What is Employee Performance Management and Why You Need it for Your Business

employee performance management

If one really thinks about it, the core of any organization comes down to its people. Yes, while the goal of any company could be to increase revenue and profits, this is only possible if the employees are coming together and working towards that. It’s the people that provide solutions for clients, and it’s those same people that attract new employees to the organization. 

Employees can only continue to improve and do better when they receive feedback. That is employee performance management. An effective performance management strategy can ensure that your employees are working towards the organization’s larger goals. 

But what is employee performance management? And why is it important? Let’s find out. 

Employee Performance Management

Employee performance management is a strategic and well-thought out framework used to improve employee performance and ensure it’s in-line with organizational goals. It’s about balancing the relationship between the value employees bring to the table and how it fits into the long-term strategic vision. It also looks into how employees are supported in the company. 

Contrary to popular belief, employee performance management is not a one-time process or a one-way feedback channel. When done correctly, employee performance management is the cornerstone of people management. 

It’s a dynamic and continuous process that helps organizations meet their strategic goals and also ensures that employees are also getting better at what they do. 

Nowadays, a lot of employee performance management systems utilize digital platforms because they allow for a fairer, quicker, and clearer process.

Annual Performance Review vs. Continuous Performance Management

What’s the difference between a traditional, once a year performance review and a continuous performance management system? The answer is actually in the name. 

Annual performance reviews are typically conducted once a year and involve a formal meeting between a manager and an employee to discuss the employee's performance over the past year. The manager will typically provide the employee with broad, generic feedback on their strengths and weaknesses and set goals for the upcoming year.

Continuous EPM, on the other hand, is an ongoing process of communication and feedback between the manager and the employee. This approach involves on-going check-ins, feedback, and performance tracking. The aim of continuous EPM is to help employees improve their performance throughout the year, rather than just once a year.

Feature Annual Performance Review Continuous EPM
Frequency Once a year Ongoing, ability to improve performance immediately
Format Formal meeting Informal check-ins, feedback sessions
Focus Past, general performance Present and future performance, more specifics
Goals Set goals for the upcoming year Identify and address performance issues as they arise
Feedback Once or twice a year, formal setting  Regularly and tailored to employee needs
Performance Tracking Once or twice a year On-going

Key Elements of Employee Performance Management 

Let’s understand the key components of a successful employee management framework. 

  • Goal setting

Setting clear and measurable goals for each employee is essential for measuring performance. Goals should be aligned with the organization's strategic objectives and be specific, measurable, achievable, relevant, and time-bound (SMART).

  • Performance feedback

Providing regular feedback to employees is crucial for helping them improve their performance. Feedback should be specific, timely, and actionable.

  • Performance evaluation

Evaluating employee performance is a formal process of assessing an employee's work against agreed-upon goals. Evaluations based on KPIs, client and co-worker feedback, and other metrics like attendance, can be used to make decisions about compensation, promotions, and training.

  • Development and coaching

Providing employees with opportunities for development and coaching is essential for helping them reach their full potential. Development support can come in the form of training, mentoring, and on-the-job learning.

employee with a resource management system

6 Reasons to Say “Yes” to an Employee Performance Management System

Are you at a crossroads, wondering whether you really need to change your annual performance review to a continuous system? Here are six benefits of adopting an on-going performance management program for your organization. 

Assists in Creating Training and Development Programs

By introducing more frequent reviews, whether formal or informal, managers have a better understanding of the skill set of employees. It can also highlight potential workplace issues, like a skill-gap, that would require some training. An employee performance system provides a proactive look into the future. You, as a manager, can turn a potential conflict into an opportunity by keeping a close eye on the performance of your team. 

Increases Work Satisfaction and Engagement

There’s an old saying, “Engaged employees are your biggest competitive advantage.” And it’s so true. Only when the employees are satisfied and engaged in their roles will they consistently put in the work and deliver high-quality solutions and ideas. 

With continuous performance management, leaders can help employees work towards their goals and objectives in real-time. The constant feedback loop also enables leaders to identify issues and support employees to get the most out of their skills and roles. In return, employees feel valued and cared for. This motivates them to perform better. 

Reduces Employee Turnover

According to a 2020 Human Resources study, companies with continuous performance management systems are 44% better at talent retention than their counterparts. Think about it — when employees get consistent feedback on their performance and know exactly what they need to do to progress in their career, they are less inclined to leave. 

An employee performance management system includes career development, mentorship, and opportunities for internal movement. These initiatives make employees feel supported and therefore they won’t jump ship to a competitor. 

Increases Clarity on Individual and Organizational Goals

As mentioned earlier in the blog, a key component of performance management is goal setting. Everyone likes to know what they are supposed to do, why and which resources they can use to accomplish the task. With an employee performance system, goals are SMART and delivered in such a manner that it’s easy to establish key performance indicators (KPIs). This provides employees with clear objectives to work toward. The clarity also minimizes the chances of conflict and confusion.

Builds Ground for Clear Communication 

Let’s look at an annual performance review practice where managers and employees only get together once a year. They typically discuss progress in broad terms and only recently performances are discussed (as they are easy to remember). The rest of the time, the manager is not available or in-tune with what is happening on the ground. This is a recipe for disaster. 

An effective performance management provides a clear communication avenue for both the employer and the employee to exchange feedback. The informal check-ins and “how are you doing?” sessions not only give managers insight into work progress but also give employees a chance to voice their thoughts.

