The once-a-year performance review is over. Done. Companies are realizing effective performance management is an ongoing process. Why? It is one of the best ways to keep your employees engaged. When companies manage their employees’ goals, they improve their overall productivity. Employee productivity increases by 56% when managers are involved and help align goals to what the organization needs.

What is Performance Management?

Unlike an annual performance review, which only happens once a year, performance management is an ongoing, open conversation with your employees. The goal of performance management is to make sure your employees are performing at their best and to stay on top of any issues that might arise. You can’t do that with one conversation a year. Performance management is a process that involves several steps or stages and the backing of your entire company. The reward of implementing such a process is having employees who are highly-productive and loyal.

The Process of Managing Performance

The performance management process includes setting expectations, creating objectives, feedback, including 360-degree feedback, establishing goals and reviewing the progress of meeting those goals. It also gives employers the opportunity to reward its high achievers. The process includes several steps or stages.

  1. Plan. The planning stage is where you and your employees set goals. Goals should be challenging, rewarding, enthusiastic and daring. Talk to your employees about the workplace performance goals they wish to set. Make goals that include the employee, the department and the company. Remember to get to the “why” of the goals. Will they drive profits, boost egos or move the employees forward along their career paths? It is also important to align the goals with your company’s core competencies. Core competencies are the abilities and advantages of a company that separates it from the competition. An employee’s core competency goals fall along with lines of improving his or her behavioral, technical and leadership skills.
  2. Check In. Regular one-on-one meetings with your employees are an important part of the performance management process. In fact, 43% of highly-engaged employees receive feedback once a week. This stage gives you the opportunity to coach your employees to help them stay on track and tell them they’re doing a good job. Feedback is important for all employees. There are at least 15% lower turnover rates in companies that implement regular feedback. One-on-ones should be a two-way street where the manager asks the employees for their feedback.
  3. Review. Review your employees’ performance against the goals they’ve set. This is the stage where performance management software can make all the difference. Managers are able to access evaluations and goals to see who is exceeding expectations. Your workers can also view their progress as well as task lists and due dates.
  4. Measure. Once goals are reviewed, the next stage is measuring how efficiently the goals were met. Using performance management software, managers can look at completed task lists, track comments and view completion dates. Business performance management not only allows you to track individual goal performance but ensure those goals remain aligned with the company and create a strategy to fill any gaps. Taking all performance data into consideration, you can assign your employees an overall performance score, which can play a huge role in compensation management.
  5. Compensate. Once you’ve planned, monitored, reviewed and measured performance the last step of the process to determine if a reward or compensation is due. In general, people will work harder if they believe there are rewards for their efforts. Many companies tie performance to salaries, pay increases and bonuses. A compensation management system, synced with performance management, allows managers to automate increases and bonuses based on merit.

what is performance management

Improving Your Performance Management Process

A performance appraisal doesn’t exist in a bubble. There are times when the process will go smoothly and other times when it will be rocky. Implement these best practices to ensure your process is doing what it should.

Create an Outline: Create an outline before the planning stage. An outline for the first meeting informs both parties about what to expect. It also gives the employee a chance to think about the goals they want to develop and any questions to ask their managers.

Set a Plan of Action: Setting goals is only one part of managing performance. You need to create a plan of action to determine how those goals will be completed. Discuss specific next steps with your employees and make sure everyone on the same page before the meeting is over.

Set SMART Goals: Setting the goals with the SMART model is a great way to conduct two-way goal-setting between managers and employees. SMART goal-setting works well with both smart and long-term goals. SMART goals are Specific, Measurable, Achievable, Results-based and Time-bound.

  • Specific: Include dates, resources and/or dollar amounts you’ll need to accomplish them.
  • Measurable: Identify appropriate metrics so employees can track progress and measure success.
  • Achievable: Make them a stretch, but doable.
  • Results-based: Align with company strategy by relating to something that is necessary, of value and supports the company’s vision.
  • Time-bound: Determine a date, time-frame or scheduled completion of the goal.

Identify High Performers: It is vital to identify key players in your business and performance reviews are the vehicles to do that. During your performance management process, take the time to give bonuses, raises or even offer promotions to those workers who have been identified as high performing employees. A reward system for top employees is a key component in improving your business’s overall retention rate.

What makes a Performance Management Process Effective?

You can create the perfect performance management plan, ensuring it includes all five stages described above, but other factors need to be considered in order to make sure it is effective.

  • Enlist the support of senior management. As with any strategy, process or purchase, having the support of the executive team is essential to its success. Without buy-in from the top, your performance management process won’t succeed.
  • Be fair and unbiased. Not every employee/manager relationship is positive. The reality is some co-workers don’t get along. Using 360-feedback to gather multiple opinions about behavior helps the decision-making process come time for promotion or dismissal.
  • Strive to have frank discussions about performance. Performance reviews tend to get a bad rap from employees and managers alike. No one wants to hear bad news or give bad news. But even though conversations about performance need to be objective, they don’t have to be overly critical. Reviews shouldn’t be used to point fingers but instead be a frank discussion about the employees’ performance and abilities. It’s best if the critiques you make about performance can be measured or at least be as specific as possible. Consider these examples:

“You didn’t meet last month’s sales goal.”

“You passed on five customer complaints to other employees.”

“You lost your temper with another employee two months ago.”

Don’t “sugar coat” weaknesses with positives and keep any discussions about strengths separate to avoid confusion.

“You are a strong writer, but your customer emails always miss the mark.”

“I love your enthusiasm, but it can be distracting to your co-workers.”

  • Use performance management software. Great performance management software can make all the difference between an effective performance management process and one that just wastes your and your employees’ time.

Using Automation and HR Software

Arcoro’s Performance Management Software gives companies the ability to effectively implement and manage their performance processes. It provides the insight needed to make informed personnel decisions with robust reporting, real-time monitoring and time-saving automation.

First, it is cloud-based so it can be accessed from anywhere, essential for remote employees and those that work flexible hours. Secondly, it’s is entirely mobile-friendly. It can be accessed just as easily from a mobile device as a desktop. That means employees can fill out self-evaluation forms from the job site or a desk chair. Thirdly, it’s easy to implement. All of your employee data seamlessly transfers from your CoreHR into your Performance Management software.

The Arcoro system has tools and features that benefit both your managers and your employees.

For managers, there are tools to approve and manage employee goals, assign evaluations, add notes for your employees and see overall performance scores. These include:

  • One-click access to performance and goals
  • Current goals list
  • Configurable integration into a standard evaluation form
  • Automatic notifications and reminders
  • 360-degree feedback capabilities

For employees, a dashboard provides users access to track their own progress and see upcoming tasks and goals. The dashboard includes:

  • Progress tracking with steps
  • Alerts when a review needs an employee’s attention
  • Evaluation forms
  • An electronic sign-off

Arcoro’s Performance Management software works alongside Succession Planning and the Learning Management System for a complete employee development system.

Schedule time to talk with an Arcoro expert for free to learn about creating a culture of engagement and retain employees long-term.