for your office manager to decrease missed client calls and for your social media manager to improve social media results.
SHRM provides this helpful infographic as a way to check whether your goals are accomplishing what they intend to in terms of importance, challenge, specificity and control. In addition, we provide a complete article on how to create SMART goals if that’s the goal setting methodology you’d like to use.
The second step of successful performance management is to act. You want your team to start to move toward the goals, and you need to help them get started.
Here are three ways you can encourage action:
- Pick a starting point: Help each department or team member get started on their goals. What should be the first step? Where can they contribute? What projects or initiatives do they need to focus on.
- Make goals visible: Whether it’s on a whiteboard or old school poster board, you’ll want your goals visible in the company break room, lunch room or some other place that gets high visibility to everyone. Some companies make company-wide, team and even individual goals visible; others might just make company-wide goals the visible ones. This is where performance management software can help. Some offer goal dashboards visible to management. Others make those goals visible to all employees, so they can see how their contributions make a difference.
- Set microgoals: If you set a big goal, like increasing revenue 10 percent in 6 months, you might want to set microgoals every 30 days to help keep employees grounded to the big picture goal. For the revenue example, it could be a 2 percent increase every month. In some of the performance management software, these goals may be said to be “cascaded” from the organization to the individual and chunked into bite-sized nuggets that employees can execute on.
Good performance management is not a set-it-and-forget-it job. If you want your company, teams and individuals to meet their goals, you need to monitor progress on an ongoing basis.
You might implement a time frame to help you regularly monitor employees like a weekly managers’ meeting that talks about individual, team and company goals and the progress toward them. Consider weekly individual meetings for managers with their team members to relay that information.
Some of the newer performance management systems build one-on-one meetings or employee and manager touch points into their software so that your monitoring is tracked and progress documented on a regular basis.
There are a few different ways you can monitor performance:
Keep the employee in the loop with regular feedback sessions. The manager — or it may be just you — can keep a simple Microsoft Word or Google document to take notes on or create a special email folder with performance notes for each employee. You could also keep notes in personnel files like the ones provided by Gusto.
If you’re using performance management software, you may have the option to keep notes or attach relevant documents directly in the system.
Have each employee track how they feel they are progressing towards their goals as well as team and company goals. Self-monitoring is best used in combination with another method in order for it to be effective.
Again, many performance management software systems and newer employee engagement apps allow for this type of self-monitoring to be documented online.
Depending on the structure of your company, you might have team members or peers monitor each other. If you have a lot of new hires, this can be useful since the new hires may be working closely with a seasoned team member already like a group of new waitstaff training at a restaurant.
Some companies have implemented peer monitoring in a positive way, where at staff meetings, people go around and give someone a shout out for their good work. Some of the newer performance review software systems provide tools to accomplish this.
Performance Management Software
There are a number of web-based software products and mobile apps out there to help you monitor your company’s performance. From formal reviews to daily feedback, performance management software can really help your business if you:
- Don’t think your managers or employees are taking the performance management process seriously, or they’re not communicating well
- Tend to lose track of documents, project deadlines or deliverables
- Don’t know everyone at the company — or don’t get to work with them all — you’ll want to see your rising stars and monitor the lagging team members since you own the business
We recommend Zoho People as an HR software that can help keep track of the people side of your business as well as allow employees, managers and teams to provide ongoing performance feedback. Click here for a free trial.
To be effective, feedback is a continuous process and not just for formal performance evaluation time. There is both informal feedback, like complimenting an employee on a job well done when you hear a great sales call and formal feedback like having a closed-door meeting with a team member who you found has gone delinquent in following up on new account leads.
Formal feedback is generally documented in an employee’s file — both the good and the bad.
Your team members should be getting informal feedback on a near daily basis and when necessary if a situation like a big win or loss or a behavior issue comes up.
Below is an example of how feedback can be built into a performance management system, using a tool like Zoho People.
Formal performance reviews should be done every 90 days, 6 months or on an annual basis, depending on your business model and your business needs. Some businesses choose to do what’s called a 360-degree performance review to gather feedback from managers, peers and customers as well as the employee’s manager.
