Module 3

PERFORMANCE MANAGEMENT
Introduction
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 here’s everything you need to know about it.
Definition of Performance Management
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.
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 employee 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.

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.

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:

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.

What is 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.

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.

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.
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.
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.

Goals of Performance Management

Performance management is about measuring, managing, and improving the contribution of the individual
to the organization.
In a classical study by Cleveland, Murphy & Williams (1989) that’s still relevant today, HR managers were
asked what their goals were for their performance management. Based on this data, the researchers ran a
factor-analysis and identified four factors, or goals, for performance management in these organizations.
1.Between-person applications. This includes evaluating the performance of employees, determining
compensation, promotions, raises, mutations, job rotations, and firing.
2.Within-person applications. This includes feedback on individual performance, assessment of weak and
strong points and further identification of training needs. These points of feedback enable the employee to
develop the specific skills required for the job and career advancement. 
3.Consolidate the global HR approach. Performance management is also used to identify a company-wide
HR approach, including strategic workforce planning, identification of company-wide training needs, and
the identification of a productive organizational climate.
4.Research purposes. Performance management can finally be used to validate selection choices and
evaluate training programs. An example is the quality of hire metric, which measures to what degree new
employees perform satisfactorily after joining the company. This is a key success metric for HR’s
recruitment activities.
How to do performance management 
There are many ways to conduct performance management. In literature, there are two approaches when
it comes to performance evaluation.
Behavioral approach: Employees are evaluated based on their behaviors and effort made. Behaviors are
identified and evaluated. This approach is suitable for giving detailed feedback on behaviors and by
mapping desirable future behaviors. This approach is suitable when individual results are hard to measure.
Examples include individual players in a team, support staff, and (oftentimes) HR professionals. 
Result-oriented approach: In this approach, employees are evaluated based on objective criteria. The
focus is not on input but output, both in terms of quality and quantity. This approach is suitable when
there are multiple ways to do the job. The end-result is key, not how it has been done. Examples include
call center employees who have specific success metrics, as well as sales professionals. The evaluation of
lawyers and accountants is also highly result-oriented, as they keep track of their billable hours.
A second element to focus on is extra-role behavior. These are the behaviors that go beyond the job
description. For more information about these, check our employee performance review template article.