The Performance Management Process: Your Ultimate Guide

By Indeed Editorial Team

Published 9 August 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Performance management is an important part of running a successful business. It allows employers to optimise their employees' strengths. The protocol also gives employees important feedback about areas to improve on. A solid performance management process is key and can provide many benefits for both employer and employees. In this article, we discuss what a performance management process should include and how to use it effectively.

What is a performance management process?

A performance management process is a set of consistent protocols used by management to track their employee's performance. It is about giving employees constructive feedback regarding their roles and responsibilities. It can be an open discourse between employer and employee, providing useful information to both.

A performance management process should be used consistently across the workplace. Many businesses schedule performance meetings once a month. While it's important to provide suggestions for improvement, it's equally as critical to give positive feedback. The employer can aim to leave their employees feeling both appreciated and heard.

Related reading: What is a Performance Review and Why Does it Matter?

The benefits of a performance management process

A performance management process should benefit both the employer and employee. It's important for encouraging communication between management and employees. A consistent performance management process can have a range of benefits including:

  • Provide employees with constructive criticism

  • Provide employees with positive feedback

  • Give employees a chance to ask questions

  • Give employees a chance to discuss development within their role

  • Provide a healthy workplace where open discourse is encouraged

  • Boost efficiency within the business

  • Give employers a chance to restructure roles and responsibilities

  • Gives employers insight into each employee

  • Support accountability within the business

  • Support a continual goal of progress

  • Increase productivity

  • Improve communication

  • Reduce stress for both employees and employers

  • Manage expectations

  • Create a positive workspace

  • Potentially increase profit margins

  • Potentially reduce employee turnover

How to use a performance management process

A performance management process should be used regularly and consistently. Instead of sticking to yearly reviews, a performance management process can be employed monthly or quarterly. It offers employees a chance to hear micro-feedback and appreciation throughout the year. To create this process, you can do the following:

1. Clearly define expectations

Every role should have a clear job description that establishes the responsibilities clearly. This can include a management chain of command. Each employee should be given this description to refer to. It gives them a clear outline of their expectations. This can be used as the base in each individual performance management meeting.

2. Provide managers with training

Managers may need the tools and knowledge to implement and use a performance management process. It is important that they are provided with training so that they can provide consistent and objective performance meetings with their employees. Additionally, it is also important that managers are kept accountable and regularly checked on.

3. Provide the correct resources

The performance management process may not work as effectively if employees are not given the correct resources to improve their performance. To avoid this, managers can facilitate the necessary tools for each team member and encourage growth. If there is a crossover between issues found in performance management processes, these may need to be addressed by management. Providing sufficient resources can help elevate productivity.

Related reading: 360 Performance Review: What are They and How They Work

What is the aim of a performance management process?

An effective performance management process should aim to achieve the following:

  • Clarify role responsibilities and duties

  • Increase productivity on an individual level

  • Increase productivity in your team

  • Strengthen and support your employees' abilities

  • Provide feedback and coaching

  • Encourage behaviour that aligns with your business values and mission

  • Improve communication between everyone

  • Enable restructuring if needed

Related reading: Management Styles: Overview and Examples

The steps of a performance management process

When setting up your initial process for performance management, try to consider a variety of steps. You can maintain these steps and review them at least once a year. A good performance management process involves upkeep. Here are the steps to consider:

1. Explain

You cannot expect employees to perform if they do not know what is expected of them. Begin by explaining their exact role description and responsibilities when you initially hire them. Aim to remind them during the training process. Is it typically much easier for workers to be successful when their expectations are clear.

Related reading: How to Welcome New Team Members (With 30 Examples Messages)

2. Plan

Next, plan your levels of satisfaction. You may also benefit from explaining this to your employees. It gives them a base to work from, and knowledge of how to exceed your expectations. Here is an example:

  • Poor: fails to complete daily, weekly or monthly tasks that are expected of them.

  • Satisfactory: completes tasks in a timely and acceptable manner.

  • Distinguished: completes tasks on or before time, includes extra detail that goes above and beyond the job description, actively seeks extra tasks or ways to improve business.

If an employee is consistently getting poor or satisfactory levels, aim to address why. You can then see whether they have the tools and knowledge to conduct their role effectively. You may need to provide extra training or reassign work to lessen the load.

3. Monitor

It's important to monitor your employee performance. Some jobs are easy to monitor as they have objective indicators such as sales numbers. Other jobs are subjective and cannot be monitored by numbers. It's important to recognise both and monitor your employee's performance accordingly. Here are some ways to monitor performance:

  • Numbers: this may include sales or profit margins

  • Customer satisfaction: in the form of online reviews or positive client emails

  • Attitude: performing tasks with a positive attitude that boosts office morale

  • Innovation: finding new ways to improve the company's performance

  • Dedication: arriving to work in a consistently timely manner and always striving for excellence

4. Reward

As you monitor employee performance you can set up a reward system or incentive program. It's important to be consistent, fair and inclusive when you do this. Make sure all team members have an equal opportunity to receive a reward. You can also make sure the rewards are suitable for everyone. One way to create a fair reward program is with a numbered system. Here is an example:

7 – Consistently performs to a distinguished level

6 – Almost always performs to a distinguished level

5 – Performs to a distinguished level 50% of the time

4 – Consistently performs at a satisfactory level

3 – Performs at a satisfactory level 50% of the time

2 – Performs below a satisfactory level

1 – Consistently performs at a poor level

During your performance management process, you can award each employee with their score for that month or quarter. Rewards may include gift cards, an extra day of leave, a paid lunch etc. You can create a leader board to promote healthy competition, however, do not name people who scored poorly. Be sure to keep morale positive.

5. Review

Finally comes the review process. You can schedule each employee review in a consistent manner that suits their schedules. Consider bringing their job description, your rating system and notes from their past performance. Go through the constructive criticism first and allow them to ask questions. Provide them with any further tools they may need to improve.

You should end with positive feedback and their reward system score. Make sure you balance each performance review with both constructive criticism and positive feedback. You can compare old performance reviews to show progress or question areas that need improvement. It should also be a chance for your employee to ask about development and promotional opportunities.

Related reading: The Main Components of the Communication Process

Frequently asked questions

Here is a list of the most commonly asked questions regarding the performance management process:

What is the difference between a performance management process and a yearly review?

A performance management process allows you to give employee feedback throughout the year. It gives your employees the chance to improve on a micro level before they receive their yearly reviews. A yearly review happens once a year and usually includes pay rise and bonus information. Having a performance management process is an effective way of consistently supporting improved productivity by keeping employees accountable more often.

What is a performance management policy?

A performance management policy provides an outline of how good or poor performance is addressed. It is a consequence list that accompanies the performance management process. Such a policy can set out expectations and guidelines on how performance matters are dealt with. It's important to note that this is different to a disciplinary policy.

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