Designing Effective Performance Management

Performance management is usually seen as an essential skill but it’s also often one of the most hated tasks managers are asked to undertake; blog Helen Tracey outlines how to design effective performance management.

The ability to manage performance is seen as a top management skill. However, at the same time, it is also often cited by managers as one of their most hated tasks. A key target of this frustration, for both managers and employees alike, is the annual performance appraisal. This focus on appraisal can be so ingrained, that the appraisal alone is seen as being the organisation’s performance management system. This fails to recognise that many of the most important performance behaviours occur outside the appraisal. 

Of course, that doesn’t mean that appraisal isn’t important. It remains an essential aspect of performance management in many organisations, particularly as formal records are required to feed into other systems such as pay and reward. It is, however, important to recognise that appraisal is only a small part of a much wider performance management ‘framework’ that consists of the policies, procedures, and most importantly, practices, that drive good performance. 

Organisations should adopt a made-to-measure framework

It can be difficult to know where to start when designing a performance management framework from scratch, or even reviewing an existing system. It can therefore be tempting to buy in to an existing system that promises results. However, without a wider review of performance management practices, this is unlikely to work on its own. 

It is now recognised that a set of policies, procedures and performance management practices which are unique to the organisation and designed with its needs in mind, are what drives the best performance. Simply put, it’s not a case of ‘one size fits all’. The organisation’s performance expectations need to be reflected throughout many processes, some of which are not traditionally seen as being related to performance management. For example, recruiting people who demonstrate the right performance potential. 

An important first step prior to implementing a performance management framework is to have absolute clarity regarding what the organisation is driving towards. Once this is established, you need to define what good performance will look like to the organisation. For example, if the organisation considers that it is performing well, what does you expect to see? This understanding is vital preparation for the next stage, which is to implement practices that encourage the desired behaviours. 

Involve managers at development stage for best results

As it is line managers who have the key role in implementing performance management, they should ideally be involved in the development of the framework. This can include engaging managers in evaluating what works well, and thereby could be replicated across teams, and what perhaps doesn’t work well and therefore needs to be avoided. This not only ensures that the framework can work in practice, but also gives a sense of ownership that can’t be achieved with a framework that is imposed from above.  

Managers, and their day-to-day interactions with employees, are what constitutes the main element of the performance management framework, so their input is crucial in ensuring a successful outcome. Involving managers in the development of the framework can facilitate a shift in their mindset; from thinking of appraisal as a bureaucratic exercise, to the mere formalisation of the performance they have been managing all year. 

Ensuring fairness in performance management 

Performance management has been described as the “black box” of HR because we know what goes in (policies, procedures, systems) and what comes out (performance outcomes), but what happens in between is much less certain. However, what is known is that two things are vitally important to the success of transforming performance management practices into outcomes, these are: fairness and the relationship between line managers and employees. 

In the past, the mantras of traditional performance management were, ‘if you can’t measure it, you can’t manage it’ and ‘what get measured gets done’. This was closely associated with outcome-focused systems that aimed to quantify performance, often providing each employee with an annual rating based on their manager’s assessment. 

This has since changed. It is now recognised that measuring performance in this way isn’t the same as managing it. Measuring on its own can drive results, at least in the short-term, but the long-term effects can be damaging if the process is divisive. Thereby, it is just as important how those results are achieved, meaning that a shift from a focus on ‘performance measurement’ to one on ‘performance management’ is essential.

No matter how well-designed policies and procedures are, it is down to the line manager to ensure that they are implemented effectively and consistently. Perceptions of unfairness can easily develop if managers don’t implement practices as intended, either within or across teams. It doesn’t matter if these are just perceptions either; they can be just as damaging as actual inconsistencies. Performance management which is seen as unfair creates uncertainty, stress and frustration that can actually lower performance. Clarity and openness regarding assessing employee performance can dispel any misconceptions. 

Ongoing communication is vital

It is important to ensure that managers buy into all aspects of the organisation’s performance management, and that they can explain and provide reassurance to employees regarding the process. However, managers also need to understand that they can take initiative, as long as it is within the ethos of the wider framework. This should include actions like ensuring efforts are recognised within an appropriate time-frame. Any feedback, such as a simple thanks or praise for a job well done, needs to be given in a timely manner, otherwise the effect is damaging and equivalent to giving no feedback at all. This really underlines the importance of not saving feedback for appraisal time.

The same applies to under-performance; if it is only addressed in the appraisal, mistakes can continue without the employee even understanding what they are doing wrong. By spotting, and handling, potential under-performance at an early stage, interventions can be framed as a development opportunity that provides the employee with a fair chance to improve. A manager who knows their staff well should be able to appeal to their motivators, as well as ensuring they have the ability to succeed. Expensive training programmes are not necessarily required; the skills that would normally be associated with a good manager, such as interpersonal skills and being able to have honest conversations, are the foundation of good performance management. This enables managers to work with their staff in driving performance, demonstrating that performance management behaviours are just as important as the outcomes. 

Author: Helen Tracey is Senior Lecturer in Leadership and Human Resource Management at Northumbria University.

Explore related resources

These areas of the People Skills Hub will help you to address some of the issues covered in this blog:

  • Performance management: learn how to improve and develop your employees' performance and how to align their goals with your business objectives
  • Team building: learn how to develop your team to ensure ongoing high performance
  • Learning and development: find out how to plan learning and development opportunities to improve your employees' capabilities, skills and competencies