Historically, performance management worked like this: an employee would annually sit down with their manager (having first completed an appraisal form) in a process often rushed and with one eye on the clock. Although this routine is still performed in some organisations, it’s not performance management.
ACAS defines performance management as ‘A continuous process’ that ensures the performance of employees contributes to the business’s goals; to continuously improve the performance of individuals and that of the organisation.
Performance management involves the perpetual process of setting goals and objectives and noting performance while giving and receiving ongoing coaching and feedback. Effective performance management contributes to a business’s success. Equally, if it’s ineffective, it will negatively impact it.
“Employees who receive ongoing feedback about their performance are more motivated to perform well in the future”
Ten ways your business can benefit
- Increased performance motivation
Employees who receive ongoing feedback about their performance will be more motivated to perform well in the future. This also increases the likelihood they will stay with an organisation. - Increased self-esteem
There’s a basic human need to be recognised and valued at work. - Insight
Managers gain a better understanding of each employee’s contribution to the business. - A sense of purpose
Employees better understand what’s expected of them and what it takes to be a successful performer (i.e., the criteria that define their role and its success). - Fairer/more appropriate administrative actions
A performance management system provides valid information that can be used to manage bonuses, promotions, transfers and terminations. - Clear goals
The team’s and the business’s goals are made clear, and employees understand the link between what they do and the company’s success. - Increased competence
An effective performance management system doesn’t just improve an employee’s performance; it sets a solid foundation. This allows them to grow and become more successful by establishing development plans. - Misconduct is reduced
A good performance management system provides an appropriate framework so employee misconduct is clearly defined and identified early – before it leads to disciplinary action. - Employee claims
Data collected through a performance management system can help employers document compliance in adopting fair and reasonable procedures and treating employees well. This can stand you in good stead when facing a claim. - Performance clarity
A performance management system allows businesses to quickly identify good and poor performers, forcing line managers to promptly address performance problems.
Putting your performance management system together
Set clear expectations
Employees should never be left thinking, ‘what’s expected of me?’. If no standard has been set, they won’t be able to meet it. This often derives from a lack of communication, so always ensure you clearly explain expectations, check an employee’s understanding, and challenge any assumptions.
Regular feedback
Managers who excel at managing performance do not wait until the annual appraisal to discuss an employee’s record. This should happen on a regular and informal basis. Formal meetings should also be held to confirm and record discussions that have taken place throughout the year. That way, there are no surprises later.
Support and develop
It is little use pointing out where someone is falling short without discussing a plan of action that addresses the issue(s). Effective performance management is about supporting employees to reach their full potential. This could come from mentoring, coaching, training, seminars or other development activities. Employees who perform well need some incentive to continue doing so.
“A performance management system allows businesses to quickly identify good and poor performers”
In short:
- A well-thought-through performance management system can benefit your business.
- If people have a sense of purpose, they’re more likely to stay with the company.
- It’s easier for employees to reach targets when they clearly know what’s expected of them.
- If employees are performing well, they should be incentivised to keep doing so.
As a starting point, ACAS has produced a helpful advisory booklet which sets out the performance cycle ‘How to manage performance’. Of course, performance management is not a cure. You must also give attention to the recruitment process at the outset, as well as implement any capability or disciplinary procedure in a timely way when an employee is identified as a poor performer (despite effective performance management being in place).
With the right resources, a performance management system can help turn your business around. The best part is, it can be implemented in any company, no matter the size, so both employees and employers can start reaping the benefits.
Note: This is not legal advice; it provides information of general interest about current legal issues.