Performance management describes how you manage your employees’ work performance, with the process and tools you use to do this making up your performance management system. The goal of an effective performance management process is to engage employees and enable them to thrive and produce high-quality work.
There are many schools of thought on how to best achieve this result. A simplified approach is to set company goals and narrow them first to department-level goals and further to individual contributor goals. You’ll then need to evaluate your employees’ progress toward hitting those goals and provide feedback and tools to improve that progress.
1. Set Goals
To ensure your team performs at optimal levels, setting precise goals at the beginning is crucial. Without goals at every level, effective performance management fails. We recommend using a specific method to create these goals, known as the SMART approach:
This strategy will not only help focus your team members on strategic objectives for your business but will also help make your goals clear and attainable.
2. Review Performance
A performance review is a process of assessing an employee’s progress toward a stated goal and their successful completion of the goal. Only after you have created the goals for each employee can you review their performance.
Check out our performance review guide and download a free evaluation template if you’re not using performance management software.
Performance reviews generally occur at regular intervals throughout the year and often play a part in whether an employee gets promoted or receives a raise. To ensure that your performance reviews have structure and provide benefits to everyone involved, here are some suggestions of different types of systems to use. These systems are not mutually exclusive and can be combined to create an even more effective performance review system.
3. Improve Performance
The only way to improve the performance of an employee is to give them every chance of success. If you haven’t been clear about expectations and haven’t set measurable and achievable goals, reprimanding an employee for not meeting expectations will backfire.
We recommend a measured approach to improve employee performance. You should have a process outlined in your corporate handbook so your employees know what to expect, while also giving you a guide to follow.
Make sure to always start it out with a clear discussion. If you notice a problem with an employee, or if they come to you with an issue that may prevent them from meeting a deadline or otherwise completing a project on time, discuss it immediately. You may be able to offer guidance or make adjustments to a project that can help your employee achieve success.
How Performance Management Helps Your Business
When done correctly, performance management can help your business thrive by providing your employees with clear goals, addressing issues at the moment, and helping them flourish through effective performance improvement. A structured performance management system provides your company:
- Clear corporate, departmental, and individual goals
- A defined process to follow for holding employees accountable
- The ability to increase employee morale and engagement
- Objective views on both individual and team performance
Through a quality performance management system, you can increase employee engagement, which increases employee productivity and ultimately helps boost your company profits. This allows you to provide additional employee benefits, attracting more high-quality employees and further growing your company. It’s a cycle that keeps repeating, with performance management at the center of it all.
There are some potential legal issues with performance management systems, but it’s important to note that there is no federal law requiring private companies to provide employees with a review. While that may be the case, not doing so could have negative consequences for employee morale and engagement.
Besides that, it’s important to note that federal, state, and local laws do require you to not discriminate against anyone in the workplace. Title VII of the Civil Rights Act of 1964 prohibits discrimination based on an employee’s:
- National origin
Given that, your performance management system must adhere to these employment laws. Your performance management process cannot discriminate against any employee or violate any other employment laws and regulations. Having a structured policy and process can help you avoid legal issues and costly fines.
A top-notch performance management system proactively involves employees in the process. Starting with your corporate goals, you can track the required work down to the individual team member level, using a structured method that provides your employees with clear objectives showing them exactly how to succeed. Effective employee management is not coming down hard on your employees but rather giving them the tools and the insight they need to succeed.