What is performance management?
Performance management is a process that provides feedback, accountability, and documentation for performance outcomes. It helps employees to channel their talents toward organizational goals.
That's a fairly straightforward explanation, and you've likely heard it phrased in a few different ways covering essentially the same material.
However in defining terms like this, what isn't always brought to light is ownership and responsibility for the program. So let's talk about that for a moment.
Who owns the performance management process and its success or failure?
Hint: It isn't just the responsibility of the HR department or people managers. Your entire organization is accountable.
And, organizational culture affects how performance is managed. If your company's culture doesn't reflect that cross-organizational accountability, then performance management will fail.
Good HR leaders who have their fingers on the pulse of their organizations will intuitively know which areas of performance must be addressed. But even the best talent programs won't work if your people managers and your employees aren't held accountable for participation.
Why is participation so important? Because investing the right amount of time, effort, and resources in performance management can yield results:
- 22% higher shareholder returns (McKinsey)
- 30% increase in company value (Watson Wyatt)
- 19% increase in operating income (Towers Watson)
What can HR do to drive high performance in your organization?
Set clear goals and expectations - Ensure personal goals in some way contribute to the achievement of the organization's high level goals. Give your managers and employees (since they should participate in writing their own goals) annual training on how to write effective goals. It's not an easy skill to master, and we easily forget how to do it well. And make it a priority in you organization to regularly communicate the progress and status for high level organizational goals.
Tip: Provide a sample of an effectively written goal (aka SMART goal) on your review form.
In terms of setting expectations, make sure managers and employees review goals set for the year. Use organizational and job-specific competencies to clarify expectations and help describe what it takes to be successful in a role.
Provide regular feedback - Think of feedback and recognition as an investment in future performance. Have managers provide both formal and informal feedback and recognition. Managers should clearly tell employees what they are doing well, and why the behavior is valued (impact on team, organization, customer, etc.).
Feedback should clearly tell what behavior needs to change/improve and why (impact on team, organization, customer, etc.). Feedback should include a specific example of when the behavior in question was demonstrated (no generalizations!).
Support employee development and success- Building organizational bench strength is just good business. By investing in your employee's development, you ensure your organization has the built-in knowledge skills and experience it needs to succeed, both today and tomorrow. It's also a critical way to drive up employee retention.
Remember, development can take many forms: mentoring, job shadowing, volunteer work, lunch and learn sessions, reading books/journals/blogs, coaching, cross-functional team assignments, webinars, podcasts, etc. Managers (and HR) should engage employees to identify the learning activities most appropriate to their needs.
Train your managers to be better leaders
To be successful at performance management, your organization needs people managers who can coach. If the role of the manager is to accomplish or facilitate work through others, then managers need to effectively direct and develop their employees.
As an HR leader you should be ensuring managers are trained on basic supervision skills and trained in coaching and giving performance feedback. Your managers should also be trained on using your organization's performance management system well.
It can't be stressed enough: the manager-employee relationship is critical to employee engagement and retention of top performers. As a result, managers should be working hard to build trusting relationships with each employee they supervise.
Hold employees accountable
This point reinforces the importance of organizational alignment and giving employees a role in the goal-setting process. When employees help to set their own goals, it not only ensures they are more engaged in the goal-setting process itself, it also holds them accountable to those goals.
Another way to ensure accountability is to include some sort of self-assessment in your performance management process. This self-assessment has many benefits, the first being that it gives employees a voice in how their performance is assessed and rated. As a result they become an active, rather than passive participant during performance discussions.
Second, it also helps to identify how a manager and employee may perceive performance outcomes differently. The information revealed in a self-assessment can be used to help prepare for a more meaningful discussion about performance as a result.
Ensure CXOs understand the value of good talent management practices
Good talent practices yield better business results:
McKinsey's ground breaking War for Talent studies determined that companies with strong talent practices outperformed their peer group, earning 22% higher shareholder returns.
- Watson Wyatt, using its human capital index, found that good people practices can increase a company's value by as much as 30%.
- Russell Investments reports that firms on the Fortune "100 Best Companies to Work for" list outperform the S&P 500 and the Russell 3000 by as much as 10%.
- Stanford professors O'Reilly and Pfeffer found that a change of one standard deviation in an index of human resource management practices produced increases of $20 000 to $40 000 in stock market value per employee.
A strong performance management process helps senior leaders know who your top and low performers are. It also helps to identify your organizational core strengths and areas of weakness.
This data can be used to put strategies into place to address performance gaps, and to understand exactly who has the specialized knowledge/skills/experience you need to succeed now and in future.
The definition of GREAT performance management? It's an engaged workforce that is fully aligned with your core business strategies. Do you agree? What's your definition of great performance management? We'd love to know.
For more information on how to align your workforce and drive employee performance read how to engage your managers and employees in your performance management process.