Effective Performance Management Systems

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Effective performance management. Those three words represent something every organization desires. Without driven, well-performing employees, businesses cannot hope to realize their full potential. Existing performance management systems usually require setting annual performance goals, entailing a lengthy and labor intensive review process that may result in disengaged employees. This process isn’t effective; annual goals become stale quickly, and retroactive reviews leaves little room for employees to course-correct.

Today, performance management is transitioning into a real-time method of communicating with employees, enabling managers to steer them toward expected performance and output. Thanks to an improved understanding of employee motivation, current performance management platforms and systems have come to fill the void created by the largely broken traditional methods.

How will you know whether your performance management system or approach is on par with current industry standards?

The following 5 elements that any modern PMS must feature:

5 Keys to Effective Performance Management

1. Goal Setting – the Right Way

As aforementioned, the staple of traditional (and now outdated) performance management systems is centering around annual (and less at times biannual) goals. These goals tend to age, and rendered irrelevant by the time it is time to assess performance. Paired with forced rankings, they can create a toxic outcome.

This is why many leading companies, including Google, LinkedIn, Intel and others, have transformed their goal-setting by successfully adopting the OKR (Objectives and Key Results) technique. OKRs work on team, organizational, and individual levels, whereby each level states ambitious objectives and sets key-results each quarter. Key-results are quantifiable measurable milestones for achieving goals. Any individual’s objectives and key-results are visible to others. This creates a new degree of transparency, impartiality, and clarity; employees are able to identify areas they need to focus on and gain an understanding as to how they will contribute to overall corporate targets. After formalizing goals and results, employees and units are measured on their ability to deliver. As objectives are generally ambitious, everyone needs to try hard.

An important thing to note is that goals are personalized. Each goal fit individual employees’ roles and capabilities and are not a generalized idea of what employees are supposed to do.

2. Collaboration & Communication

competition does not prove to be an effective motivating factor for everyone. Good performance management systems foster communication and collaboration instead of just focusing on competition. They motivate employees to share information, assist in highlighting activities that make certain individuals successful and use them as a reference for the rest of the workforce. Additionally, they measure activities that breed success instead of measuring success retroactively, and prompt employees to communicate with their peers and managers to train, learn and get support.

3. Feedback/Review

As mentioned above, employees feedback in the form of annual performance management reviews can be ineffective, since goals have managed to age over the year, making the dialogue both threatening and irrelevant.

Instead, new performance management tries to give feedback in real-time, so it is relevant and gives employees an opportunity to correct. These new systems measure KPIs in real-time, based on data harvested from the company’s operating systems. They then utilize it to empower meaningful regular feedback, like a fitness-tracker for work.

4. Recognition

An effective performance management system should be tied to recognition. Never underestimate how much people care about recognition, and how important it is to create a positive sense of achievement at work; it can even reduce turnover rates.

5. Development

In addition to being agile, personalized, and firmly focused on powering ongoing productivity, performance management systems must encourage employee development. This will come in the form of offering users continuous learning opportunities and new ways of gathering reliable, work relevant information. An effective system must be linked to learning and allow employees to enhance their capabilities.

In Short

In order for a performance management system to be truly effective, it needs to achieve the following:

Be engaging in a way that leads to maximum user buy-in.
Allow employees to constantly monitor their performance, and managers to run the system continuously and not periodically, like a fitness-tracker for work
Be considered fair and objective
Be connected to, or provide in itself recognition (more on recognition and rewards programs in this link)
Allow employees to develop and learn

Finally, it is important to realize that an effective PMS is no replacement for good managers who know how to communicate goals and performance. A good system however, with the right tools set in place, will help good managers make the most of their employees and help drive employees’ business results instead of just keeping employees’ busy.