HR & Employee Management Articles

How to Create an Effective Performance Management Process to Engage Employees

by Karen McCandless
Published on 15 November 2016

Scissors cutting up paper chain of peopleThe performance management process is broken. Companies are dropping their performance reviews left, right, and center. Part of this is down to the rise of millennials in the workforce. These people (this writer included) are part of the selfie generation. They want instant likes and feedback, and so having to wait a year before they hear how they are doing just doesn't cut it.

According to research from Gartner, almost 60 per cent of HR leaders are unhappy with their current performance review and rating processes, while 58 percent think that their current performance management approach drives neither employee engagement nor high performance.

While you're busy running around trying to get your business off the ground and doing 20 jobs at once it can be easy to neglect your performance management process. But then your employees start receiving better offers from companies that are effective at giving feedback, and suddenly that talented bunch of workers are heading for the door.

So what should you do to stop this exodus and make your top talent feel valued? Here we give you some tips to help create a performance management process that really works.

What exactly is (and isn't) performance management?

Let's start out by debunking a myth: performance management is not just a once-a-year appraisal where you discuss the KPIs set by a company or individual. Instead it's a collaborative process, where bosses and employees work together to plan, track, and review career goals, work objectives, and contributions.

"An effective performance management process ensures your employees get the ongoing coaching, feedback and development they need to succeed in their roles and deliver the results that will help grow your business," says Natasha Loeffler-Little, senior director of Global Business Development, Cloud at SuccessFactors, an SAP company that provides cloud-based human capital management solutions.

What are the benefits of performance management?

Building an effective performance management process is no easy task; what works for one company may not work for another. "Many people dread the performance management process at their workplace or think it's useless," says Loeffler-Little. "This may make businesses reluctant to even try at all for fear of this kind of feedback. But an effective performance management process can help you unlock your talent's full potential and turn your small business into a major force."

There are five key major benefits of performance management:

  • Aligns strategic goals
  • Drives employee development
  • Engages your employees
  • Encourages performance, conversations, feedback, and recognition
  • Improves your bottom line.

What challenges might hold my business back?

So, you understand the benefits of creating a performance management process, but that doesn't mean it'll be plain sailing. There will likely be a number of stumbling blocks you'll come up against along the way.

"These include having too many company goals, which will likely leave your employees feeling dazed and confused," says Alexandre Parandian, director of Engineering at SuccessFactors. "Other issues include not providing enough feedback on a regular basis, a lack of support and involvement from management and stakeholders, not fully understanding the process, an over-complicated process, and not enough rewards and recognition."

How do I create a performance management process that works?

The first step is to set up a team representing all key stakeholders to design and implement the process. Their initial job is to define the scope of the process, which can involve activities such as goal setting, on-going coaching, recognition, and regular meetings to re-evaluate the process. This process needs to fall in line with company objectives, meaning that it needs a schedule. And then finally, your company must consider whether it would benefit from software to help it manage the process (more on that in the next point).

How can cloud-based performance management software help?

Once you've created a performance management process it doesn't mean that your work is done. You still need to communicate it to your staff and ensure that as your business grows and evolves, so does the way you assess and support your employees.

"One way that can help you to fully implement a performance management process and ensure that it's effective in both supporting your employees and driving your business forward is to implement cloud-based software," says Parandian.

What are the benefits?

The benefits of such software include the ability to:

  • Create a more effective goal-setting process
  • Achieve business goals faster
  • Boost team collaboration
  • Increase employee productivity
  • Provide higher quality feedback and coaching
  • Gain powerful insights into your employees
  • Improve your bottom line.

"It's important to be sure that your business is ready to implement a performance management system," says Parandian. "The right solution will help ensure not only the growth of your business, but also maximize the potential of each and every employee, allowing you to put together a team that can build long-term success."

What's next?

If you want to find out more about performance management, then check out our HR blog.

If you're ready to buy performance management software, then take a look at reviews of the top cloud-based offerings on the market.

This post was originally published in October 2015 and has been updated.


Apps mentioned in this article