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Employee Performance Management Process: Key Concepts for Maximum Success

From planning and goal setting to reviews and rewards – how to implement a successful employee performance management process

Without a plan, even the most brilliant business can get lost. You need to have goals, create milestones and have a strategy in place to set yourself up for success.

Yogi Berra, baseball coach

Performance management for employees offers a wide range of versatile solutions to challenges faced by businesses. Whether dealing with underperforming employees or seeking to upskill the A-players, a set of core concepts underpins the performance management process. These stages ensure that business leaders understand their priorities and can deliver the most effective solutions.

There are 5 key concepts to consider when crafting a performance management strategy:

  1. Planning. Understanding the root causes of the need for a performance management process builds a foundation which recognises desired outcomes and potential obstacles.
  2. Tracking. Determining the goals and objectives provides a framework through which progress towards success can be measured.
  3. Development. Coaching and training should be integrated into any performance management processes. Employee talent stacks should be continually improved so they have the tools required to deliver results.
  4. Review. Regular feedback makes sure managers and employees can identify and address problems as soon as they arise. These continuous conversations also boost engagement and strengthen relationships between managers and their staff.
  5. Recognition and rewards. Confidence and motivation are all increased when employees feel their work is appreciated. A variety of rewards and recognition mechanisms can be utilised to demonstrate hard work is valued.

1. Planning for effective employee performance

An effective employee performance management process begins with planning. Here, HR leaders and managers determine the desired outcome for an employee, along with any obstacles they might encounter.

Setting up new hires for success with Performance Development Plans

Personal Development Plans (PDPs) are a perfect tool for orienting new starters on the right path. When used effectively, these plans not only guide new employees through their journey within the company, they also align professional growth with personal ambitions. Such alignment encourages higher levels of engagement and motivation.

When setting up a PDP for new employees, HR leaders and managers should ask the following questions:

What skills do you want to bring to your role? What skills do you need to improve upon?

Résumés only reveal so much about an individual’s levels of competency, so getting them to express in their own words strengths and weaknesses is crucial. The appropriate training and development can then be effectively integrated into their job role.

What soft skills do you feel you can bring to the organization, or would like to improve?

Organizational skills and management abilities are often hidden from view when an employee begins at a new company. Understanding a new hire’s level of competency in this regard can help shape future business leaders.

Where do you see your career heading in the following year? What are your long term career goals?

Long term ambitions largely define short term priorities and can be very helpful for managers looking to craft an employee’s evolution within an organization. Understanding the direction an employee wants to drive their career can help with alignment.

Effective planning for underperforming employees

Planning performance management for underperforming employees requires a thorough understanding of the core problems affecting their performance. During this stage, HR leaders and managers should clearly define performance shortcomings to the employee, with specific examples so they are clear on what needs to be improved.

Employee feedback is also crucial at this stage. Before a plan of action can be determined, all factors affecting performance need to be understood by all parties. By engaging in conversations with the employee, hidden issues such as work overload, well-being, and problems in their personal lives can be brought to light.


Cultivating new leaders with succession planning

Underperforming employees can have a negative impact on teams and departments and need to be addressed. At the same time, companies shouldn’t neglect to pay attention to their A-list players and potential future leaders. After all, it’s these star employees who often drive the best outcomes.

When planning an employee performance management process, business leaders should be consistently vigilant in identifying employees with the greatest potential. Once HR leaders and managers have spotted individuals with this potential, a plan of action can be crafted to develop their careers. 

2. Monitoring goals and objectives with data-driven analytics

Once a plan has been formulated, specific goals and objectives need to be established in order to orient employees in the right direction. As Edwin Locke discovered in the 1960s, goal setting is closely linked to motivation, with specific and challenging goals along with appropriate feedback contributing to higher and better task performance.

Motivating employees with stretch and SMART goals

Stretch goals are ambitious long-term goals that encourage employees to go above and beyond expectations. Sometimes known as big hairy audacious goals, these help align personal professional ambitions with their roles within the company.

Short-term and more realistic goals can be defined using the SMART goals methodology. SMART goals are:

  • Specific. When setting SMART goals avoid being vague and instead make it crystal clear what needs to be accomplished.
  • Measurable. Ensure that these goals can be clearly measured – objectives and key results (OKRs) and key performance indicators (KPIs) can be used for effective measurement.
  • Achievable. Understand the capabilities of the employee. Failure to meet unrealistic goals is demotivating so make sure they are attainable.
  • Relevant. SMART goals should have tangible benefits to both the individual and the company. Keep goals relevant to these broader aims.
  • Time-bound. Don’t make goals open-ended – give clear instructions on when employees are expected to accomplish them from the outset so they can schedule work accordingly.

Measuring progress with objectives and key results and key performance indicators

Once goals have been set, progress can be measured using objectives and key results (OKRs). OKRs allow managers and employees to manage the framework around which accomplishing goals is structured. By breaking down the overall objective into key results, performance management tools can be brought into play to track these in real-time.

By including key performance indicators (KPIs) in the process, managers and employees can place individual goals into the broader context of the organization’s overall strategy. As a result, the employee performance management process is intrinsically linked to the company’s strategic, financial and operational ambitions.

