In a nutshell
Performance management is an umbrella term that covers the strategic and management practices which help your employees succeed in their role (and beyond!) through a combination of direction, feedback and development.
There have been substantial changes in the approach to performance management in recent years. This has predominately been a move away from the traditional annual performance appraisal and the emergence of more employee-centric ideas; for example, specifically tailored objectives, goals and/or responsibilities aligned to the wider business that have been individually developed between the employee and manager, or ongoing "in the moment" constructive coaching conversations around performance feedback. This is illustrated by results from Deloitte’s 2017 Global Human Capital Trends research where “more than 70% of the companies studied said they are well on their way to completely reinventing the performance management process in their organisations” (Bersin, 2017, 10). This seismic shift signposts the importance of employee performance at the heart of business strategy.
The key to successful performance management is to align individual, team and your business objectives together. This underpinning strategic and operational connection at the start of performance management combined with a positive and forward-looking ethos promotes success. This can be observed through an increase in productivity, increase in efficiency and skill development, reduction in costs and elimination of duplicate work.
Why this matters
Individual employee performance impacts your wider business performance; both directly and indirectly. High performing individuals and teams equate to a high performing business; whereas low performing individuals and teams negatively impact your business performance.
People are the most valuable resource that lie at the heart of your business. Successful performance management supports your employees’ current needs and their growth into the future; alongside your business. It’s a win:win scenario for you.
Key steps to manage this issue
1. Firmly embed performance management
Performance management needs to be firmly embedded at the heart of your wider management systems and within every employees’ role. It’s essential the performance management process is regularly reviewed to ensure it meets the needs of the employees and your wider business strategy.
Veteran HR Expert Michael Armstrong (author of “Armstrong's Handbook of Performance Management”) highlights performance management as an integral part of the management cycle with an initial plan, that’s carried out through various actions, monitored over time, reviewed regularly and the plan adapted if necessary, as shown by the diagram below.
2. Identify key collective objectives (individual, team, organisation)
It’s important to create relevant performance objectives that link to each individual job role, team and your wider organisation. These can include Key Performance Indicators (KPIs), SMART goals, SWOT analysis, key competencies and/or capabilities and a Personal Development Plan (PDP). There are many sources of information on creating objectives online; you can also use the resources included below. The information from these different methods also feeds into future learning and development practices (see below) which complements performance management across your entire business.
3. Continuous conversations
One to one “bite-size” conversations are essential to maintain ongoing open dialogue between yourself and your employees. It can be useful to adopt a coach-like approach through active listening, asking powerful questions, encouraging a growth mind-set and empowering your employees. Forbes Coaches Council highlights these ideas further in the article "10 ways to lead like a coach”. The following questions can be useful to start the conversation:
- What do you need to perform better in your role; in line with wider organisational goals?
- What would make your role easier?
- What barriers are in place that make it more challenging than necessary to do your job?
- What frustrates you at work?
The regularity of these performance focused conversations ensures the communication of timely and relevant feedback that conveys meaningful information and insights. It’s important to remember feedback is a two-way process and can be facilitated through the SBI Feedback Tool created by The Center for Creative Leadership (CCL)
- Situation: Set the feedback context through where and when; as this creates a specific reference point.
- Behaviour: Describe the exact behaviour you observed from an objective perspective.
- Impact: Highlight the effect of the behaviour to the team and wider organisation.
4. Measure performance
The measurement of performance identifies success or highlights areas where performance needs to be improved by an individual, team or across your wider business organisation. This ability to define, track and analyse performance provides direction for any future action.
Performance can be measured through a variety of quantitative or qualitative methods. For example 360 degree feedback, pulse surveys, online analytical software tools/apps or annual/biannual/quarterly appraisal meetings.
