PERFORMANCE MANAGEMENT

What Is Performance
Management? Definition,
Process, Cycle, and Best
Practices for Planning
 Puja Lalwani June 12, 2020   

Performance management is defined as the process of continuous

communication and feedback between a manager and employee
towards the achievement of organizational objectives.

Traditionally, performance management has been a forward-looking solution

based entirely on hindsight. But organizational culture is evolving to one of
continuous feedback powered by technology, where managers can foresee
problems based on current employee performance and initiate any form of
course correction to bring the employee back on track.
In this article, we offer clear insights into what performance management is,
the performance management cycle and best practices, the features of an
effective performance management software, and the future of performance
management.
Table of Contents
 What Is Performance Management?
 The Performance Management Cycle
 How to Improve the Performance Management Process
 The Era of Automated Performance Management
 Which Performance Management Processes Cannot Be Automated?
 Performance Management Best Practices

What Is Performance Management?

Performance management is the process of continuous feedback and
communication between managers and their employees to ensure the
achievement of the strategic objectives of the organization.
The definition of performance management has evolved since it first appeared
as a concept. What was once an annual process is now transitioning to
continuous performance management. The goal is to ensure that employees
are performing efficiently throughout the year, and in the process, address any
issues that may arise along the way that affect employee performance.
“Most workers perceive their organization’s performance management
approach as confusing, subjective, and infrequent,” said Kathi Enderes (vice
president, Talent, and Workforce Research Leader) and Matthew
Shannon (senior research analyst) at Bersin, Deloitte Consulting LLP, in an
exclusive with HR Technologist.
This is the current state of performance management. However, it doesn’t
have to be that way. Automation now plays a significant role in performance
management, and many of the processes involved can be streamlined so that
employee performance can be strategically managed. This is the age
of continuous performance management, and heres everything you need to
know about it.
Performance management differs from talent management in that the latter is
a set of initiatives taken to engage employees to retain them. Performance
management, on the other hand, is an initiative that guides employees
towards establishing and achieving their goals in alignment with the
organization’s immediate and overarching goals.

Why is performance management important?

1. Performance management supplements the annual performance
review. This prepares both employees and managers about what to expect
during the annual appraisal. It keeps both the manager and the employee in
the loop about ongoing changes to the performance management process,
what both can do to streamline it, and how performance overall can be
improved.
2. To employees, continuous performance management indicates that
managers value them. Employees believe that their managers are interested
in their work and care about their goals and any issues they may face in the
course of their job. They also become more open to receiving constructive
feedback.

The Performance Management Cycle

The performance management process or cycle is a series of five key steps.
These steps are imperative, regardless of how often you review employee
performance.

1. Planning
This stage entails setting employees’ goals and communicating these goals
with them. While these goals should be disclosed in the job description to
attract quality candidates, they should be communicated once again when the
candidate becomes a new hire. Depending on the performance management
process in your organization, you may want to assign a percentage to each of
these goals to be able to evaluate their achievement.

2. Monitoring
In this phase, managers are required to monitor the employees performance
on the goal. This is where continuous performance management comes into
the picture. With the right performance management software, you can track
your teams performance in real-time and modify and correct course whenever
required.

3. Developing
This phase includes using the data obtained during the monitoring phase to
improve the performance of employees. It may require suggesting refresher
courses, providing an assignment that helps them improve their knowledge
and performance on the job, or altering the course of employee development
to enhance performance or sustain excellence.

4. Rating
Each employees performance must be rated periodically and then at the time
of the performance appraisal. Ratings are essential to identify the state of
employee performance and implement changes accordingly. Both peers and
managers can provide these ratings for 360-degree feedback.

5. Rewarding
Recognizing and rewarding good performance is essential to the performance
management process, as well as an important part of employee engagement.
You can do this with a simple thank you, social recognition, or a full-scale
employee rewards program that regularly recognizes and rewards excellent
performance in the organization.

How to Improve the Performance

Management Process
To improve the performance management process, ask the following
questions:

1. What does your workforce want from performance

management?
A performance management program can either help or hinder your
workforce. However, before you can make any practical changes to your
current processes and tools, you need to understand what isnt working and
why. You also need to take the time to evaluate what your employees want
out of a performance management program.
During this evaluation, there’s nothing more important than talking to your
people. Your employees and managers likely have some strong opinions that
they’ll be more than happy to share with you. You might be surprised how
many of them crave an improved process.
The next step is to convey your findings to decision-makers who can sponsor
and drive change in your organization. Share your internal findings as well as
evidence-based research from experts that show the impact that an improved
performance process can have on business results.
Learn more: 3 Effective Ways to Create a Non-Toxic High-Performance
Culture at Work