3. Continual employee development with coaching and training

When you encourage others, you in the process are being encouraged because you’re making a commitment to that person’s life. Encouragement really does make a difference.

Zig Ziglar, motivational speaker

Coaching and training should be an integral part of any employee performance management process. When employees hone their proverbial tools on a regular basis, they are best prepared to tackle potential problems before they take root. 

Furthermore, providing opportunities to develop their talent stacks helps boost alignment between their personal and professional ambitions. 

Integrating development into an employee performance management process

The conventional approach to employee development focuses on training courses and other qualifications. While these should be included as part of an organization’s development toolkit, employee development should also be integrated into the work culture.

This can be accomplished by:

  • Allowing time off for seminars, conferences and other events focused on skills development
  • Providing on the job cross-training opportunities
  • Facilitating access to learning through intranet and forums
  • Creating employee development programs to address specific concerns
  • Tailoring the employee experience to the individual (avoid a “one size fits all” approach to employee development)

Connecting employees for ongoing talent management

Performance management software features HR admin tools that can be used to boost ongoing talent management. By identifying individual skills and logging these on the system, managers and HR leaders can construct an organizational map. This sheds light on strengths and weaknesses at the individual, team, department, and company-wide levels.

With this understanding of talent distribution across the company, managers can connect colleagues from various teams and departments who have the necessary experience to help mentor other individuals. Multi-channel communications help ensure these employees stay connected, for instance through dedicated channels set up in Microsoft Teams.

4. Implementing regular performance reviews and appraisals

In order to keep track of employee progress both in terms of objectives and their professional development, regular feedback is required. This feedback allows managers and employees to address any barriers to success in a timely manner, as well as shift their approach when necessary based on real-time data.

Promoting ongoing conversations with regular one2one check-ins

One2one check-ins are a popular method for scheduling and holding regular conversations. Performance management tools offer HR leaders and managers the option to customize templates so these meetings can be conducted as efficiently as possible. 

One2one check-ins:

  • Allow managers to flag performance shortcomings as soon as they arise.
  • Give employees an opportunity to offer fresh insights into performance and suggest a positive course of action.
  • Strengthen relationships and give managers insights into any issues affecting employee well-being
  • Build upon loyalty and trust between the employee and the organization.
  • Help ensure an employee’s personal development is aligned to professional requirements.
  • Provide space for managers and employees to raise any concerns they have which may otherwise be overlooked.

Moving from annual to quarterly reviews

Annual performance appraisals have been falling out of favour among competitive organizations for some time. By moving to regular feedback, clarity of expectations improves significantly. Gallup’s Jim Harter explains in his article, Obsolete Annual Reviews:

“High-performing managers check in with employees on a regular basis (as often as weekly or daily, depending on the job) and formally discuss progress and development semiannually. If the conversations are primarily strengths-based and useful to the employee’s development, Gallup research indicates they are more likely to engage than disengage employees.”

By using performance management tools, these regular meetings can be scheduled with ease, and a record maintained of any conclusions drawn. This gives managers and employees a comprehensive overview of any progress made and challenges overcome. 

5. Recognition and rewards based on employee performance

Deloitte’s 2019 Global Human Capital Trends article, Rewards: Closing the Gap, outlines the complex relationship between the value of employee rewards and the deeper desire employees have for meaningful engagement. 

“In the world of the social enterprise, where workers are seeking deeper meaning in their work and organizations are striving to create a greater human connection with their workers, rewards can either be an incredible motivator or a topic of contentious debate. To help avoid the latter, organizations must expand their view of rewards, engage their workers, and enter a new world of work where perks and pay are just the beginning.”

To this end, employers need to consider the overall employee experience as an integral element of making their roles fulfilling. 

Understanding the difference between intrinsic and extrinsic rewards

Traditionally, business leaders demonstrate appreciation for accomplishments through extrinsic rewards. These typically include financial remuneration measures such as pay raises, bonuses, stock/share options and other company perks. 

While extrinsic rewards have an obvious place in employee recognition, intrinsic rewards are increasingly adopted by HR leaders and managers. Such rewards include fostering a sense of satisfaction, providing creative opportunities, and increasing levels of confidence. While the sense of reward derived from bonuses can be fleeting, intrinsic rewards contribute towards building a healthy, dynamic workforce.

Using recognition to encourage positive behaviours

Employee recognition can be delivered either from management to employees or peer-to-peer. Such recognition isn’t limited to verbal appreciation of hard work; achievements can also be displayed via performance management software. This gives managers and HR leaders an instant insight into those employees who bring the most value to the company.

Such recognition can take on a variety of forms, including:

  • Recognising cross-team collaboration. Effective collaboration improves a sense of unity towards accomplishing goals and should be widely encouraged.
  • Work reflecting the company’s core values. When employees are praised for contributing to the awareness of an organization’s culture others are likely to replicate these behaviours.
  • Employees who go above and beyond their job description should likewise be visibly praised to encourage others to accept new challenges.
  • Showing appreciation for employees who adopt mentor and coaching roles. Peer-to-peer recognition is particularly effective in this regard, as it is often a colleague who gains in the development of their talent stack.