5. Additional performance enhancers
The list of initiatives below can also be used to support performance management:
- Reward and recognition programmes. These must be genuine, specific, visible, imaginative and used frequently. It's recommended to include a mix of top-down and peer-to peer ways. For example; celebrating work anniversaries with a hand-written note, peer to peer recognition where a valuable action, behaviour or gesture is openly acknowledged through sharing via a big screen, a communication channel (eg Slack or WhatsApp group) or framed image or coffee/lunch "drawings" where the selected individual (due to a specific achievement) draws a colleague’s name out of a bowl; both are awarded with lunch courtesy of the business. This is also a great method to support internal networking and develop team work!
- Varied compensation models. There are different methods to calculate your employees' financial remuneration package based on a variety of factors; for example, base pay, commission, bonuses (based on performance), profit sharing, merit pay, share options, travel or housing allowance, alongside medical and/or dental insurance, holiday or pension. You can refer to the pay and benefits section for more information.
- Pulse surveys. Here you are literally "taking the pulse" of your organisation to get a quick snapshot on employees’ view on a subject; there are various platforms available or you could use a free online polling tool like SurveyMonkey. These fast, frequent and short surveys should be based on a fixed measurement scale eg five point Likert scale (1 = Strongly Disagree, 2 = Disagree, 3 = Neither Agree or Disagree, 4 = Agree, 5 = Strongly Agree). Example questions to ask are: "I am happy at work"; "I regularly receive meaningful recognition for my work"; "I am given opportunities to learn and develop my skills"; "I feel comfortable sharing feedback and ideas to my manager".
- Strategic well-being programme. Well-being must be embedded within the business, integrated within every policy, part of the culture and openly supported by yourself – the business owner! This is far more effective than ad-hoc activities organised throughout the year as a convenient “add on” or “stand alone” event. Possible areas to consider are healthy eating, mental health, workplace environment, sleep and physical activity. You can refer to the well-being section for more information.
- Career development. Every employee within your business is unique and their career aspirations will vary enormously. It’s important to discover what their future career goals might be and support them in line with their learning and development (see below). Career development could involve changing jobs to work within a completely different profession, specialisation within a particular niche or progression up the management hierarchy.
Tools and resources
Watch the video on team development or use the development needs questions download to help shape development conversations (both from the FutureLearn People Management Skills course, download our guide to the key terms used in performance management processes and use the seven rules of objective setting download to help set objectives for your staff.
View the full video transcript
Development - we know it's important. It improves staff resilience, productivity and well-being. It's about so much more than sending people on training courses. You can't plan development needs in isolation. It's a conversation between employees and managers, with managers carefully balancing individual needs with those of the organisation. There are three main areas to consider in your team's development. Current performance, organisational needs, and individual hopes and needs. For current performance, ask how are things going at the moment? What's working and what's not? What are your top achievements? What are the biggest challenges? What do the next six to twelve months look like? And what managerial support can you provide?
Not just financial incentives but creative solutions like flexibility in time and work shadowing. For organisational needs, ask how's the organisation developing? What changes can we predict? How might team roles develop in light of these changes? And what new skills might a team need? For individual hopes, and needs ask how do they see their future role developing? Can they build on their skills? Do they have useful skills they're not already using? Remember employees are so much more than their job description. How do their needs and hopes fit with those of the organisation? What if their needs and hopes don't fit with the organisation? Great managers know that supporting wider career and lifelong learning is always important.
This could be as simple as giving employees time to attend an external course. What are the challenges in light of all these questions? And finally, what support can you provide? If you commit to development and involve your staff every step of the way, you'll see huge benefits for individuals and the organisation.
Access more information on performance management:
- CIPD Factsheet on performance management
- CMI Performance Management Checklist
- CIPD report on What works in performance management
- Acas advice on How to manage performance
- Mindtools article on Performance Management and KPIs
- Mindtools article on SMART Goals
- SBI Feedback Model
- CIPD podcast on What’s new in performance management
- Investors in People article on giving praise
- CIPD factsheet on performance appraisals
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