2. Do you deliver continuous performance

management?
Employers want their employees to be happy. But happiness isnt necessarily
what people want from their employers. Instead, employees want to feel
motivated and understand that their work matters and why. A performance
management experience that delivers value to employees should focus on
increasing motivation.
To drive motivation, a performance management process must include
frequent, ongoing conversations between employees and managers so that
goals, progress, and personal achievement remain relevant and top-of-mind.
The content of these conversations is just as relevant as their frequency.
Motivation is tied to a future-focused outlook focused on developmental
opportunities. Managers must authentically engage with employees about
their career success, goal achievement, and alignment of their work to the
organization’s top priorities.
To be successful, these frequent conversations should be lightweight and
include future-oriented questions for employees such as: What motivates you?
What’s helping you? What do you need? And HR can support this by coaching
managers in giving more productive, proactive feedback, as well as asking the
right questions.

3. Do managers have the tools to manage the

performance management process?
Managers are critical to the success of your organization’s performance
management program. They play an outsized role in motivating, engaging,
and developing staff. This makes it essential to ensure managers are trained
to give and receive useful feedback and are coached in the elements of a
continuous process.
Take time to meet with managers and train them on your talent management
practices so that everyone feels comfortable having frequent, lightweight
conversations.
Finally, having the right technology in place to support continuous
performance management is essential. You need HR technology explicitly
designed to help managers and the organization in a continuous process.

The Era of Automated Performance

Management
Performance management is not just a matter for HR. It is the concern of all
leadership levels in an organization. However, Organizations are often left
wondering if investments in technology will actually lead to improvements,
says Deloittes Performance management Solutions: Market Primer.
Should you invest in performance management software?
Investments in technology will lead to improvements only when there is a
specific performance management strategy in place. Without one, an
automated solution can only overburden a manager.
Enderes and Shannon believe that: “When no strategic vision is in place, an
organization might fall back on merely automating existing processes, missing
out on the transformational power of technology. This typically results in a lack
of adoption by the workforce and leadership, which in turn will result in a lack
of business outcomes.
Every employee (including top leadership) is a stakeholder who will benefit
from the organization-wide implementation of an automated performance
management system. However, they must be aware of the goals they aim to
achieve through performance management. Performance management
data can offer unique insights that no amount of manual tracking or surveys
can offer.
Lets move on to what features an ideal performance management software
(PMS) should contain.
Learn More: What is HRIS? System, Model and Application

Key features of effective performance

management software
Any software should be chosen with the following considerations in mind:
 Customization: It should be customizable to suit your organizations
industry and performance management strategy.
 Transparency: It should be able to eliminate the confusion that both
managers and their teams experience in the process of performance
management.
 Objectivity: It should be able to offer objective metrics on which
managers can base their performance evaluation.
 Frequency: It should allow for real-time, instant feedback and
periodic employee ratings.
Based on these considerations, the ideal performance management tool will
have at least the following features:
Fig 1. The 10 key features of performance management software
1. Dynamic goal-setting: The employees goals should be aligned with the
organizations goals. The solution should allow the option to change the goal
as and when needed.
2. Communication on the fly: A good performance management solution
provides interaction between team members and managers effortlessly at any
time with an in-built chat feature. A quick chat with team members or
managers can keep communication transparent and effortless.
3. Scheduling tools: It should allow scheduling for team members to
complete tasks, plan meetings, and collaborate with other team members.
This works as an excellent tool for employees who work out on the field or
remotely.
4. Continuous performance evaluation: Managers should be able to set up
automated self-assessment and general evaluation questionnaires delivered
in the flow of work through the PMS. This gives managers a clear view of how
employees perceive their performance on the job and whether they are on
track to achieve their and the organizations goals.
5. Recognition tool: The PMS should have a platform where managers can
shout out to their team members for doing well. Further integration with an
email to give direct, instant feedback is another great feature that can motivate
employees and enable positive employee engagement.
6. 360-degree feedback: Feedback from multiple sources or 360-degree
feedback is essential for effective performance management. It significantly
reduces the bias that can arise from the evaluation of an employee by just one
person. The tool should be able to offer the option of feedback collection from
team members, reporting managers, reports, and peers from other teams.
7. Project performance tracking tools: It should offer tools such as
timesheets that help track how employees use their time, and whether their
input matches the expected output and outcome.
Artificial intelligence-powered tools use features such as advanced natural
language processing, which track project-related keywords through email and
other communication to gauge progress on a project. These tools can enable
more objective performance evaluations.
8. Performance comparison: Managers should be able to track the
performance of all employees in their team or those assigned to a specific
project. The tool should go further and be able to generate a performance
report automatically, providing data on the metrics you have customized it to
evaluate.
9. Automated reminders and notifications: A gentle nudge to
employees/managers to remind them of deadlines, notifications that indicate
progress on a particular project, and general updates to changes in the
process can improve an employees experience with performance
management.
10. Data security: This level of granular data about individual employees
should be safeguarded with a robust firewall in place. Always ensure that any
tool you shortlist offers a robust data security and protection feature.
Whats critical in the implementation of a performance management system is
that both managers and employees are trained to use the system for
maximum efficiency. Choose a PMS from a vendor who offers ongoing
support and helps both managers and their team members use the software
optimally.
Learn More: What is Human Capital Management (HCM)? Definition, Process
and Strategy