Increases Employee Autonomy and Accountability

With performance management, the goals are also very clear. Therefore, the worker knows exactly what they have to do and has the autonomy to complete the task —- there is no micromanaging. As a result, employees are happier, more committed, loyal, and productive. It’s a much better working space than one where every action is dictated.

A performance management system also creates an atmosphere of encouragement, support, and trust. When managers consistently provide concrete feedback, a culture of trust and accountability is established. This allows for more creative solutions and the freedom to express ideas and share knowledge. These will only benefit the company. 

How to Implement an Employee Performance Management System

If you’re considering starting a continuous employee performance management system in your company, follow our guidelines. 

1) Secure Buy-In 

The support of leadership and staff is paramount to having a successful performance management framework. Communicate the benefits of the program clearly by highlighting that it will help employees reach their potential and feel supported. For instance, a common concern amongst some employees could be that they feel the continuous feedback to be a form of micromanagement or extra performance pressure. Likewise, some managers may feel that they cannot do this when their schedule is already packed. 

Everyone in the system, from upper-management to the newest customer service recruit, should feel as though the system will assess them even-handedly and reward their successes. This can be done by also incorporating people’s feedback into what or how they'd like the system to be. 

2) Define Your Reason

Performance management frameworks can be quite extensive, and so you need to know why. Instead of a general goal like “helping employees,” have defined objectives and goals. Without this, it will also be harder to measure success. 

Define some clear objectives that are easy to track and measure. Examples of clear goals could be “x” savings, improved staff retention, or increased satisfaction scores. In the end, your performance management structure needs to align with your organization’s strategic goals.

3) Provide Sufficient Training

Not all managers or employees may have the skills to give constructive feedback. In an employee performance management structure, managers or co-workers can serve as mentors as well. Therefore, there needs to be ample training and guidance provided to all on how to provide feedback. This could be done through workshops or one-on-one sessions. Also, ask current managers and staff about what training they feel they need. Sometimes the answers are right there, we just need to ask the question.

4) Incorporate the Right Technology

To achieve efficient performance management, it is crucial to have the right technology. Many cloud-based HR and resource management platforms are equipped with feedback and employee tracking functionalities. They also have the capability to allocate resources, measure utilization and billings, and monitor the project budget. This automation can help shape and support your new, improved processes.

5) Encourage Communication

Make communication the oxygen of the management strategy. Ensure the following initiatives are happening frequently: 

  • Managers should have regular one-on-one meetings with team members.
  • Use a continuous 360-degree feedback loop to help with development so your people feel they’re reaching their full potential before performance becomes an issue. 
  • Create a culture of communication with multiple channels (chats, emails, meetings) and social activities. 

Remember that performance management is quite broad, and two businesses will go about implementing it the same way. It’s best to follow our guidelines while tailoring them to your company’s needs.

employee with a resource management system

Best Practices for Employee Performance Management

Next, let’s talk about some tips for establishing and maintaining a robust EPM system:

1) Involve Employees and Their Feedback 

We no longer live in a world where the bosses can dictate everything. The success of an employee performance management program needs to cater to the employee. Involve employees in the development and implementation of the EPM system. Gather their feedback to ensure the system is effective and meets their needs. When employees gain a sense of ownership over the program, they’ll be more committed to following through with it. 

2) Invest in a System you can Afford and Manage

There’s no point getting halfway through developing a performance management process and then deciding it will be too difficult to sustain. Build a system that you can afford and manage. For instance, when it comes to picking a work management software, know your budget and “must-have” features before committing to one.

3) Keep checking to see how the system is working

The performance framework can’t remain static. Regularly review and update the EPM system to adapt to changing business needs, employee feedback, and industry trends. Foster a culture of continuous improvement and innovation. This will ensure your program is always aspiring for better performance from employees. 

4) Recognize and Reward Employees and Managers

Some might argue that this might be the most important part of keeping an effective employee performance process going. Why? Because if managers and employees are performing well and consistently pushing themselves, there needs to be a “hurrah” or end to celebrate the triumph and push, right? 

There are ways to recognize and reward people even if all metrics aren’t met. Recognition and rewards can be given if employees are headed in the right direction or are putting forth the right effort to get the job done. 

Performance Management and Technology

If there is no performance management system implemented in the organization, will you be able to provide clear feedback? Probably not. Without feedback, it’s difficult for employees to gauge what’s expected of them or if they are performing adequately. How can they move to the next level in their career if there is no communication on performance? It can become very confusing and possibly even demotivate employees. 

An established employee performance system will tell employees what’s expected of them and their KPIs on a daily basis. Through this, employees know exactly what needs to be done so they can stay on track, progress, and feel like they are in charge of their career trajectory. 

There are digital tools that can make performance management an automated and more streamlined process. Technology can also reinforce communication and collaboration. 

How Resource Management Tools Aids Performance Management

eRS, a resource management software, can provide you with enterprise-wide resource visibility and real-time data that can be used to support your company’s employee performance management program. The tool shows what each employee’s skill-set is, how they performed on assigned tasks, and their shortcomings. 

Let’s consider this example, resource X is assigned a task and given 1.5 hours to complete it. Upon tracking eRS, the manager notices the task actually took the employee three hours —- double the time allotted. The manager can use this data to do a quick check-in and establish communication to understand what happened and whether the employee requires more support. 

Managers can also use data from billables to assess employee performance. The centralized dashboard can aid in setting goals and creating transparency across the organization. 

If you want to enhance your employee performance program, talk to our team about eRS. Leverage data and insights to create an effective and sustainable employee performance platform. Start your trial today.

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