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How to implement an effective performance management system

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Last editedJan 20212 min read

How can you help employees realise their true potential on the job? A strong performance management process is a good start. Find new ways to motivate your workforce with our performance management tips.

What is performance management?

One of the highlights of performance management is an annual performance review for each employee. However, a strong performance management system takes this process a step further. It’s a continuous process of setting goals, monitoring progress, and developing employee skills. This is sometimes referred to as the performance management cycle, which we’ll look at in greater depth below.

The ultimate goal of performance management is to maximise employee value. By improving performance on an individual level, the whole team can be elevated together. Successful employee management involves a two-way conversation.

The performance management cycle starts with an organisation’s objectives and values. These are the ultimate goals that all team members should be working to support.

  1. Planning stage: At this stage of the performance management cycle, management and team members set objectives, agreeing on personal development plans to meet these goals.

  2. Acting stage: With clearly defined goals in mind, team members can achieve these objectives or carry out their intended roles.

  3. Track stage: Progress should be tracked along the way, with regular feedback to guide the employees. Performance management involves coaching to help overcome any obstacles as they’re happening, rather than after the fact.

  4. Review: Finally, managers can assess and discuss performance. They’ll find out what was learned during the process, along with career progression and next steps.

The cycle then repeats itself with a new set of goals or objectives. Historically, organisations focused almost entirely on the ‘review’ stage of the performance management cycle because this is linked to the annual assessment. However, by focusing more attention on the ‘act’ and ‘track’ stages you can often achieve stronger results. Communication is the key to success in performance management.

How to improve your performance management system

To implement the most effective performance management process for your business, here are a few tips to keep in mind.

1. Set realistic, meaningful goals.

Employees are more likely to succeed when they understand why they’ve been asked to do something. In addition to their daily roles, having a long-term objective can be motivating. Boost employee engagement by involving them directly in goal setting.

2. Don’t skimp on orientation.

Induction is the first contact that new team members have with your organisation. Employees should already have received clear information about expectations, but orientation gives them a chance to ask questions and learn more about company values. Without this foundation, they’re more likely to underperform or even leave within the first few months. 

3. Keep lines of communication open.

You can build a stronger company culture by fostering relationships between employees and management. Employees will feel more valued with regular communication, gaining a greater understanding of your organisation’s values.

4. Develop a recognition system.

Any performance management process should include a system of reward and recognition. Employees will feel more motivated when they know their work is appreciated, and a strong rewards system can decrease turnover.

5. Offer one-on-one feedback.

Apart from the annual performance review, work regular one-on-one feedback sessions into your schedule. Meeting face to face gives employees the chance to have a conversation about obstacles or triumphs on the job. You can also review employee objectives and discuss the need for further training.

6. Invest in development.

Your top talent won’t want to stay long if they have no room to grow. Be sure to offer a development program with workshops, upskilling courses, and the chance for advancement within the organisation.

Use the structure of the performance management cycle as a starting point for determining how best to support your employees. By going beyond the annual performance review, you’ll find new ways to achieve goals as a cohesive team.

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