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Performance Management and Development System: The Definitive Guide

Understanding how to pair performance management with employee development as part of a continuous process

An organization’s ability to learn, and translate that learning into action rapidly is the ultimate competitive advantage.

Jack Welch, former General Electric CEO

There are several types of performance management system approaches which HR leaders and managers can use throughout the lifecycle of their employees. Perhaps the most significant of these is one that pairs performance management with employee development. An employee’s ability to deliver on the requirements of their job responsibilities is significantly enhanced when these responsibilities are set in tandem with learning and training.

This method helps guarantee individuals and the teams they make up are consistently oriented towards building talent stacks that bring the most value to an organization. And the skill stack of the individual can be paired with the skills distributed throughout an organization, connecting employees with one another to further develop new talent.

The article from Deloitte, Becoming irresistible: A new model for employee engagement, highlights four key areas businesses can focus on to develop growth opportunities:

  1. Training and support on the job.
  2. Facilitated talent mobility.
  3. Self-directed, dynamic learning.
  4. High-impact learning culture. 

Let’s take a closer look at these opportunities, along with a range of other approaches HR leaders and managers can adopt to make employee development a central focus of performance management.

Determining the people needs of the organization

A business performance management system needs to be oriented towards the broader strategic aims of the organization. As an individual’s abilities grow, they should be closely tied to both short- and long-term goals desired by the company’s leadership. This includes consideration for potentially expanding the scope of an organization, for instance, if the organization is considering expanding its line of products or services into new sectors.

Business leaders and managers can gain insights into the people needs of the organization through the use of HR administrative tools embedded in their performance management platform.

People databases

People databases allow HR professionals to input and track the core skills and abilities of the company’s employees. This database can also incorporate details on contractors and candidates, ensuring that HR leaders and managers can make the best hiring decisions.

Additionally, such databases provide a central hub for other employee-related information such as the department they are working in, their job title, location and other important contact details.

Organizational charts

On a broader level, organizational charts allow HR leaders and managers to map individuals in the company and how they fit into teams and departments. Not only does this allow users to see how employee roles fit into the bigger picture, it also offers a formal outline of the company’s structure so that new positions can be identified and people with the right skills assigned to them.

Onboarding new employees to set them up for continuous development

Setting up a performance management system for employees begins the moment they start working at the company. HR leaders, managers and team leaders need to be clear from the outset concerning the skills and competencies a new hire is bringing to their role. This can be achieved through the use of performance management tools.

Key skills and competencies

When onboarding a new member of staff it is important to have a clear understanding of their key skills and competencies. Basic information on their qualifications and current level of training can be gleaned from their resumes, and one2one discussions can help to flesh out this information in a more comprehensive manner.

Many competencies are not listed under general qualifications, so skills such as public speaking, data analysis, teamwork and an ability to conduct thorough research can be noted down and added to their skill set. These competencies can then be added to their Personal Development Plan (PDP) alongside those tangible skills for which they have direct qualification.

Personal Development Plans

A written account of self-development and improvement plans should also be drawn up between employees and managers during the onboarding phase. These Personal Development Plans should seek to be comprehensive so that employees are able to plan for academic, personal and career goals in tandem. 

Where a person sees themselves within the company and what training they require to get there should be broken down into short- and long-term goals. This helps HR leaders to facilitate on-site training and other courses which may help accomplish these goals. Any soft skills the individual wishes to develop should also be discussed so that their role and responsibilities can be adjusted to provide opportunities for further development.

Aligning personal and professional goals

Aligning personal and professional goals when developing PDPs gives employees and business owners a cohesive edge. If an employee’s career development coincides with the strategy of the organization, it can be shaped to benefit all involved.

Consider asking new employees the following questions:

  • How can I continually learn and grow in the role?
  • How can I do better in the future?
  • How can I avoid performance problems I have faced in the past?
  • Where am I now and where would I like to be in terms of my career path?
  • Where do I see myself within the organization a year from now?
  • How can the company help me to develop new and existing skills?

Creating relevant performance objectives with learning components

Whether setting up a performance management system for small business requirements or managing the development of hundreds of employees, performance objectives should be established with learning components integrated into the processes.

While performance goals are largely confined to specific business goals and job responsibilities, development goals can be added to create this new layer of learning. Such goals contribute to business objectives in an indirect way, for instance sending employees on public speaking courses to improve their communication skills. 

Performance goals help ensure that employees hit specific benchmarks, it is development goals that will provide opportunities for professional growth and have an enduring effect on their future within the company over the long term.

Holding continuous conversations to monitor development

Employees who believe that management is concerned about them as a whole person – not just an employee – are more productive, more satisfied, more fulfilled. Satisfied employees mean satisfied customers, which leads to profitability.

Anne M. Mulcahy, former chairperson and CEO of Xerox Corporation

Continuous feedback provides HR leaders and managers with the glue that binds performance with development. This can be achieved through the use of a performance management appraisal system to plan, schedule and conduct regular feedback sessions. These feedback sessions should be viewed as flexible and will address first and foremost the primary concerns of managers and employees at a given time.