To evaluate employees in a fair and even way, you’ll need to do the following:
- Create a performance review form with a uniform scoring system or build one based on a template using performance review software.
- Fill out a review for each employee or have each person’s manager do one or both of you about 2 weeks before you intend to give the reviews. Make sure to use the files or tracking records you have been keeping on everyone’s performance, from both formal and informal feedback, to help you fill out the reviews. There should be no surprises during this step. If you use performance review software like Zoho People, much of this feedback will already be captured for your reference.
- The results of reviews should send to you a strong message about whether your prior three steps of performance management are working. Look at the general trend of the reviews and see if there is someone who deserves a promotion. Also, ensure that everyone is getting constructive feedback. If no goals were met, why? Were employees monitored carefully after goals were set? What is happening with the business as a whole?
The recognize step means both acknowledging the achievements of those who are performing at a high level — meeting or exceeding their goals — and giving constructive and supportive feedback to employees in areas they need to improve. This may include coaching on other aspects of their performance, such as their demonstration of company values as well as the achievement of goals.
Recognition with promotions or pay raises is the most common, but recognition can be as small as handing someone a gift card for the way they handled a customer complaint.
On the flip side, performance improvement needs should have been made identified by the continuous feedback you have been giving your employees throughout the performance management cycle. People should be informed continuously about their progress toward their goals by monitoring and sharing feedback.
Let’s start with what to do with underperforming employees, and then go over what to do with your top performers and high achievers, followed by a start to finish example of managing performance with a fictitious employee to give you an example of how it all works together.
What to Do with Underperforming Employees?
One of the main reasons business owners decide to implement performance management is unfortunately because someone is underperforming. How can you get these underperforming employees to improve? How can performance management help to motivate them?
- First, you want to document the employee’s performance against his or her job description or goals you have set for them. Document both the good and bad things.
- Now, examine that list of the good and bad. Is there anything in the list that could be solved by training? Is there anything in that list that is perhaps the fault of the company setup, supervision or a lack of resources? Try to see these issues from the employee’s standpoint.
- Next, you’ll want to communicate your concerns to the employee during their review or prior to their review, depending on how far away their next review is scheduled.
Once you are ready to talk to your employee, you will want to make sure to:
- Be specific and direct: Use specific statements like, “Mark, you were late three times last month. We need you to be on time” versus “Mark, you always come in late.” Specificity leaves less room for miscommunication, so the employee understands there is a problem, and it needs to be fixed.
- Plan actionable next steps: You need to set specific targets for your employee to meet in order to be “out of the doghouse.” For example, you could say, “Mark, it’s expected that you might be late one time per month. If you exceed this, then next month we will need to reconsider your employment or put you on probation.” Don’t just say, “Mark, don’t be late anymore.”
- Set a follow-up date: 30, 60 or 90 days is traditionally the amount of time for performance improvement meetings. If you have a business like a call center or a restaurant, you may visit even weekly. Tell the employee the plan, such as “Mark, we will be keeping track of this every month from now on, and we will meet again in 30 days to discuss this.”
Ultimately, it’s up to the employee to make the necessary improvements. You’ll want to document your conversations on performance with the employee and their progress against the improvement goals you are setting for them — just to be thorough in case of the worst, such as firing someone.
Online performance management systems provide tools for you to note these concerns and can provide you with documentation, in case the employee retaliates in any way.
Hopefully, the employee just needs to be made aware of the issue, and they will improve. If not, here’s a guide on how to terminate someone.
What to Do with Top-performing Employees?
High achieving employees don’t sound like a problem until they leave your company because they are bored, and you’re faced with having to replace someone you didn’t want to lose.
If you have some employees who are performing at a really high level, here are some ideas on how to keep them happy and engaged at your company. Keep in mind that it doesn’t always cost money to retain your top performers as long as they’re being paid fairly for the work they do.
