Managing employee performance has become an increasingly popular topic in recent years. Large and small companies alike are taking a specific interest in measuring and improving productivity and performance. In fact, one-third of companies in the US have abandoned the traditional employee performance management models in favor of more modern systems.
Although the idea of throwing out old appraisal processes might seem alarming, a significant number of American businesses are doing just that. Performance statistics indicate that companies across the nation are switching from annual reviews to more frequent and informal check-ins. And it seems to be working.
In this article we discuss what employee performance management is, how it can help your business, metrics you should be tracking, and highlight eight ways to improve your day-to-day performance management.
What is employee performance management?
Effective employee performance management is essential to businesses as it helps them align their employees, resources, and systems to meet their objectives.
An ideal performance management system would see an organization create strategic metrics and targets that focus on everything from its top-level goals, down to the day-to-day actions of its employees. Managers monitor these metrics continuously and regularly engage with their teams to review their progress.
Once established, this system can be used as a dashboard, allowing managers to highlight where targets are being met and providing an early warning of potential problems. Good performance is rewarded and underperformance triggers processes to address the problem to get the business back on track.
Why is employee performance management important?
Continuous, effective employee performance management helps foster a company culture of open communication between employees, management, and the organization as a whole. This increases trust and ensures everyone feels valued, supported, and more engaged. Without this, employees are more likely to feel detached from their work and their role within the company, which is likely to result in a higher rate of employee turnover.
In a highly competitive job market, attracting and retaining talent is vital. Recent studies have discovered that companies with ongoing, real-time performance management programs are nearly 40 percent better at attracting top talent and 44 percent better at talent retention. This is because employees want to know where they stand within an organization and whether they are doing a good job. They want specific, timely, and useful feedback that helps them improve and fulfill their potential.
The traditional model of providing feedback through an annual review process is not functional anymore. An Adobe-conducted study revealed that a staggering 80 percent of employees would prefer immediate feedback over annual reviews. Feedback statistics show that employees feel much more positive about an immediate appraisal or criticism. They believe it improves their overall performance and productivity as it is beneficial to receive feedback on a particular behavior or action closer to the actual time of happening.
Benefits of an effective employee performance management strategy
The advantages of employee performance management include:
· Highlighting gaps in knowledge/experience and where corporate training is required
· Encouraging open channels of communication
· Boosting employee morale
· Improving productivity and performance
· Identifying the right employees for recognition, promotion, or transfer
· Guiding workforce planning, including delegation and workload management
· Increasing employee retention/reducing employee turnover
· Giving employees more autonomy to manage their responsibilities
· Reducing work-related stress for employees
Employee performance metrics
To measure the productivity and efficiency of your employees you need to define a set of employee performance metrics. The key performance indicators for employees that you should track can be split into four core categories:
Work quality metrics – These metrics reflect on the quality of an employee’s performance. The most commonly used metric is a subjective appraisal by their direct manager
Work quantity metrics - As quantity is often easier to measure than quality there are multiple ways to measure this employee KPI, though they will vary between industries. Some roles are more difficult to quantify, or not well suited for this method, but metrics can be adapted to suit.
Work efficiency metrics - There should always be a balance between quantity and quality. This balance is measured by work efficiency metrics which consider the resources (e.g. time and money: quantity) needed to produce a certain output (quality).
Organizational performance metrics - Organizations can also use employee performance metrics to assess their competitiveness. These metrics are generally used to assess the efficiency of an entire workforce, as opposed to individual employees, and be analyzed to compare with competitors.
Ways to improve employee performance management
The right set of metrics for any business depends on a host of factors, including its size, location, scope, growth characteristics, and whether it is a start-up or fully-fledged company. However, there are numerous common factors that every employer should consider when trying to improve their day-to-day employee performance management:
1. Set clear expectations
Start as you mean to go on by setting clear expectations from the very beginning. This means opening the discussion about employee performance management as early as during your recruitment interviews.
Set clear expectations about your team’s performance standard and how it translates for every employee based on their job description. Explain how you track specific metrics and other critical aspects that are best determined at the beginning of your working relationship.
Try not to concentrate solely on the issue of tracking and clarify why your business operates in this manner for their benefit. Respect your potential employees by encouraging them to express their own expectations. Different individuals will have different performance levels, habits, and needs which should align with the company culture.
2. Implement performance coaching
This relatively new technique for managing employee performance concentrates on the one-on-one relationships between employees and their direct supervisors.
Performance coaching involves a manager meeting with their employee on a regular basis, every week or two weeks, to discuss how they can improve their performance. It follows a four-step process: assessment, goal setting, action planning, and implementation. This should be an inclusive session where both parties are encouraged to give feedback and ask questions. The conversation should focus mainly on the present and the future, not on past actions or behaviors.
