What is performance management and why do so many businesses consider it an important element of their talent strategy? It’s all about the benefits it can provide employees and your ability to manage and develop them.
CEOs, directors, influencers and big names in business regular preach the importance of performance management — the act of engaging with an employee to review their ongoing workplace performance and development. The process of performance management combines information gathered through the monitoring of goal completion, feedback and discussions. By analysing successes, strengths, learnings from mistakes and potential for growth and development, businesses can develop talent, enhance working performance and weed out problems.
Continuous Performance Management vs. Annual Appraisals
There are currently two main approaches for managing talent progression:
- Continuous performance management
- Annual appraisals
Many businesses, 65% in fact, are still using annual appraisals over continuous performance management. This traditional approach entails a one or twice a year formal review whereby an employee’s performance over the last 6-12 months is assessed and future targets or objectives are set.
Conversely, continuous performance management involves regular check-in meetings combined with frequent real-time feedback with the aim of improving performance on an ongoing basis.
Annual appraisals are dying off in favour of continuous performance management. Despite the number of companies still using yearly reviews, the numbers are rapidly tumbling as businesses recognise the problems inherent with annual appraisals and move to new ways of managing their talent.
But why is performance management important at all? Do you really need to be keeping such a close eye on what your workers are doing?
Why is Performance Management Important? The Undeniable Benefits of Continuous Feedback Processes
Reward and Recognition
Rewarding and recognising your employees can be hugely beneficial to your business. A survey by American Express revealed a third of companies believe reward and recognition systems result in better staff retention, while half also attribute greater motivation to offering incentives.
Yet meaningful reward and recognition systems can only operate in businesses where there is an accurate and visible process of performance feedback and discussions. Continuous performance management enables management to identify activity worthy of praise or reward. It allows them to see when employees go above-and-beyond, track progress against goals and personal development and make informed decisions about additional compensation, such as pay-rises or bonuses.
Meaningful reward systems are immensely important for employee happiness. Here are a few key statistics to consider:
- 83% of employees that work in an environment with good reward and recognition structures say they are content in their position.
- 69% of workers will work harder if they know their work is valued and appreciated.
- Businesses that have effective reward structures enjoy an almost 50% rise in employee engagement.
Boost Engagement and Productivity
Engaged employees stay longer, actively involve themselves in the workplace and produce better results. Keeping an employee engaged is key to boosting productivity and maximising ROI. Performance management, done well, is a vital tool for having engaged employees.
Continuous performance management creates an ongoing dialogue and an atmosphere of trust, support and encouragement. It helps develop a relationship between employee and company. If an employee is aware that their manager and the business cares about what they are doing and is dedicated to helping them not only do it better but progress in their career, they are far more likely to engage with the company.
Consider a business where managers only speak to their employees once a year about their progress. For most of the time, the employee is not connected to the direction of the company or team. There is little consequence, need or benefit to engaging. However, when a company is consistently engaging with its employees, encouraging them to grow, and setting goals that stretch and develop them, there is genuine connection and increased likelihood of ‘discretionary effort’.
Create Development Strategies
Continuous performance management means you are proactively developing employees. You are regularly discusssing their strengths and what skills or behaviours need development. By combining this with flexible personal development objectives, businesses can cultivate talent in a way that is simply not possible with once or twice a year appraisals.
Use the information you collect, and the discussions you have, to grow talent through strategies that not only play to employees’ strengths, but also reflect the direction the business is heading. Having a consistent understanding of your employees’ abilities, along with an agile platform that allows you to regularly shift priorities and focus on new areas of development, produces an environment where your workers are constantly moving forward, while doing so in a direction that is ultimately providing the maximum possible benefit to your company.
By failing to consider the importance of performance management, the employee-business focus can become misaligned, goals can become irrelevant and employee potential can be squandered.
Ensure Workplace Clarity
It is surprising and rather worrying to hear that studies have shown that around 50% of employees aren’t clear on exactly what their role within the workplace is or what goals they are trying to achieve.
This is another reason why effective performance management is so important as it can eliminate employee ambiguity and confusion. Having regular, future-focused conversations through continuous review processes helps to ensure that employees are clear on everything that they are supposed to be doing and what is expected of them. The process also ensures that management in touch with the work that is being delivered and are able to identify when performance is dropping off as a result of lack of job clarity.
Performance management is vital but easy to over-complicate. Simplify your performance management systems with Clear Review’s innovative software purpose-built for agile goals, continuous feedback and meaningful conversations.