Performance Management Strategy: Its 8 Components

If people are the greatest creators of value in organisations, then a performance management strategy is critical for an organisation’s success.

We’ve curated the ultimate A-Z of Performance Management. And below, you’ll find the 8 fundamental elements to consider to build happy, high performing teams.

Good performance management is critical for an organisation’s success

The statistics around performance management tell us a worrying story:

77% of HR professionals believe their company’s performance management tools and processes aren’t an accurate representation of employee performance.
Fewer than 50% of employees feel as though they understand their current work expectations.
8 in 10 employees feel current performance reviews are at best ‘average’ at improving their performance and future development.

Sound a little too familiar? Then read on.

1. Alignment is needed for your performance management strategy

Forbes found that 91% of companies with exceptional performance said that employee goals were explicitly linked to wider organisational objectives. Clearly then, goal alignment is essential if you want your people to perform at the superstar levels they’re capable of reaching.

Using goal-setting for each person in your team and ensuring these goals are clearly linked with bigger company objectives is a must for every manager. But why?

Well, top-down alignment between what your people are asked to do and how it impacts outcomes gives staff two things: autonomy and purpose. Psychology tells us that these are two of the three key elements in human motivation. The third being mastery.

So, by helping your people understand the bigger picture, and how what they work on day-to-day impacts the organisation, you’re increasing their motivation to get sh*t done. And managers are the perfect drivers of this initiative.

Managers should continuously coach employees to set and meet aligned goals. By doing so, performance will be easy to measure and address.

2. Bias will affect employee performance

Humans are imperfect, yes even you! As much as we may try to avoid it, our own attitudes, thoughts and experiences impact everything we do. Social, behavioral and neurological studies show that at both a conscious and subconscious level we bring biases into all we do. This includes how we design, develop and implement an effective performance management strategy at work.

Unmitigated biases will dilute objectivity and fairness in an organisation and can negatively impact employee productivity, engagement and wellbeing. Biases that impact performance management include:

Recency bias: We are far better at remembering recent events than we are older ones. If you were to try to remember the past 12 month’s performance levels of a random member of your team now, the likelihood is you’d naturally focus on the most recent achievements.

Confirmation bias: We look for information, data and experiences that support our current view. We’re more likely to ignore or downplay anything that goes against our current thinking.

Avoid bias by doing these 3 things:

Awareness: acknowledge that you’re likely under the influence of biases.
Challenge: ask your peers to review the processes you’re suggesting. A fresh pair of eyes gives a new perspective.
Technology: look for tools that offer objectivity. If a potential vendor skirts around any questions about biases, then you’re better looking elsewhere.

3. Continuous Performance Management

Effective performance management is a continuous, always-on exercise. Managers need to offer their teams a channel to discuss performance when they need to discuss it, not when the diary deems it time.

That’s because traditional performance management typically revolved around setting a few high-level targets at the start of the year. And, at best, running review sessions at 6 and 12 months.

Sadly, traditional employee performance processes are a waste of time.

The key hindrance to performance management? The time between any relevant interaction. In between goal-setting and a performance review, objectives may well shift. Think back to the start of the pandemic for some monumental scope shift. With months to wait for a review, issues have time to fester.

The best companies use a mix of tools at different cadences to ensure performance is talked about frequently.

Here’s what a modern, continuous performance management strategy looks like

Weekly employee check-ins: These are light-touch, high-frequency check-ins allow managers and their staff to raise issues, celebrate wins and give recognition in a timely way.

Monthly 1:1s: Nothing beats a proper conversation. Plenty of performance management takes place at serendipitous moments at the water cooler or over the top of a computer screen. But making sure all your people have a monthly slot to sit down and discus things with you is essential. The feedback received from the weekly check-ins can help shape these conversations and questions should look to build upon that.

Quarterly conversations: Performance reviews work when they’re part of a continuous approach to performance management. They don’t work in isolation. Using the outcomes and data from the weekly check-ins and monthly 1:1s means performance reviews are evidence-based, focused on real events and can help shape development.

Because a business’s success and reputation relies on its people, having a healthy and satisfied workforce is key to ensure maximum productivity. Employee engagement and performance management have traditionally been two separate parts of HR’s role. But both need to be better aligned for organisations to get the most from their people.