This individual attention caters to an employee’s needs, allowing them to significantly improve their skills and aptitudes, and, consequently, increase their performance.
3. Empower your employees
Continuous performance management should not equate to micromanagement. You don’t want to fall into a trap of tracking your employee’s every move and making them feel undervalued and untrustworthy. Performance management shouldn’t be a method of controlling your employees, it should be utilized to ensure they are performing to the best of their abilities.
If you allow your employees more autonomy, while providing the right tools and resources, you will empower them to push their own limits and become more productive. Employee empowerment can instill greater trust in leadership, encourage employee motivation, lead to greater creativity, and improve employee retention.
4. Encourage feedback
A recent survey concluded that 96 percent of employees consider regular feedback as a positive thing.
You should give and ask for constructive feedback every step of the way. Offering and receiving criticism isn’t always easy, and may at times be uncomfortable, however, it is an essential part of the process. It will help you to stay ahead of important performance drivers such as engagement, motivation, and development.
Addressing issues that may often go ignored will promote an open, honest, company culture where employees feel able to speak up without fear of repercussion. Over time, this will ensure long-term performance and productivity and it will create a healthy working environment. It can be easy t forget that the little things do matter and every small concern left unsolved can become a critical disengagement factor that leads to poor performance.
5. Set goals
Working without clearly defined goals that can be easily tracked and evaluated is a formula for disaster when it comes to employee performance. You need to start with the end in mind. This applies to both an employee’s career path as well as to the overall business planning process.
Set clear performance milestones for your employees as well as broader team milestones and check them regularly. Consistency is key if you want your employee performance management to be effective.
Selecting the right targets for your employees isn’t always simple. If they are too easy, they won’t improve performance. If they are out of reach, people won’t even try to hit them, or they will fail which affects morale. The best goals are attainable but challenging. Be prepared to adapt based on experience.
TIP: Talk to your teams. Employees who set their own goals tend to have a greater sense of ownership for and commitment to achieving them than do those whose goals are simply imposed upon them from above.
6. Create a performance measurement system
Sometimes, you can be so busy concentrating on the finishing line that when you reach it, you forget how you got there, leaving you with no data to review when you want to develop a more efficient performance strategy. This can easily happen when you only measure performance at the end of the year when you’re distracted by plans for the new year or next year’s budget.
Effective performance measurement is the key to effective management in any organization. Adopt or create a performance measurement system that works well for you and your team and stick to it.
Benefits from an effective performance measurement system include the following:
Enhanced decision-making and control - It is difficult to make the right decisions without a good understanding of an organization’s performance. A performance measurement system means that decision support can be enhanced at all levels. This ranges from decisions concerning employee performance to strategic decision-making at board level.
Supported strategic planning and target setting - The ability to measure performance and progress gives meaning to the process of developing strategic plans and targets. An effective performance measurement system should emphasize the link from the corporate level to management and operational levels. In this way, decision-making and resulting actions are in line with strategy.
Improved communication - Involvement in setting goals can enhance employee understanding and support of strategies and decisions. It also provides a common language that encourages inter-departmental knowledge sharing.
Accountability - A performance measurement system gives decision-makers a significant tool to achieve accountability.
7. Adapt and adjust
Your business is changing all the time, as is the world in which it operates, you need to be agile and learn to adapt. You may have implemented an employee performance management strategy a year ago that may not be working so well for your current needs.
If you don’t monitor and modify your performance levels will slowly diminish. Push for organizational innovation, using internal ideas and suggestions; listening to employees, getting feedback, and committing to the improvement ideas that arise. Always try to be one step ahead and use your current performance results and the feedback received to adapt your system moving forwards.
Employees have to believe their targets encourage meaningful achievement. All too often the link between individual effort and company objectives can be obscured or diluted as metrics cascade through the organization. This can result in disgruntled workers who are likely to disengage.
Remind your employees how each of their actions influence the overall project or team objectives. Connect them with your company’s business objectives and you will be able to get a clearer perspective on what your performance levels should be and why.
Never gloss over the “why.” People are not robots, they have ambitions, aspirations, and opinions. Not having a clear perspective on their actions and the related impact affects their performance negatively.
Managing employee performance – a conclusion
Effective employee performance management can be beneficial for both the organization and the employee. It is important to take the time to find out what they key performance drivers in your team are and how you can manage them to get optimum results.
If you consider the above factors; setting clear expectations and goals, empowering your employees, accumulating feedback, whilst creating an adaptable system that suits your business, your day-to-day employee performance management should improve dramatically.