How does performance management work?
Because performance management is (or should be) so all-pervasive, it needs structures to support it. These should provide a framework to help people operate, and to help them to help others to operate. But it should not be a rigid system; there needs to be a reasonable degree of flexibility to allow people freedom to operate.
Performance management is a process, not an event. It operates as a continuous cycle. Corporate strategic goals provide the starting point for business and departmental goals, followed by agreement on performance and development, leading to the drawing up of plans between individuals and managers, with continuous monitoring and feedback supported by formal reviews. Tools of Performance Management: It is impossible to go into details of each of the tools used by performance management, so the following paragraphs simply provide an outline.
Performance and development reviews
Many organisations without performance management systems operate ‘appraisals’ (see our factsheet on Performance appraisal for more information on this topic), in which an individual’s manager regularly, usually annually, records performance, potential and development needs in a top-down process. It can be argued that the perceived defects of appraisal systems (that line managers regarded them as irrelevant, involving form-filling to keep the personnel department happy, and not as a normal process of management) led to the development of more rounded concepts of performance management. Nevertheless, organisations with performance management systems need to provide those involved with the opportunity to reflect on past performance as a basis for making development and improvement plans, and the performance and development review meeting (note the terminology; it is not appraisal) provides this chance. The meeting must be constructive, and various techniques can be used to conduct the sort of open, free-flowing and honest meeting needed, with the reviewee doing most of the talking.
Learning and development
Employee development is the main route followed by most organisations to improved organisational performance, which in turn requires an understanding of the processes and techniques of organisational, team and individual learning. Performance reviews can be regarded as learning events, in which individuals can be encouraged to think about how and in which ways they want to develop. This can lead to the drawing up of a Personal Development Plan (PDP) setting out the actions they propose to take (with the help of others, not least their managers) to develop themselves. To keep development separate from performance and salary discussions, development reviews may be held at other times e.g., anniversary of joining an organization. Increasing emphasis on talent management also means that many organizations are re-defining performance management to align it to the need to identify, nurture and retain talent. Development programmes are reflecting the needs of succession plans and seeking to foster leadership skills. However, too much of an emphasis on talent management may be damaging to overall development needs and every effort needs to be made to ensure that development is inclusive, accessible and focused on developing organizational capability.
Coaching
Coaching is an important tool in learning and development. Coaching is developing a person’s skills and knowledge so that their job performance improves, leading to the achievement of organisational objectives. Coaching is increasingly recognised as a significant responsibility of line managers, and can play an important part in a PDP. They will take place during the review meetings, but also and more importantly should be carried out throughout the year. For some managers coaching comes naturally, but for many they may not and training may be needed to improve their skills. See our factsheet on Coaching for more information.
Objectives and performance standards
Objectives (some organisations prefer to use ‘goals’) describe something to be accomplished by individuals, departments and organizations over a period of time. They can be expressed as targets to be met (such as sales) and tasks to be completed by specified dates. They can be work-related, referring to the results to be attained, or personal, taking the form of developmental objectives for individuals. Objectives need to be defined and agreed. They will relate to the overall purpose of the job and define performance areas—all the aspects of the job that contribute to achieving its overall purpose. Targets then need to be set for each performance area, for example, increase ‘sales by x per cent’, ‘reduce wastage by y per cent’
Along side objectives are performance standards. They are used when it is not possible to set timebased targets, or when there is a continuing objective which does not change significantly from one review period to the next and is a standing feature of the job. These should be spelled out in quantitative terms if possible, for example, speed of response to requests or meeting defined standards of accuracy.