In general, ongoing feedback will either be positive or constructive, depending on the recent performance of the employee. Let’s break down the distinction between these two core types of feedback:

Positive feedback

Positive feedback places an emphasis on responding to good – or great – performance. This should only be given when such feedback is genuinely warranted so that the message being delivered is sincere.

It should also relate to specific and measurable behaviours and results that employees can see for themselves. This helps to make clear what behaviours can be repeated in the future.

Constructive feedback

Constructive feedback – sometimes referred to as negative feedback, which has unpleasant connotations some managers prefer to avoid – is concerned with offering corrective feedback when performance has fallen short of expectations.

Future-oriented, constructive feedback is geared towards finding solutions to performance issues, rather than simply picking apart what went wrong. Understanding why an employee failed to meet expectations and providing options for addressing these shortcomings is key to successful constructive feedback.

Enhancing understanding with self-assessments and 360 degree feedback

Gaining a holistic overview of what factors are impacting upon performance – and how development initiatives can mitigate these negative influences – comes from employee self-assessments and 360-degree feedback. The former allows employees to shed light on factors that may have caused problems that otherwise wouldn’t be apparent to management based simply on the available data.

The latter offers the peers and colleagues of employees an opportunity to shed fresh light on why an individual might be having issues with work. These employees are free to voice their honest perspective, since 360 feedback is submitted anonymously. Ultimately, this gives managers and HR leaders a much more well-rounded view of performance so they can offer the support needed to bring employees back on track.

Measuring performance to identify strengths and weaknesses

Decisions relating to the development of employees are intrinsically tied to their strengths and weaknesses. A competency-based performance management system gives managers insight into their employees’ achievements and failures. These can be tangible qualities measured in direct relation to employee objectives, or more abstract competencies such as oral communication skills which are trickier to quantify.

Understanding performance in a role

Objectives and Key Results (OKRs) are used to clearly measure an employee’s ability to achieve results and expected outcomes. Typically these are used to coordinate progress towards role-specific outcomes, for instance, sales per month or the number of units produced.

While not strictly linked to employee development, tracking OKRs can offer valuable insight into issues that may be affecting performance which could be rectified through a stronger focus on development.

Measuring progress towards desired behaviours

When it comes to measuring behaviours, these can be clustered into competencies. These are clusters of knowledge, skills, and abilities (KSAs) that are critical in determining how results will be achieved.

Some examples of competencies include:

  • Customer service skills
  • Written or oral communication
  • Creative thinking
  • Persuasive techniques
  • Dependability
  • Research
  • Problem solving
  • Stress reduction
  • Data management

Competencies are not directly observable, so HR leaders and managers need to rely on key performance indicators (KPIs), which focus on the measurable behaviours telling us the extent to which the competency is present.

As with objectives and key results, KPIs can be tracked via a performance management system’s dashboard. This system also allows users to define a matrix of related competencies which can be tracked in real-time, allowing associated skills and abilities to be understood in context. 

A better understanding of strengths and weaknesses and how they relate to one another creates opportunities for targeted employee development initiatives.

Linking performance and development to HR data insights

Often, the obstacles to optimal development of skills from employees can remain invisible to managers and HR administrators, since they exist outside of the workplace. With vast numbers of people working remotely, the problems associated with work-life balance and emotional and physical well-being are compounded.

HR administrative tools embedded within performance management systems can help HR leaders and managers:

  • Identify consistent absence and sickness patterns which may be linked to lower performance outcomes.
  • Understand an employee’s medical history and any conditions they are struggling to cope with.
  • Provide employees with a more flexible work schedule to help them to address any personal issues.
  • Track employee sentiment to understand the impact of decisions on the wider workforce

Tying employee well-being to professional development

Career-related learning and development can be further augmented with well-being initiatives. Such programs can help employees build systems to improve their personal lives, whether this is encouraging programs of fitness and exercise, or offering mindfulness sessions to help improve their overall state of mind.

A performance management system’s intranet and social feed can help businesses to place additional emphasis on the significance of well-being throughout the workforce. Connecting employees with one another on a personal level – through sports clubs and hobby groups – also helps to strengthen relationships for greater cohesion in the workplace.

Providing ongoing training and learning opportunities

Training and learning opportunities lie at the heart of talent management and employee development. The more an employee can hone existing skills and develop new ones, the better they engage with their roles. 

This link between employee training and development is well established in the scientific literature. For example, The Impact of Employee Training and Development on Employee Productivity, published in ResearchGate, found that:

“There is an imperative need to effectively manage training and development programs. However, the most vital asset of every organization under stiff and dynamic competition is its human capital. Training and development is an instrument that aids human capital in exploring their dexterity. Therefore training and development is vital to the productivity of an organization’s workforce.”

Online courses to enhance skills and bring new qualifications can be offered throughout an employee’s development cycle. Additionally, performance management tools allow companies to provide support and training directly to staff through intranets and forums, creating spaces where qualified employees can offer assistance to peers who are developing their talent stacks.