5 elements of an effective performance management system

Sharon Monteiro
I
7
min read
5 elements of an effective performance management system

Performance Reviews – never have two words invoked such collective dread in people’s minds. And yet, here we are, waiting to see if there’s anything new to say on the matter. So, let’s talk about it.  

You’re here because you want to know about effective performance management systems. But before we get into that, let’s backtrack a little – why did we start prefixing ‘performance management’ in the first place?  

Over the years, traditional performance management systems have come under immense scrutiny owing to claims of being ineffective, time consuming, demotivating, mind-numbing, soul-crushing... you get the idea. The objective method of standard form processes sure made it easier for managers to see where employees stood on the performance bell curve, but it did little to address setbacks that affected employee performance.  A system that glorifies star performers while invalidating the rest of the team is counterproductive in creating a motivated workforce.  

Performance appraisal systems are about aligning individual effort to support organizational priorities. It is a system and not a one-time event. This means that it includes a whole set of exercises like setting individual expectations tied to organizational goals, providing coaching and feedback that helps employees improve, and measuring and evaluating employee performance to inform talent decisions.  

Traditional performance management systems are relics of the past. But, like an obnoxious parasite, they still continue to leech off of people’s efforts, time, and organizational resources. According to a 2019 Gallup study, as much as $2.4 million to $35 million a year in working hours is lost to take part in performance evaluations. However, the world is beginning to witness a gradual shift. For instance, organizations like Microsoft, Adobe, and GE are doing away with legacy software and replacing them with more dynamic and engaging processes of continuous feedback and coaching. Changing tides warrant a change in course; Millennials and Gen Zs are the growing constituents of today’s workforce and are projected to comprise 75% of the world’s workforce by 2025. Standardized assessments just won’t cut it for the generations who are more flexible and more aware of the corporate climate than their predecessors.  

An effective performance management system is agile and flexible to the needs of the new workforce. The appraisals go by different names, but they all fall under the umbrella term of what is known as ‘continuous performance management’. And at its metaphorical core lies the five elements of a performance management system.

Frequency

The efficacy of continuous management hinges upon communication. Frequency of feedback cycles sets the precedent for organizational as well as individual growth. Traditional feedback cycles that are conducted once or twice a year have little to no effect on growth. Consequently, these widely paced cycles leads to inefficiency and fall in accountability. It’s like leaving a kid alone with a box of matchsticks and hoping that he learns how to burn a candle and not the whole house.  

In a continuous performance management model, the frequency of feedback cycles should be determined according to the goals and expectations at the organizational level, team level, and personal level. This allows for flexibility and encourages feedback to become an integral part of the employee experience.  

Time

Time – a crucial component of a performance management system and a subject of great frustration during performance appraisals. With traditional feedback cycles paced at lengthy distances, documenting individual performances for the course of a whole year and compressing all that information on the day of the performance review sounds a lot like procrastinating until the exam and cramming all your notes on the last day. It’s inefficient and will possibly lead to inaccuracies which will make the knowledge unreliable.  

Effective performance management systems can narrow these glaring discrepancies by a large margin. With ongoing feedback, employees and managers can rely on receiving precise and accurate feedback. Additionally, on the matter of goal creation, organizations should avoid creating rigid timeframes and far-fetched goals at the beginning of the year, and instead set effective goals with formatted timeframes. This gives employees the freedom and motivation to work productively.

Accuracy

The 360° feedback model can describe this element in the best possible way. Just as the name implies, a 360° evaluation provides a well-rounded picture of a person’s performance. Unlike the traditional top-down approach where feedback is reserved between an employee and their superiors, 360° encourages feedback from all directions. Compared to traditional performance reviews, immediate feedback allows an individual to become aware of their performance during real-time, makes them more self-aware, and take suitable steps for improvement. It’s no wonder that more than 85% of all Fortune 500 companies use the 360° feedback system.

Purpose

The precept of motivation is to never lose sight of the things that matter. All work is oriented towards a goal, whether that be personal or professional. As human beings, we are always on a quest to find a sense of purpose in the work we do. Traditional performance management models overlooked the power of it in driving productivity. However, the younger workforce prides itself in discovering a sense of purpose in whatever they undertake, and it is up to employers to accommodate, or rather prioritise their well-being. The trick is to help your employees invest themselves in their job and in their own manner. This benefits them at a personal level, and all parties concerned at a professional level.

Adoptability

Good implementation outweighs elegant design. Traditional performance management systems already don’t deliver on the promised results; but if an organization was to adopt a continuous performance management system, then the success of the system would ultimately rest on the strength of its implementation. There are quite a number of employee performance management software that offer hosts of varied services. Therefore, to have a system effectively integrate with an organization, it is imperative for senior leaders to determine the kind of goals they would aim to fulfil with the aid of those systems. For instance, if a small-scale company wants to improve its recruitment processes, they wouldn’t go for Gusto (which only provides onboarding services), and would rather go for peopleHum which offers the recruitment services the organization requires.

Adoptability also hinges on sustained efforts to implement it. A worker is only as good as his tools, so, constant and consistent efforts is critical to good implementation.

As promising as the transformative powers of an effective performance management system sounds, true transformation begins with a change in mindset. Traditional performance management systems, as abysmal as they may be, are still incredibly prevalent worldwide. However, with the change in employee sentiments on the matter, the future of performance management is worth striving towards. Organizations require a push towards sensible practices that emphasises simplicity, flexibility, relationships and communication, and that trivialises rigidity and strict adherence to policies and procedures.  

Undoubtedly, a performance management system renewal is a massive change to the dynamics of an organization’s culture. A change at that scale must be spearheaded by top managers and senior leaders to have the desired impact upon company growth. Companies that still stick to the traditional methods must consider what the future of talent attraction might look like if they don’t upscale in time. Embracing innovation (with care) and adapting flexibly is how companies stay ahead of the curve. And if the 2020 pandemic has taught us anything, it is that this flexibility and buoyancy is what is going to help organizations navigate through rocky waters.

We hope you got some great insights from this blog. Its now time to apply it. Get started with peopleHum for free today. No credit card needed.

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Performance Appraisal
performance reviews
performance management
organizational culture
employee retention
feedback
future of HR
HRtech

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