- Give them a new responsibility or special project: Rewarding top performers with a higher level of responsibility or visibility can be very motivating. For example, if you can’t promote someone, perhaps he or she can be invited into management meetings to share personal insights.
- Send them to a conference or course: Show your top performer that you are invested in his or her success by sending the person to a conference or a course that will enhance his or her career.
- Treat them: Taking employees to lunch or dinner to acknowledge their hard work and to say thank you also never gets old. Is your top performer a huge sports fan or is a popular music act coming to town? Sometimes giving someone tickets and an early night off to have some fun can also mean a lot.
- Promote them: It seems obvious but promoting an internal employee vs. recruiting a new employee for an open position can be a great thing for morale. If you don’t have the capacity for a new manager or if the employee should not manage people, you could also give the employee a new title like a “senior” version of his or her position. For example, an analyst could become a senior analyst or lead analyst vs. being an analytics manager.
- Give them a raise or bonus: This is often a go-to response, but even a small amount of extra income and the acknowledgment of the employee’s value to the team can mean a lot. You could also implement a performance bonus structure for all employees if one doesn’t already exist so that they’re compensated based on the extra effort they put in or the improved results they contribute to the business.
For more ideas on meaningful ways to keep your top performers, check out our post on the 31 best employee engagement ideas.
Who Performance Management Is Right For
Performance management is right for all companies but may be less structured in the smallest of firms. For example, if you have only two employees, you’re likely managing their performance with daily conversations and ad hoc updates.
However, a performance management system is an important aspect of your company HR strategy as you scale your business and can no longer provide one-on-one coaching and feedback to every employee on your own. You’ll need a system that ensures all managers know how to support employee and team performance and that all employees get the feedback and coaching they need.
Here are examples of different types of employees and the performance management they most likely need.
- All employees: All employees need to understand the objectives of your business, what you’re trying to accomplish and how they can help, which focuses their work
- New hires: New hires need to understand what good looks like in the job so that they come up to speed in their new role and are able to contribute in the way you expect
- Underperformers: Those who aren’t achieving desired outcomes need feedback, coaching and possibly training, or they may need to be exited from the company; in any case, performance management data will help you make that decision
- Top talent: Your best people need feedback and praise as well as new opportunities to keep them challenged; performance management helps you know which ones they are
- Project team members: Project teams are always working on something new and need coaching, praise and feedback, which helps you decide which next project to assign them to.
All businesses and all employees need performance management. To use a nonpeople analogy, when you invest your money in funds, you typically monitor their performance and make changes based on which funds are performing and which are not. Performance management does the same with people.
The difference is that people are adaptable. They can learn and grow, and the requirements of their jobs change. They need direction in terms of goals and feedback in some way to understand how they’re performing and what they may need to do or focus on differently.
To give you a sense of how other businesses are doing in the performance management arena, this data provided by Mercer shows that most — about 95 percent — are using some sort of system to manage performance.
Employee Performance Management Example — Start to Finish
While the performance management five-step loop makes sense in itself, what does it look like with a real employee? Let’s look at a performance management example for Eleanor Employee, from the time of her hire until her employment with your company ends:
Hired Eleanor Employee (Step 1 — Plan)
After hiring Eleanor, you inform her of your company’s performance management system and what she should expect each year and when. You share the company objectives with her and help her to set goals that match your performance management time frame. Because Eleanor probably started during the middle of a cycle for performance management, you may need to adjust her individual goals to be more realistic in a shorter time frame while she’s being onboarded or still in training.
Get Eleanor Up & Running (Step 2 — Act; Step 3 — Monitor)
Keep tabs on Eleanor in her first few weeks on the job and create a performance file for her just like your other employees.
If you have a performance management system, you’d set her up in it so you could schedule weekly check-ins. If you don’t manage her directly, make sure to keep in touch with her manager about her progress. Because Eleanor is new, provide good training and encourage her to ask questions so you can help her make progress toward her goals.
