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What are the key features in a performance management system?

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Performance management forms an essential part of every organization. It’s the process by which employers and employees can work alongside one another in an attempt to assess the performance of an individual employee. The benefit of this is clear; it allows managers to see how effective employees are, and how they can improve their contribution to the organization.

Performance management forms an essential part of every organization. It’s the process by which employers and employees can work alongside one another in an attempt to assess the performance of an individual employee. The benefit of this is clear; it allows managers to see how effective employees are, and how they can improve their contribution to the organization.

 

The key to performance management is that it’s an ongoing thing. You don’t just hold a performance appraisal every year, you continually look at things and assess goals, etc. To do this, you need a performance management system. These systems are primarily built to analyze employee performance and pick up on any problems. To get the most out of your system, it’s essential that it has the right features.

 

How to run effective performance management

The most effective way of running performance management is by implementing a system that provides you with as much relevant information as possible, without overloading you with things you don’t need. Some of the critical features of an effective performance management system include:

 

  • Setting clear goals: You need to be able to set clear goals for your employees and be able to establish timeframes for these goals. This allows you to communicate in a two-way process with each employee, setting the goals and reviewing their performance based on how the goals are achieved. It’s easy for them to see what they have to do, and it’s even easier for you to analyze their performance.

 

  • Providing constructive and positive feedback: There should be no such thing as ‘negative’ feedback in performance management systems. Telling someone, they’re doing a bad job won’t help anyone. Instead, when people aren’t up to scratch, you should provide constructive feedback through this system. Tell them what’s going wrong, and how they can improve to boost their performance. On the other hand, you should also praise employees when they do good work and achieve all their goals.

 

  • Identifying training opportunities: Another key feature in a performance management system is that you should identify any training opportunities for your employees. As you analyze their workflow, it can become apparent that someone lacks in one particular area, which you can provide training for. You flag this up, communicate with them, and set them up to go on a course where they can train and develop their skills. By being supportive of your employees, you end up making them better, and this benefits your company on the whole.

 

  • Show how each employee performs: Naturally, you need your system to paint a clear picture of how every employee is performing. When you look at your system, you should be able to focus on one individual and clearly see their performance trajectory. The benefit of this is that it can show you if someone is steadily improving, staying around about the same level, or declining. Therefore, you can decide on the next steps depending on their performance.

What are the theories related to performance appraisal?

Performance appraisal is slightly different to performance management in that it’s something that happens once every year. Employees are reviewed and rated depending on how well they performed in the last 12 months.

 

There are some theories surrounding performance appraisals that suggest they’re not as effective as they could be. The biggest one revolves around agency theory and performance appraisals. Agency theory refers to differences in how two parties think. In this scenario, it’s all about managers and employees possibly having different goals and motivations. There was a research paper published in 2017 that talked about how many managers conduct appraisal interviews with the mindset that their employees are only motivated by their own economic goals, rather than the shared goals of the company. Going into meetings with this negative mindset can lead to skewed performance ratings that don’t help anyone out.  

Is there more to performance management than just ratings?

For years, people stuck with the traditional appraisal method of handing out ratings to their employees. However, you can definitely see that there’s more to modern performance than just ratings. Giving someone a rating doesn’t help them improve, it just tells them that they’re either doing a good job, a bad job, or a mediocre job. With performance management systems, it’s all about analyzing their performance, ensuring employees are motivated by shared goals and helping your employees develop by providing actual feedback.

 

The future of performance management is definitely focused more on employee development, rather than this obsession with ratings. This is why it’s essential that you have a performance management system in place that includes the key features mentioned earlier. If you have the tools to accurately assess your employees, then it will benefit both your business and your team in the long-term.

Henrik Dannert

CEO

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