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What Is The Most Important Step When Managing Performance?

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Businesses are often compared to machinery, with the employees playing the vital role of the cogs that ensure the business is able to operate smoothly. While not the most perfect of metaphors, the concept of cogs is useful when considering the importance of performance management systems to a business. 

Why are performance management systems important?

 

Without a reliable performance management system, the performance of each cog can be compromised - but not severely enough to grind the whole system to a halt. A cog can judder, squeak, and struggle to turn comfortably; it’s only just about coping, but often, the overall machinery has no way of knowing this. Over time, the cog will become more and more stressed, and may ultimately break completely - in a real business, reaching this stage would mean an employee struggles so much, they ultimately have to leave the company. 

 

 However, with good performance management, the individual cogs are able to keep turning smoothly. Problems can be identified and rectified before they compromise the employee’s well-being or the overall business operations. The cogs are thus well-oiled, more effective, and thus able to help contribute to the wider goals of the overall machine. In terms of a real business, this means you will enjoy happier employees, high levels of staff retention, and a business that runs smoothly and comfortably. 

 

Employee performance management really is a necessity for a successful business. To address this requirement, any modern business needs to ensure they have a capable, competent, and correctly-focused performance management system in place.

 

How do performance management systems work?

 

Performance management systems collect data on each individual employee, and create metrics by which an employee’s performance can be evaluated. This will involve elements such as: 

 

  • Goal setting
  • Monthly objectives
  • Competence evaluations 
  • Sales monitoring…
  • … and similar areas. 

 

Performance management systems should evaluate the individual employee, their department, and the overall role in the performance of the business. To return to the earlier metaphor, performance management systems should evaluate the cog as it is today, what the cog should be doing in the future, and how the performance of the cog impacts the overall business. 

 

Why do performance management systems fail? 

 

Performance management systems can fail for a number of reasons, including: 

 

  • Lack of goal setting. For a performance management system to truly be beneficial to a business, there have to be goals and milestones to measure progress against. Without these, performance management data is largely irrelevant, as it does not have a relevant data point to match against.
  • Recency bias. Recency bias occurs when only the most recent performance aspects of an employee are considered during a review. This can paint an unfair picture; for example, if an employee has worked hard for 10 months and then experienced a difficult two months to finish the year, a recency bias can paint a picture that suggests the employee is constantly struggling, when they actually have performed extremely well over 12 months. Recency bias can make employees feel resentful as it is not truly reflective of their abilities.
  • Reliance on annual performance reviews. An annual performance review may be a business standard, but it is incredibly inefficient. If an employee is struggling or not performing well, a reliance on annual performance reviews can mean the employee continues to struggle for - potentially - 12 entire months without being noticed. In this time, business operations will be severely impacted and the employee’s happiness will also be compromised.

 

What are the key features in a performance management system? 

 

By far the most important step when managing performance is goal setting. Without adequate goal setting, performance metrics are useless data that cannot be used constructively to improve or monitor an employee’s efficiency and overall performance.

 

As well as goal setting, you will also want to ensure that your performance management system provides for… 

 

Frequent reviews. As mentioned above, annual employee reviews are simply not fit for purpose when it comes to managing employee performance - so you should opt for a performance management system that allows for monthly evaluation. This ensures that any issues an employee is experiencing can be dealt with quickly, so the employee’s morale can be maintained.

 

Feedback opportunities. A good performance management system will provide opportunities for positive feedback when an employee has performed well, but also for constructive feedback when areas for improvement are identified. 

 

Provide an accurate, up-to-date picture of each employee’s performance. This is the core essential of any employee management system, and should factor in areas such as accountability, goal setting, and alignment of the business’ goals with the employee’s overall performance. 

 

In conclusion

A good performance management system that includes the elements above - and goal setting in particular - should serve your employees and your business very well indeed.

 

You can book a live demo with one of our team members or start now for free 20-day with trial account. Get to know how can Heartpace help you with achieving your goals!

 

Additional sources:

https://engagedly.com/6-most-common-reasons-why-performance-management-systems-fail/ 

http://hrcouncil.ca/hr-toolkit/keeping-people-performance-management.cfm

https://www.quora.com/What-is-the-most-important-step-when-managing-Performance 

 

Henrik Dannert

CEO

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