Eleanor’s First 90 Days & Beyond (Step 4 — Evaluate; Step 5 — Recognize)
Having a meeting at 90 days to touch base on where Eleanor is with her new hire goals or having a softer performance review at the same time as the other employees will help eliminate any issues with Eleanor as well as motivate her to keep on the right track for the things she is doing well. It’s also helpful for Eleanor to see how other employees are measured on performance and goal achievement.
Some employers use the first 90 days as a probationary period, so this review will be crucial if you are disappointed with Eleanor’s performance and are planning on taking disciplinary action. In fact, many of the performance management systems we reviewed in our article on the best have a feature that allows you to create a new hire performance assessment in support of your onboarding process.
After the first 90 days, Eleanor should continue to go through the performance management process along with the other employees. She should be getting regular performance feedback as well as have a paper or online file that is documenting her progress and notable performance items.
- If Eleanor’s performance goes down: You will want your system to include progressive discipline with consequences for poor performance. However, realize it often takes a new hire up to a year to reach peak performance. Provide mentoring and training.
- If Eleanor’s performance is great: You will want a system for how to reward Eleanor, such as the employee engagement ideas listed above. You’ll also want to document how her performance contributes to the overall success of the team and the business, so she stays motivated to continue performing at a high level, and you have examples to use in her formal performance reviews.
Pros & Cons of Performance Management
There are no negatives to performance management as a concept — in terms of letting people know how they can contribute to your company and monitoring their progress toward work goals.
However, there are pros and cons to how performance management is implemented. In fact, if you’re not willing and able to do performance management well as a formalized process, it’s often better to train and trust your managers to manage employee performance without a formal structure.
Pros of Performance Management
The benefits of performance management executed well are:
- Increased employee satisfaction that results in higher employee retention rates
- Reduced turnover, resulting in lower recruitment costs
- Improved employer branding, which may result in top talent wanting to come work for you
- Better alignment of business objectives with individual work performance resulting in improved business results
- Fewer hiring fails, as new hires understand expectations from day one
- Fair and defensible data for making decisions about pay increases and incentives
When it comes to performance, employees want to know two things:
- How they are doing and
- That they are fairly rewarded for that effort
As I work with clients, I share a process for removing the HR-speak and adopting a practical, three-point, business-focused decision process for rating performance. It involves a manager asking three questions:
- Would you hire this person again today for the same role at the same pay? If so, he or she likely meets expectations.
- Would you take steps to prevent him or her from leaving and joining the competition? If so, he or she likely exceeds expectations — or you’re facing a tight talent market, which is a different problem.
- If the person left and went to the competition would you giggle or breathe a sigh of relief? If so, he or she is likely below expectations.
Managers should set goals, track metrics, consider competencies and obtain feedback to validate and balance their assessment but, after 20 years in HR, I’ve yet to meet a manager who can tell me the difference between an employee rated 2.47 and one rated 3.15. Leaders need to make the tough calls, deliver clear messages and then invest time to help employees succeed. Systems and forms don’t enhance performance, strong managers do.
— Tim Toterhi, TEDx Speaker, ICF-certified Executive Coach & Founder, Plotline Leadership
Cons of Performance Management
A 2017 study cited by SHRM, showed at only 3 percent of companies felt that their performance management system provided “exceptional value.” Approximately 48 percent felt that it needed some work. The downsides of poor performance management include:
- Misalignment between business objectives and employee work efforts that result in missed deadlines, unhappy customers and reduced profits
- Angry or frustrated employees who quit — or worse, stay and continue to perform poorly
- A negative employee brand that makes it more difficult and costly to recruit new employees to work for your business
- Poorly documented performance issues that can result in legal action if, for example, an employee sues for wrongful termination or discrimination
Alternatives to Performance Management
Harvard Business Review found that more companies are ditching the traditional aspects of performance management like annual reviews and structured three- or five-point rating systems. They’ve also stopped comparing employees by grading them on a bell-shaped curve or by doing forced rankings. Instead, they’re turning to alternatives that improve performance in more natural ways.
