How to Build Effective Performance Management Systems

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Throughout shifting business structures and workforce dynamics, a functional performance management system remains the common denominator for any successful business.

 HR departments across the globe are prioritising their performance management and policies in an effort to be more compliant. The issue is that while many of these systems make sense on paper, a common complaint is that employees often feel disengaged, finding the process lengthy and unnecessarily convoluted.

According to Michael Armstrong, ‘’Per­for­mance man­age­ment is the con­tin­u­ous process of improv­ing per­for­mance by set­ting indi­vid­ual and team goals which are aligned to the strate­gic goals of the organ­i­sa­tion, plan­ning per­for­mance to achieve the goals, review­ing and assess­ing progress, and devel­op­ing the knowl­edge, skills and abil­i­ties of peo­ple.”

 An effective performance management system should involve a two-way discussion between managers and employees. Rather than feedback coming in at mid-year to end of year reviews, a truly successful performance management system should involve constant communication between managers and employees to ensure a company-wide effort to achieving business objectives.

Key components of an effective performance management system

1. Set Goals

 The goals you set for your business should be clear, and employees should have the full context on how company goals will further larger objectives.  Where company goals used to trickle down from supervisors and managers, modern organizations have evolved into making sure that everyone is aware and involved in the goal-setting process. With this insight, employees have the context to align their work with the larger organizational objectives, ensuring constant forward movement on every level of your organization.

2. Use multiple data sources

An efficient performance management system should use a multi-rater feedback system. When managers rely solely on their perceptions of a person’s performance this can introduce “rater bias.” However, when the manager’s evaluations are peer-reviewed this lowers the chances of a biased response, ensuring a fair and accurate assessment of each employee.

3. Invest in Regular Feedback Systems

 Feedback is a vital part of successful performance management because it allows businesses to course correct in a targeted way. Upping your performance reviews makes a huge difference in how quickly managers can address performance issues. Transparent feedback systems not only helps managers identify performance issues, but also provides them with insights on how to better support employees, benefiting overall performance and productivity for businesses.

4. Recognise Achievements

 Recognition of hard work boosts company morale and overall engagement. A key part of performance management is rewarding good performance—allowing your company to model employee behaviour and encourage constant buy-in to company goals. To ensure a fair evaluation, rewards should be based on a formal record of outstanding performance.

5. Ensure Employee Development.

 Lastly, a successful performance management system should meet two objectives; to clarify job expectations while developing key skills. Career advancement and development are important to employees and is a motivating factor in employee retention. Employees should be in an environment that encourages constant growth, and ultimately, a skilled workforce forms a successful business.

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