Harvard Business Review in 2020 found that 79% of business leaders strongly agreed that their engaged employees were also their most productive. 69% also stated that it’s impossible to improve performance without also improving engagement. What we need here is alignment.

Processes that focus only on engagement and that aren’t linked to performance management may not serve the organisation’s best interests. It’s only by bringing the two concepts together that HR can create programs that lead to happiness and success at work.

The trouble is these two activities have come from very different parts of HR, with performance typically focused on assessment and engagement typically more focused on listening and feedback. Bringing the two together requires a new approach. Having integrated systems and processes is the ideal, but the reality is that most organisations still operate with engagement and performance management in silos.

This is where managers come in. The manager’s role in integrating a strategy that considers employee engagement and performance management is critical. The same HBR study showed that the greatest impact on employee engagement is an employee’s relationship with their direct line manager.

As a manager, focus on building trust, setting goals, and prioritizing workplace feedback, to improve engagement in your people that will lead to organic performance improvements.

5. Goal-setting keeps performance top of mind

Helping employees set and reach goals is a vital part of every manager’s job. But ever wondered why? It feels just like something we’ve always done, but there are clear reasons why.

Firstly, your employees want to see how their work contributes to larger organisational objectives and setting the right targets makes this connection explicit for them.

Goals act as motivational targets for people to work towards. Autonomy and purpose are two key elements of human motivation. By setting goals we give people clear purpose and allow them to be autonomous in their day-to-day work.

Goals by their own nature make us more productive (regardless of what the goal itself is) and improves employee performance. One study found that people who had goals set were faster at completing tasks than those offered financial rewards for better performance but no clear goals. That’s where a clear performance management strategy comes into its own.

And finally, and perhaps most obviously, goals are a measure. They are a yardstick against which we can see how productive we are being, what successes we have had and where improvements can be made.

Managers need to set clear and actionable goals for their team, check-in frequently to ensure these goals are still appropriate and give feedback when required on progress.

Need some more info on goal-setting? Head to OKRs and SMART goals for more detailed insights.

6. Transparency means people understand how their work contributes

Transparency is a top priority in successful organisations.

This isn’t just because it’s the right thing to do, but because seeing things more clearly has been shown to boost employee engagement and performance. Studies have found that management transparency is the most significant predictor of employee happiness. And leaders who practice transparency and positivity are seen as more trustworthy and more effective. Using OKRs or prioritising open workplace feedback all help make performance a more transparent process.

Anonymity is the silent killer of accountability. So as a manager, ask yourself what your employees don’t currently have oversight on, if that’s a necessity and what can be done to be more open if possible.

7. Visibility helps your employees feel seen

Employee performance increases when staff feel their efforts are being recognized. And not just by their direct manager but those higher up and in other teams. So ensure you champion your people.

By shining a light on the great work your people are doing and promoting them through the organisation, you increase the likelihood of two things. Staying with your business, and being considered for additional responsibilities and promotions.

But how do you give your team visibility?

Well first off, make celebrating success regularly a priority in your team. We tend to focus on the negative both as managers and employees. Empower and encourage your people to shout about their wins, to congratulate their colleagues on a job well done and make sure you pass on a personal congratulations.

By doing these things you start to build a culture that makes sharing great work more likely and easier. Once this starts happening, the job of promoting this outwardly is far easier.

Zensai connects to a Microsoft Teams channel, offering even more ways to help you shout about the great work being done by your team. But it can be as simple as sending an email to your manager that outlines the great work your people are achieving.

8. Wellbeing affects all areas of your employee performance performance strategy

If your people aren’t feeling their best, they’re unlikely to perform at their best.

Wellbeing is a critical part of the employee performance process. With managers and businesses offering channels for employees to seek advice and support when their wellbeing is being impacted.

There are five wellbeing pillars which are inter-connected and impact one another.

Why does this matter? A 2021 Indeed study shows employee burnout is up. 52% of people have felt the effects of burnout at varying degrees over the past 12 months. With burnout leading to increased levels of stress, lack of sleep, increased absenteeism and ultimately higher levels of staff turnover. This is not good news for performance and productivity.

Build a performance management strategy underpinned by the right people, tools and tactics

Great managers look at performance as a more holistic beast. They know that engagement, wellbeing, communication, and technology play an important part. And they know that traditional performance management has a bad reputation. So here’s what you need to reverse it: