Performance management is one of the most critical responsibilities of any manager or HR professional. Done right, it aligns employee goals with organizational objectives, motivates employees, boosts engagement and productivity, and drives both individual and company success. Done poorly, it can demoralize staff, kill creativity, and drag down results.
So how can you get performance management right? Read on for a complete guide covering the what, why, and how of effective performance management. You’ll walk away with actionable strategies to set goals, give feedback, conduct reviews, and more—all while creating a high-performing yet human-centric work culture. Let’s dive in!
Defining Performance Management
Performance management is the process of setting goals, assessing progress, and providing ongoing coaching and feedback to help employees maximize their productivity and achievement. It involves:
- Establishing clear expectations through goal-setting
- Monitoring employee performance and progress
- Providing regular coaching and feedback
- Conducting formal performance reviews
- Linking performance to compensation and rewards
- Identifying training and development opportunities
- Addressing underperformance quickly and fairly
Done right, performance management is a year-round, collaborative process focused on fueling employee growth and aligning individual accomplishments with company objectives.
Why Performance Management Matters
Many managers see performance management as a bureaucratic box to check. But a thoughtful program provides immense value—for both employees and organizations. Benefits include:
- Increased productivity. Aligning employee goals with company goals and providing regular feedback on progress focuses everyone’s efforts on the right activities. This drives higher productivity.
- Improved engagement. Ongoing coaching shows employees their work matters and helps them feel invested in the organization’s mission. This improves engagement and retention.
- Greater development. Performance conversations highlight skills gaps and strengths employees can build on through training and stretch assignments. This facilitates professional growth.
- Better alignment. Open communication ensures everyone understands key objectives and how their efforts ladder up to organizational success. This strategic alignment empowers employees.
- Higher achievement. Setting clear goals and expectations, coupled with support to reach them, inspires employees to deliver their best work. This fosters individual and company success.
- Fairer compensation. Documenting performance provides objective metrics to base salary increases, bonuses, and other rewards on, ensuring pay is equitable and performance-based.
For these reasons and more, prioritizing performance management should be a top priority for every HR and people leader.
Performance Management Best Practices
How can you build an effective yet employee-friendly performance management program? Follow these best practices:
Set Inspiring GoalsGoal-setting kickstarts the performance management process. Make sure all employees have SMART goals that are:
- Specific and concrete
- Measurable with clear expectations
- Achievable but challenging
- Relevant to the employee’s role and growth
- Timebound with delivery dates
Goals should tie to company objectives but leave room for employees to get creative. Allow staff to give input and collaborate on goal-setting since involvement breeds commitment. Revisit goals quarterly to refine them as priorities shift.
SMART goals inspire employees to bring their best by providing clarity while stretching their capabilities.
Give Regular Feedback
Don’t wait for formal reviews to provide feedback. The best managers give regular coaching tied to goals and expectations. Monthly one-on-ones are ideal for:
- Recognizing wins and progress
- Identifying potential roadblocks early
- Course-correcting tactfully
- Offering development suggestions
- Realigning on priorities
Feedback shouldn’t just be top-down. Solicit employee input to understand their perspective. Make conversations a two-way street. Be consistent with informal feedback, and you’ll avoid “surprises” at review time. Employees will feel supported in reaching their full potential.
Check in With AI
AI-powered tools like meeting assistants, feedback aggregators, and performance analysis dashboards are invaluable for gathering employee feedback efficiently. Solutions like Supernormal use advanced natural language processing to automatically document and analyze conversations. This gives managers comprehensive data to guide coaching while saving hours of manual note-taking and review.
Leverage AI to supplement (not replace) human connection. It makes giving regular feedback scalable.
Conduct Thoughtful Reviews
While informal feedback should happen year-round, annual or biannual reviews are still important. A thoughtful process includes:
- A self-review to reflect on accomplishments, challenges, and goals
- 360-degree feedback from peers to reduce bias
- A manager review synthesizing performance across the period
- A live discussion allowing for dialogue
- An emphasis on development with coaching for improvement
- Fair ratings tied to clear criteria
- An opportunity for employees to share feedback on management
Tightly link reviews to compensation decisions, promotions, or disciplinary actions. Be transparent about how ratings connect to outcomes. Emphasize two-way communication, not top-down judgment.
Reviews done right align on successes, improvement areas, and future goals. They should energize, not deflate.
Address Underperformance Quickly
Even stellar employees have occasional dips in productivity or conduct. When underperformance persists, address it swiftly and constructively by:
- Outlining the performance gap objectively
- Exploring causes and showing empathy
- Setting expectations for improvement
- Providing coaching/resources to meet goals
- Agreeing on follow-up check-ins and consequences
- Moving to discipline if concerns continue after a reasonable time period
The key is addressing issues promptly rather than allowing problems to fester. Employees deserve direct but compassionate correction to get back on track.
Connect Recognition to Values
Link informal and formal recognition programs to company values and goals. For example, call out an employee demonstrating great teamwork or creativity. Recognition is most meaningful when tied to behaviors you want to cultivate.
Make recognition public when appropriate, and keep programs equitable. All employees should be eligible for kudos aligned to their role and goals. Reinforce great work frequently and sincerely.
Invest in Development
Careers stagnate without growth. Use performance conversations to ask employees about their skills gaps, interests, and aspirations. Then provide development opportunities like:
- Mentorship or coaching
- Job shadowing
- Training programs
- Tuition reimbursement
- Stretch assignments
- Increased responsibilities
This shows the company is invested in each employee’s continuous growth. It also builds the talent pipeline your organization needs to execute its strategy. Make learning a priority.
Take a Human-Centered Approach
Bureaucracy kills engagement. While documentation and structure have a place in performance management, make the human element central:
- Have frequent informal chats in addition to formal meetings
- Get to know employees’ needs, challenges, and aspirations
- Offer empathy and support when giving constructive feedback
- Allow employees to give anonymous input on what’s working and what’s not
- Continuously improve the performance management process based on feedback
- Keep scoring simple and minimize complex criteria
Programs perceived as checking boxes or forcing ratings feel demotivating. Prioritize helpful conversations over rigid processes. Employees will share more and perform better when they feel respected, heard, and cared for.
Make It Ongoing
Performance management shouldn’t be a one-time annual event. The best programs:
- Establish expectations upfront
- Revisit goals quarterly
- Provide monthly coaching
- Deliver real-time feedback regularly
- Link development to growth needs continuously
- Conduct fair reviews biannually
- Address problems ASAP
By making performance management an ongoing cycle, employees stay aligned and engaged. They don’t feel judged during reviews since there are no surprises.
A thoughtful program aligned to organizational objectives makes performance management a driver of employee fulfillment and business success. It’s a critical investment for every company’s long-term health.
Bringing It All Together
Performance management done right is strategic, collaborative, development-focused, and human-centered. It aligns employee growth with company goals while making people feel valued, invested, and supported.
Achieving this requires moving beyond bureaucracy to culture. Look at performance management as fuel for employee potential and organizational progress—not just a box to check.
With clear expectations, constructive coaching, and open communication, performance management can motivate staff and accelerate results in 2023. It all comes down to supporting your employees so they can do their best work in service of shared objectives.
When you get performance management right, employees win, organizations win, and amazing things happen. The payoff is well worth the investment of time and intention.