Which Performance Management

Processes Cannot Be Automated?
Performance management is a people-oriented process. A technological
performance management solution cannot have the sometimes-necessary
difficult conversations for managers. That is the one thing that managers need
to take ownership of.
While feedback conversations are often difficult, when supplemented with
objective data supplied by performance management systems, they can turn
into honest discussions and coaching sessions. This data can also help
eliminate implicit bias, so employees know that they are being assessed
objectively.
Learn More: 5 Ways to Improve Your Performance Management System

Performance Management Best

Practices
The only way to ensure the success of performance management is to treat it
like a continuously evolving, fluid process by three best practices.
Fig 2. Best Practices for Effective Performance Management

1. A well-designed performance management strategy

Some of the key questions that a well-designed performance management
plan will answer are:
 How often will employee performance be evaluated weekly, monthly,
or quarterly?
 What systems are in place for this evaluation sentiment analysis
trackers, automated pulse surveys, one-on-one meetings?
 What approach will a feedback conversation follow?
  What will the post-feedback approach and evaluation system be?
To this, Enderes and Shannon add, Small bite-sized feedback that is provided
by the people closest to the work, in the flow of work, and with actionable input
helps make steady improvements and enables learning in the flow of work.
This again is made possible by using an automated performance
management tool that allows you to set goals, modify them, and communicate
changes on the go. No unnecessary meetings are required, and employees
can modify their work plan and strategy as per the goals you assign.

2. A culture of open and effective communication

Continuous monitoring can help initiate conversations about employee issues.
A negative sentiment or the poor performance of an employee can be
addressed only when communication is open and transparent in an
organization.
A culture of communication is an organization-wide responsibility, starting
from top leadership and trickling down to all departments. Managers will adopt
this culture and deliver honest feedback to employees, allow employees to be
honest, and use that information to help them.
A culture of communication is also developed by hiring people managers who
are skilled in delivering both positive and constructive feedback managers
who motivate employees but also hold them accountable for their work.
Transparent communication also includes:
 Sharing with the employee exactly what is expected of them.
 Coaching employees to reach their maximum potential through
actionable goals.
 Giving them actionable, not generic, feedback.
 Revealing the rewards in place for successful goal achievement.

3. Continuous monitoring
This may sound more like a Big Brother form of monitoring an employees
every move and action, but that is the exact opposite of efficient performance
management.
In the HR context, this involves tracking employees’ progress in real-time and
monitoring the output and outcomes an employee delivers. Also, by keeping
an eye on employee sentiment, through observation, interactions, as well as
with the help of sentiment analysis tools, managers can assess the general
mood of their teams. This allows them to address the specific problem at hand
as soon as a problem occurs.
With the tech tools available, as discussed in detail later, continuous
monitoring at a granular level is now a much easier task. And with the
objective data an automated performance management software can reveal, it
is easier to start conversations with employees.
To enable all these elements of a successful performance management
strategy, there is a host of automated performance management systems to
choose from. These solutions can simplify several operations that traditionally
relied on manual processes as well as monitoring and feedback delivery.
Learn More: What is People Management? Complete Process with Best
Practices

What Is the Future of Performance

Management?
As a practice, performance management is converging with learning,
engagement and career management, reveal Enderes and Shannon.

1. Annual performance management is going out of style

Interestingly, as the concept of performance management evolves, so do the
practices associated with it. For instance, several organizations such as
Netflix have entirely abandoned annual performance management practices
for what they call fluid performance management, a more agile, continuous
approach to managing performance.

2. One-on-one feedback is gaining importance

It must be emphasized that the replacement of annual for fluid performance
management does not eliminate the need for one-on-one feedback. In fact, it
reinforces the importance of regular feedback to ensure that employees work
is aligned with the organizations objective. And if necessary, managers can
coach their employees and tweak the workflow to facilitate the achievement of
goals.

3. Performance management tech is becoming more

mainstream
From a technology perspective, we expect smart machines, cognitive and
artificial intelligence to become more prevalent including capabilities that can
actively recommend performance actions and engagement suggestions to
better meet individual goals. We also foresee a much more advanced use of
capabilities that offer a user experience that is seamless rather than disparate
systems building performance activities into the systems where work actually
happens, say Enderes and Shannon.
With these insights, the key takeaway for HR teams is clear. The alignment of
an effective performance management system with managers who have the
people skills to deliver feedback regularly can result in a highly motivated
workforce, not to mention, translate into improved business outcomes.