Here are some ways to improve performance without a structured performance management system:
Businesses are using tools like Slack and scheduling weekly check-ins to align employees and managers with daily and weekly goals. This doesn’t require any formalized system. It’s simply an approach to managing employees that gives the employee and manager a periodic, scheduled time to share information and course adjust as needed.
Company-wide meetings with team check-ins provide the same value — so long as they offer two-way dialog and reinforce company and team goals.
HR teams help build and maintain a culture of conversation in a number of ways, including frequent all-hands meetings, chat tools and skip-level meetings. One of the most effective ways I’ve found to transform a company culture is for HR to actively help managers have the crucial conversations they need to be having regularly with their team members around goal alignment, continuous feedback, career development and recognition. A continuous performance management process can feel complicated, so you definitely want to find HR software that supports a robust, agile program.
— Diane Strohfus, Chief Human Resource Officer, BetterWorks
Provide Ongoing Feedback
Feedback is a natural choice to improve performance. However, it may be a cultural change if your business is not in the habit of sharing positive praise or lessons learned. One way to do this is to schedule weekly team or company meetings that highlight what’s going well and what’s not.
Managers can then follow up with individuals with team praise and recognition, as well as one-on-one with individuals who may need additional training, tools or resources to accomplish their work objectives. Positive feedback has been proven to improve performance. It’s common sense. If employees are praised when they do well, they’ll keep doing well.
[Tools like] TINYpulse Perform help make performance management stress-free for both manager and employee. Instead of big, heavy, annual reviews, TINYpulse makes it easy to do frequent, lighter-touch coaching.
— Andrew Sumitani, Marketing Director, TINYpulse
Give Real-time Recognition
Big companies spend lots of money coming up with ways to recognize employees as part of a formal performance management approach. However, as a small business, this can be as simple as a pat on the back or a shout out on social media. Providing recognition in both informal and formal ways helps all employees see what you value and inspires them to earn recognition as well. Some of the new employee engagement apps even allow peers to offer recognition to their team members so that it doesn’t all fall on your shoulders and can be done real-time.
Frequently Asked Questions (FAQs) About Performance Management
Where can I find examples of different performance management review templates using different rating scales?
FitSmallBusiness has an article that showcases different types of performance reviews, such as rating scales that use smiley faces and three-, four-, five- and 10-point rating scales so that you can choose the kind of ratings that you feel work best for your performance reviews.
Is it a good idea to have employees do their own appraisals first?
HR professionals generally agree that employees should have a say in the performance appraisal process. That’s because managers with many direct reports often forget about individual accomplishments. That’s why it’s often helpful to document employee progress toward goals on a more frequent basis than every quarter or 6 months.
Employees are in the best position to know what they’ve accomplished. However, some managers — generally untrained in performance management — prefer to maintain total control of the performance review. That’s a mistake that can easily demotivate employees.
What’s most often missed when setting up a performance management system?
The piece often missed in performance management is training managers on how to provide performance feedback in constructive ways that motivate the employee to perform. Often, performance management systems are rolled out by HR staff who may not realize how reluctant managers are to share “bad news” with their staff.
More businesses need to invest in communication and leadership training for their managers so that performance feedback is effective and not damaging to the business culture.
What cycle of performance management is best?
Newer research shows that more frequent performance reviews are better than annual reviews. For example, you might consider monthly reviews at the team level, with quarterly reviews at the annual level. The reason that larger companies tend to stick to an annual review cycle is that they tie annual salary increases to performance. That’s not a bad idea, but it’s also no reason to limit performance discussions to once a year. Your business should schedule performance reviews on any cycle that makes sense, such as one month after a new hire starts or immediately upon completion of a major project. The best performance review cycle is the one that matches your business cadence.
The Bottom Line
Performance management is important at companies of all shapes and sizes. People want to be engaged at their jobs, both with feedback and with the work they are doing. Having a performance management system in place allows you to make the most of the talent on your team.
For a low-cost, self-service HR software that includes the full suite of performance management tools including multirater 360-degree feedback for as low as $5 per month per employee, consider using the Enterprise version of Zoho People.