Performance Management: Are You Doing it Right?

8min

In one of my recent podcasts, I had the pleasure of speaking with Kyle Lagunas, an expert in HR and talent technology.

During our conversation, Kyle shared invaluable insights from his latest research, diving into critical observations, the importance of data quality, the integration of AI, and the various challenges in performance management.

The depth and impact of this interview inspired me to write an article based on the profound insights and findings Kyle presented, which brings us to the topic, "Performance Management: Are You Doing it Right?"

Performance management is a crucial aspect of any successful organization. It's about ensuring that your employees are aligned with your company’s goals and are performing to the best of their abilities. But are you managing performance correctly?

Let’s explore the key components of effective performance management and how you can improve your approach.

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What is Performance Management? Why is It Important?

Performance management encompasses a variety of practices aimed at enhancing the value employees contribute to an organization. It involves setting objectives, providing feedback, evaluating performance, and implementing improvement plans when necessary. The ultimate goal is to align individual performance with the strategic objectives of the organization, thereby driving overall success.

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Let’s find out why performance management is important

Setting Realistic Expectations:

Establishing clear and achievable goals helps avoid unrealistic expectations and sets a concrete path for growth. This process encourages realistic planning and better decision-making.

Driving the Right Behavior:

Performance management ensures that all decisions made at various levels of the organization contribute to the overall strategy. It helps in creating a cohesive environment where every action taken aligns with the company’s objectives.

Fostering Team Alignment:

When everyone understands the company’s direction, individual and departmental goals are more likely to be in sync, leading to better organizational harmony and effectiveness.

‍Promoting Cooperation:

Effective performance management encourages departments to work together, recognizing that collaboration can lead to better resource allocation and overall success.

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Are We Getting Performance Management Right? The Numbers Say It All

Performance management practices in the U.S. are not always consistent. Some organizations still stick to old, inefficient methods while some are not aware of the right way of conducting feedback or analyzing employee performance.

Let's examine the data to better understand the current state of performance management and identify critical areas for improvement:

58% of companies continue to rely on basic spreadsheets for tracking and monitoring employee performance. (Source: Employeeperformance.com)
Nearly half of all managers overlook the significance of their company's performance management procedures. (Source: Annualreports.com)
U.S. managers spend an average of one to two weeks completing performance reviews for individual employees. (Source: Lattice.com)‍
Only 21% of international employees express feelings of engagement at work, compared to 33% of U.S. employees. (Source:Gallup.com)
Close to half of managers fail to recognize the value of their organization's performance management process. (Source: Annualreports.com)‍
A staggering 85% of employees would contemplate leaving their jobs following an unjust performance evaluation.
Approximately 10% of the U.S. workforce admit to experiencing anger after receiving negative feedback. (Source: Businesswire.com)

Four out of 10 U.S. employees disengage from their tasks when they receive minimal or no feedback from their supervisors. (Source: Shrm.com)

Key components of performance management: continuous conversations, goal setting, regular feedback, and 360-degree reviews.

Key Components of Effective Performance Management

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Continuous Performance Conversations

Regular one-on-one meetings between managers and employees are essential. Research shows that employees who have frequent performance conversations are more engaged and aligned with their goals.

Adobe Inc. was the pioneer in adopting continuous performance management by replacing annual appraisals with "check-ins" and frequent feedback in 2012. Their efforts to integrate this approach into their culture paid off, resulting in a 30% decrease in voluntary turnover since the introduction of check-ins. (Source: Adobe.com)

Cargill Inc., a leading US food producer and distributor, also modernized its outdated performance management process in 2012 by launching "everyday performance management." (Source: Wikipedia.com)

These meetings should focus on discussing priorities, aligning personal and organizational goals, and providing feedback.

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Collaborative Goal Setting

Setting goals collaboratively ensures that employees are invested in their objectives. This process should involve clear communication about why each goal is important and how it contributes to the organization’s success. Using frameworks like OKRs (Objectives and Key Results) can help in setting specific and measurable goals.

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Providing Regular Feedback

Frequent feedback is crucial for employee engagement and development. Employees who receive regular feedback are more likely to be engaged, less likely to leave the organization, and more aligned with their goals.

According to Gallup, team members find feedback five times meaningful if they get it every week.

Feedback should be constructive and aimed at fostering a culture of trust.

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360-Degree Feedback

Incorporating 360-degree feedback allows employees to receive input from peers, subordinates, and managers.

Teams that receive feedback highlighting their strengths are 8.9% more profitable and 12.5% more productive compared to teams whose reviews focus on their weaknesses.

This holistic approach provides a more comprehensive view of an employee’s performance and can highlight strengths and areas for improvement that might be overlooked by managers alone.

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Performance reviews should focus on qualitative feedback, recognition, and aligning individual goals with company strategy.

Performance Reviews and Improvement Plans

While continuous feedback is important, formal performance reviews are still necessary.

But feedback shouldn’t be those nine box forms as stated by Kyle in the podcast--

“Almost all of the HR leaders that we surveyed their performance management workflow, like the portal that they would use to capture feedback was all open text. So there was actually...so there was no like numerical- they might assign a number at the end overall, or in certain areas, but I don't know if you've ever worked somewhere that had a nine box.”

The point is here that the feedback should be qualitative and personalized, rather than relying solely on numerical ratings or standardized forms like the nine-box grid.

These reviews should assess how well employees meet their objectives and provide an opportunity to discuss development plans. For underperforming employees, a Performance Improvement Plan (PIP) can outline specific goals and provide a timeline for improvement.

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Recognizing and Rewarding Performance

Recognition is a powerful motivator. Acknowledging employees for their achievements and contributions can significantly boost morale and motivation.

A study by Aon Hewitt found that companies with a strong culture of employee appreciation had a 31% lower turnover rate compared to those with weaker recognition programs. (Source: AON Mediaroom)

You can pat your employees' backs with formal rewards, promotions, or simple acknowledgments in meetings and company communications.

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Adapting to Different Work Environments

Performance management strategies should be flexible to accommodate different work environments, including remote and hybrid setups. Remote employees often require more frequent check-ins to stay engaged and aligned with company goals.

(RELATED: Building a Continuous Learning Culture.)

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Linking Performance to Organizational Strategy

Every performance management activity should be directly linked to the broader organizational strategy. This ensures that individual efforts contribute to the overall success of the company. Tools like performance management software can help track these connections and provide insights into progress and areas needing attention.

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Promoting an Open Culture:

By fostering an environment where transparency, communication, and feedback are encouraged, companies can cultivate a culture of trust and collaboration.

Openness in performance management means providing employees with clear expectations, regular feedback, and opportunities for dialogue about their performance and development goals.

It also entails creating channels for employees to voice their concerns, share ideas, and contribute to decision-making processes.

From leading by example, and encouraging feedback to providing training and following through, there are many ways to promote openness within any organization.

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OVER TO YOU…

Effective performance management is not just about conducting annual reviews. It’s about creating a continuous dialogue between managers and employees, setting and aligning goals, providing regular feedback, and recognizing achievements.

By incorporating these best practices, you can ensure that your performance management process not only improves individual performance but also drives your organization toward its strategic objectives.

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