About performance management
An important component of developing employees is a comprehensive and well executed performance management system incorporating elements such as regular one-to-one meetings, through to performance appraisals and processes to manage underperformance.
Performance management is a well-established, all-encompassing term used to describe the practice that drives decisions about performance, remuneration, promotions, disciplinary procedures, terminations, transfers and development needs within an organisation.
Performance management is a much broader concept than performance appraisal or a disciplinary process. It aims to improve organisational, functional, team and individual performances. Effective performance management measures the progress being made towards the achievement of the organisation's business objectives. It does so by planning, establishing, monitoring, reviewing and evaluating organisational, functional, team and individual performance.
Holistically, performance management may incorporate job design, recruitment and selection, training and development, disciplinary procedures and counselling, career planning, compensation and benefits and performance appraisals.
The components of the performance management system provide the framework within which managers and employees operate. A successful performance management system should:
- incorporate performance improvement, development of teams and individuals, and behaviour management to ensure productive working relationships
- have structures which support the effective functioning of the performance management system. Ie. a performance management policy as well as performance appraisal and disciplinary processes and procedures
- ensure that employees:
- know and understand what is expected of them in their job role (i.e. performance objectives and performance standards)
- have the skills and knowledge required to deliver on these expectations through implementing development plans and learning and development activities
- are given feedback and an opportunity to discuss their work performance
- are rewarded for their performance through a reward and remuneration strategy
- are counselled for underperformance and/or behaviour which is out of alignment with organisational values and/or inconsistent with achievement of organisational goals
- are supported by the organisation to achieve optimum performance.
Why do we do it?
To maintain competitive advantage in today's dynamic economic environment, it is essential that organisations invest the time to accurately reflect upon, evaluate and measure their performance at all levels against specific criteria. This process not only ensures strategic objectives are achieved and stakeholder needs are being met, but will have a direct impact on an organisations bottom line and ability to grow in the future.
A well-structured and implemented performance management system provides a number of benefits to the organisation, management and employees. These benefits include:
- establishing group and individual performance objectives to ensure that their performance is aligned with the organisation's strategic and operational objectives
- linking performance evaluation and employee development and rewards to motivate individuals
- assisting the organisation in improving its productivity and efficiency
- regular monitoring of progress toward achievement of performance objectives
- identification of specific training needs across the organisation
- improved salary administration
- improved communication and relationships between managers and staff members
- improved guidance and assistance in developing capabilities and potential of staff members.
Link with other human resource activities
In order for a Performance Management system to work effectively, it must be encouraged and supported by strong leadership (support from senior management) and an organisational culture which values improvement. The diagram below depicts the relationship between performance management and other HR activities within the organisation. Put simply, all other HR activities need to be managed effectively as they have a direct impact on the performance management process and its likely success. Managed successfully, performance management can have flow on effects to other intangible elements of the HR function including engagement.
More information on Performance Appraisal
Managing underperformance and discipline
More information on managing underperformance and discipline
The latest McKinsey & Co. report, Individual performance management in the COVID-19 world, explores how performance has changed and what organisations can do to drive performance management towards an approach that is more data driven, flexible, continuous, and development oriented.