Performance Management

The modern organization needs to manage its performance and the development of employees. The performance management is about setting the performance standards, monitoring the progress and building strong succession plans for the organization. The performance management provides the structured and formal feedback to managers and employees.

The performance management allows motivating employees and giving the development of the organization the direction. The goals and tasks of managers and employees should be aligned with the business strategy. HR is responsible for the development of the consistent and painless performance management system in the organization.

Purpose of the Performance Management

The organization uses the performance manage to ensure the same direction at all levels of the organization. The top management sets the business strategy and defines the strategic initiatives. The top management defines the desired steps to be taken during one year.

The performance management is not focused on measuring the standard performance resulting from the job description (other processes should be used for keeping the consistent and reliable output of any job). The performance management is focused on performing the strategic tasks of the organization. It is focused on the development of the key talents, top performers and successors. The process identifies the best potentials in the organization, and it differentiates them from the rest of the population.

The performance management system should be always aligned with the business strategy. Each organization has different priorities and needs. The performance appraisal process should be aligned with the priorities as the organization can highlight most essential values for the development.

Performance Management Overview: How does it work and links to other HR Processes
Performance Management Overview: How does it work and links to other HR Processes

The performance management system brings many benefits, but it can build a strong dissatisfaction when it is not used properly. The performance system should be as painless as possible, and outcomes have to be used for the development of employees and the organization.

The performance management has to be based on pretty straightforward principles. The system has to collect basic information about the performance of the individual, setting and evaluating the personal development plan and plans for next positions. Some employees can be identified as top performers, and they should see the consequence in their variable pay.

Some employees can be identified as high potential, and their base salary should be significantly increased. Some employees are identified as “development needed” and they should have their own plan for correction. This should be the main principle of the performance management.

The performance management has to be explainable in several words. Each employee has the right to understand the basic principles of the performance management system used in the organization. Many organizations use the normal distribution (or forced distribution) to rank employees and managers. The employees have to understand reasons to use the forced distribution, and they have to understand the consequences of ratings.

The system should be easy to use. The electronic and flexible system of performance management should be designed. The application has to be flexible as much as possible. The performance management is under a constant development, and forms are not the same each year. HR needs to add new sections, and it has to cancel sections, which are not longer needed.

HR has to make clear priorities about information collected. Sometimes, HR asks for many details. Managers want to finish the performance appraisals as soon as possible. Some employees like to receive the formal feedback at least once a year, but some employees do not see any consequences. HR has to set standards for each performance rating category. Some employees cannot expect much from Human Resources; some employees can go through intensive training sessions to speed up their career path in the organization.

HR should study best practices before coming with the new performance management system. Many studies are published about mistakes and errors in the performance management. Setting the efficient performance management for the organization is not an easy task.

HR Role in the Performance Management

The performance management system has to be well connected with other HR processes like the Compensation and Benefits, Talent Management and Training and Development. HR cannot run the performance appraisals without using the outcomes from discussions. The performance management process is expensive. Each manager has to prepare for the appraisal, and the discussion has to last at least one hour per employee. It is a massive loss of productivity if the results are not used.

The performance management system is a ongoing process. It consists from several sub-processes during the year:

  • Goal Setting Process
  • Personal Development Plan
  • Interim Performance Appraisal
  • Performance Appraisal
  • Succession Planning and Talent Management

The performance management has to be consistent with the business strategy, and most processes have to be managed top-down. Employees do like to receive the positive feedback, but they do not like the ranking. Many organizations use the normal distribution for the performance rating of employees. Managers have to be trained in providing the honest feedback about the performance of the employee. Managers have to be trained in the consequences management.

The role of HR in the PM is about making the process transparent, clear and consistent across the organization. The results of employees have to be comparable as the outputs can be used in other HR processes. The top management will not take HR proposals relevant if they do not trust the fairness and transparency of the performance appraisal process.

HR has to make the process as easy as possible. It has to focus on collecting the most valuable information. HR has to lead the development of the application for the performance management system as the data collection is run automatically.

The organization with the high performance corporate culture has to take care about the performance of employees. It has to provide the entire organization with global and unified goals. HR develops the performance management to increase productivity. The system helps to distribute the strategic goals through the company. The performance management has a positive impact on motivation of employees and identifies key talents and key gaps in the organization.

Business Performance Management and Performance of Employees

The modern organization building the sustainable competitive advantage cannot exist without the performance management. The business performance is not just about measuring processes; it is about measuring and monitoring employees, as well. The business performance management is a modern and extremely complex approach to manage the high performing organization.

The business performance management is based on selecting the most strategic goals and bringing the complex system to measure key performance indicators in chosen areas. The top managers do not focus on the daily operational management of the company; they focus on the strategic agenda of the organization. The top management discovers quickly the missing information about the performance and opinions of employees.

The business performance management is a set of managerial processes, and it spreads common goals of the organization and utilizes the monitoring tools for the performance of the business. The goal-setting process for employees is a powerful HR tool to accompany the business performance management.

Performance Management and Goal Setting Process

The goal-setting process has to be tightly connected with the business performance management. The goal-setting process makes sure, that each employee has goals in the organization. The process makes sure, that all goals are connected with the strategic agenda of the organization.

The goal-setting process is the excellent tool for the top management to spread vision and navigate employees. The employees are creative, and they can work unique solutions for the goals given to them.

The strategic agenda has to be a living agenda of the organization. The goals given to employees can make the agenda happen. The top management does not have to worry about the translation of the strategic agenda into daily activities. Managers and employees make the translation. The conflicts can be escalated, and the top management has to take the right decision to give the agenda the right way.

The top management has to focus on leadership and education of the line management. Top managers have to speak and explain the strategic agenda. They have to set expectations. They have to show the living examples in the organization.

Managers are smart, and they will set goals the right way. Top managers have to make a final check of selected samples of goals through the organization. They can be sure, that managers and employees will follow the strategic agenda.

Performance Management and Motivation

The employees are motivated when they see their real contribution to the results of the organization. Everyone wants to be connected with the successful projects. Everyone wants to be rewarded for successes. The performance management has a strong impact on motivation of employees.

The goal-setting process makes the link between the strategic agenda and goals visible. Employees can obtain a direct feedback from the manager about the results.

The efficient performance management makes employees interested in the company results. Employees are focused on the development of the entire organization. They want to know more about the sources of cash-flow in the company; they work on the daily improvements.

The performance appraisal is an essential feedback provided to employees; employees can think about the next challenging job in the company. The performance management supports the interest of employees.