Performance Management – Part I – An Overview

Every organization wants to do what they can to improve their success. A key part of this for any company is performance management. However, many companies simply are ineffective in their efforts. A Deloitte study found that 58% of companies have processes in place that make performance management an ineffective use of time.  

In this series, we will take a look at the current state of performance management, best practices, and potential future trends. Let’s begin with an overview of the issue.

What is Performance Management?

Like many concepts in organizational leadership, how performance management is conceptualized has shifted over time. Traditionally, performance management has been viewed as a periodic assessment process evaluating employee performance and success.

Recently, it has taken a more holistic view, denoting it as on ongoing process of communication between supervisors and employees. The process typically includes the following components, which tend to operate in a cyclical manner.

  • Setting expectations
  • Identifying goals & outcomes
  • Providing feedback
  • Reviewing results

Trends in Performance Management

When we think about performance management, many of our initial thoughts go towards getting our annual evaluation. While this is part of the process, it certainly should not be its entirety. Over the past few decades, the process has shifted to put more focus on the overall process.

Organizations have learned that a rigid, one-sided annual process is not particularly effective at motivating employees. Some of the major issues with the traditional way of doing evaluation include the following.

  • Unclear goals
  • Extensive time and resource commitment without results
  • Managers lack training
  • Managers & employees dislike the process
  • Pairing ratings with pay largely demotivates

Recent conceptualizations of performance management have shifted from a top-down HR driven process to one that puts the employee at the center. Employees are part of the goal setting process while managers are trained to provide feedback early and often. The goal is to better equip employees to succeed in their roles.

You may have heard the mantra that you should never include anything in a performance review that has not previously been discussed with an employee. This is centered upon the concept of frequent feedback. Employees value feedback in a frequent, structured manner.

However, the issue is not that simple. Many organizations still do not effectively provide feedback. One in five employees only receive performance feedback annually or less frequently. While this shows that there is still work to do, there is a clear trend in moving towards providing employees with near-instantaneous feedback.

It should not surprise people to learn that 81% of human resource leaders are making significant changes to the performance management process. Companies adopting a continuous feedback system tend to be more successful in outperforming their competitors and attracting and retaining top talent.  These are important considerations in today’s environment where talent is a top commodity.

As the performance management process continues to evolve, organizations clearly need to assess their current processes and determine what is needed to align them with best practices.