The role of performance management in organization

The importance of performance management in organization cannot be overemphasized because not only do organizations with effective performance management practices  out performed their competitors but fosters employee’s retention and engagement

Performance management helps organizations ensure that employees understand their roles, receive constructive feedback, and have the support they need to achieve their goals and business objectives. Performance management is an ongoing process in which managers and employees regularly communicate to assess and review job responsibilities, expectations, performance, and development strategies. The goal is to empower employees to perform at their best, align their efforts with the organization’s strategic objectives, and create a positive and fulfilling work environment for everyone.

Performance management process is strategic and systematic, establishing a continuous conversation between employees, managers, and human resources to drive individual and organizational success. It combines verbal and written components, which culminate in an annual performance appraisal.

The process involves the following:

  • Establishing clear expectations,
  • Setting individual objectives and goals that align with team and organizational goals,
  • Providing ongoing feedback, and
  • Evaluating results.

Career decisions, including promotions, bonuses, and dismissals, are linked to the performance management process. Performance management aims to develop the skills and competencies employees need to improve performance and success in their job. In turn, these skills help the organization meet its goals.

Continuous, real-time feedback helps employees understand where they are, learn, self-correct, and grow. They can constantly improve their performance at work, providing them with a greater sense of accomplishment. This equips the organization with a skilled, engaged, and qualified workforce. It is believed that companies using performance management programs effectively are 1.5x as likely to outperform their competitors financially and 1.25x as likely to see an increase in employee productivity.

Performance management improves individual and team performance which helps businesses achieve their goals and objectives. For example, if a business objective is to grow revenue, effectively managing the performance of your sales employees can help you achieve this (WillisTower Watson study)

Performance management also allows employees to see how their individual goals align with the company goals and understand how they contribute to achieving those, encouraging engagement.

 The major processes of performance management

The four major processes of performance management are:

-Planning: Managers and employees establish performance expectations and set SMART goals together.

-Monitoring: HR and managers monitor employee performance in relation to the goals set, and provide regular feedback to employees.

-Developing: The data obtained during the monitoring stage is analyzed, and the results are used to improve employee performance through further training, assigning extra projects, etc.

-Rating & rewarding: Finally, employee performance is rated, which helps quantify it and determine the value every employee adds to the company. Poor performance can then be addressed, while excellent performance can be recognized and rewarded.

– Example of performance management?

An example of performance management is HSBC’s HR mobile app which enables employees and managers to easily capture and share feedback and achievements. It combines performance management methods of goal setting, continuous performance management, and traditional performance appraisals.

The app enables employees to manage their performance, track their development, set up regular check-ins with their manager, and access online learning resources, which cultivates a culture of continual growth and strengthens the employee-manager relationship.

Rationale for performance management

If performance management goals are achieved, there are several benefits for both your employees and the wider organization.

-Future-proofing your workforce’s skills

Establishing a continuous line of communication with employees and monitoring their skills, learning, and training developments helps uncover potential skills and performance gaps in the organization. You can then work to close these, providing the business with a strong competitive advantage.

-Increased employee engagement

When carried out effectively, performance management sets expectations for your employees in a transparent way.

It provides them with learning and development opportunities, a clear career path in the organization, and an understanding of their role’s impact on meeting organizational goals. Plus, continuous performance management helps employees feel valued and cared for. That makes them more open to receiving constructive feedback and working to improve.

-Higher employee retention

When an employee can see their progression at work and clearly understands their career path and what they need to do to earn a promotion, it leads to more engaged employees who are likely to stay with your organization.

-Culture of feedback and trust

Establishing a culture of communication, transparency, and trust begins with leadership and HR initiatives that will trickle down to the rest of the organization. That includes the nature of your performance management process and a transparent performance management policy.

When managers are open and give honest, constructive feedback to employees, this encourages employees also to be open and honest, building mutual trust. It also fosters a healthy overall company culture.

-Improved organizational performance

Managing employee performance ultimately leads to significant improvements in organizational performance, including revenue growth and customer satisfaction. Helping your employees learn, develop and perform better in their roles has a positive knock-on effect on the wider business.