The Ultimate Guide to Performance Management
Growing your business and hitting your target key performance indicators (KPIs, the metrics that help to measure long-term growth and the "health" of a company) requires more than just investing money into your product development and advertising budget. You also need to look in the development opportunities within your individual employees if you want to see real business results.
Using your human resources department to work towards improving the performance of your employees is one of the best investments you can make. And one of the most effective ways to improve the way individual employees perform is to put a performance management program in place.
Are you ready to unlock the true potential of your team members? Read on to learn how to use our ultimate guide to performance management in your company!
How Important Is Performance Management?
Implementing a performance management process isn't just about annual appraisals or meeting departmental goals (although those things are important too). It's also about improving performance as a whole, and being able to create goal setting benchmarks to measure how your employees perform.
Without the proper systems in place, you won't be able to gauge where you're losing the most time, what needs to be done to improve the work environment, and which employees are showing leadership qualities that could qualify them for an internal promotion.
And while it may be tempting to ignore these metrics in favor of your traditional metrics, it can be costly. In fact, Gallup estimates that poor engagement costs the U.S economy about ~8.1 trillion each year. Yikes!
So how do you make sure you don't end up contributing to that number?
Task your talent management team members with talking to your employees. Make sure they understand the challenges your teams face every day. Not only will this help to increase engagement overall, it will help you improve your SOPs before bottlenecks start clogging up your workflows.
Take Google for example. They were able to boost their employee productivity by 37 percent just by focusing on the happiness of their team members.
A good performance management cycle is easy to make when your performance appraisal managers and employees are all on the same page. One of the best ways to do this is to focus on the three pillars of performance management and how they can be used to improve engagement.
Three Pillars of Performance Management
It's easy to jump into reforming your engagement plan and change things haphazardly, but that doesn't bode well for long term results. Instead, you need to consider the three pillars of performance management, and how they look inside your current structure. These pillars are:
The organizational structure of your company
The engagement processes in place
How you manage and develop talent
Understanding the gaps in your current performance management process will help you when it comes to development planning.
Organizational Structure
The first pillar is the organizational structure of your company. The hierarchy of your business helps to set a foundation for every other structure in the company, so it's important that you make sure it's solid.
Some questions to consider:
Is the hierarchy of each department (and the company as a whole) easy to understand?
Is it easy for employees to get their questions answered?
Do all departments in your company have clearly defined goals to ensure that no overlapping work is done on projects?
If you answered "no" to any of these questions, it might be time to rethink your organizational structure. Keeping roles separate without any overlapping duties helps with efficiency.
For example, if you run a content production company and your editors and QA reviewers have significant overlap in their job description, you'll lose a lot of hours to a job that's already been done. Clearly defining the role and responsibility of these positions will allow you to get some of those hours back and use them to accomplish more in a day.
Engagement Processes
The engagement process is what most people think of when they hear the words, "performance management." It's all about connecting with the employees and seeing what can be done to make improvements. There are many ways to develop your internal processes, but the most important things to consider are:
Setting a performance management cycle
Creating KPIs for your employees
Making goal setting a priority
Recognizing good performers
This may seem simple enough in theory, but it's surprising how frequently it's forgotten in practice. 72% of employees in the workplace say they get recognition for their efforts less than once a week, which is shocking considering that businesses who show appreciation to their team are able to reduce voluntary turnover by more than 30%!
Considering the costs of employee turnover (like increased recruitment costs, time lost to training, and missed sales opportunities), creating an environment where your employees feel heard and appreciated is clearly the winning strategy. And fortunately, it's very simple to implement.
Set Your Performance Management Cycle
One of the first things to consider is the performance management cycle. What are the steps in the cycle? How frequently will you check in with your employees? What feedback can you give to make real-time employee development possible?
To make sure you're creating a balanced cycle, you need to allow for more than just annual appraisals or quarterly check-ins. While the data you may get from waiting longer may be tempting, the drop in employee morale is not.
Instead, create a reporting system between your human resources department and team leaders. You'll be able to gain more insight into the challenges each team encounters and hear directly from the leaders how good performers are securing wins for their team. It will also give you more information to work with regarding skill gaps, and what training might be beneficial to teams in the future.
Aim to check in with employees a few times a quarter, and be sure to express your appreciation for everyone's hard work frequently.
Create KPIs as Part of the Goal Setting Process
You may already use KPIs to measure the success of your company. But are you using them to help your individual employees perform at their best? If not, you're missing out on a great way to improve the engagement of your employees.
More than 50% of employees don't think they have a chance to advance within their company's hierarchy. That means you may be spending too much money on the recruitment of new talent when you could be promoting employees internally.
Not only does internal promotion help to cut the costs of onboarding new hires, it also helps to incentivize current employees to increase their productivity and look for ways to increase their contributions to the company.
Make Goal Setting a Priority For Your Employees
This step goes hand in hand with creating those KPI's we talked about. When your employees know what metrics you're using to measure their work, they can focus on how they can improve their productivity. Make goal setting a key part of each performance evaluation to help your team stay engaged.
Recognize Your Good Performers
Measuring success within your company isn't enough on its own. You also need to make sure you create practices to celebrate the milestones your good performers hit. Depending on your organizational structure, this may be anything from gift cards and awards to bonuses at the end of the year.
Managing and Developing Talent
Last, but not least, you need to take a look at the way your company manages and develops talent. Some questions to consider are:
Does the job description you post describe the responsibilities of the role?
Are you considering the compatibility of current (and future) employees for their roles?
Does your existing structure encourage real time employee development?
If you answered no to any of these questions, there are significant gaps in your talent management processes.
Job Descriptions
It's important that you are as clear and thorough as possible when you create a job description for positions within your company. Not only does this help to attract the right people to apply to your role, it also helps to define expectations for your existing employees. A good job description has:
The purpose of the position
Clear descriptions of the responsibilities and duties
Qualifications for the role
Actionable goals
Sharing this information with potential candidates and employees allows them to understand how their work directly impacts the success of the company. Additionally, it has the added benefit of ensuring that candidates looking to fill the role understand exactly what the job entails and are less likely to be unhappy with the position in the future.
Considering Compatibility
Many companies make the mistake of evaluating the compatibility of a candidate against the company culture and job requirements. Instead, they simply focus on making sure the candidate they hire (or promote) has all of the necessary qualifications.
While it is important to make sure your employees have the necessary knowledge to fulfill their duties, it's also important to make sure the person you place in a role has the ability to do their job well. And one of the best ways to do that is using Predictive Index (PI).
PI measures the motivations, drive, and traits of your employees, and then uses that data to help you make informed decisions about how an employee may perform in a certain role. It goes without saying that someone who loves their work is much more effective than someone who isn't invested.
Using PI allows you to identify the individuals who are best suited to take on a position, ultimately helping your business' productivity (and profits).
Encouraging Real Time Employee Development
Once you've found an ideal fit for your job, one of the worst things you can do is let that talent go to waste. The same traits that made a candidate great for their current role are often behaviors that will also make them excellent candidates for other leadership positions.
One of the best ways to promote talent internally is to use PI as a way to measure an employee's potential for more senior positions. As your employees grow with the company, you can use their KPIs and PI results to keep an eye on promising talent.
Have your performance appraisal managers and employees look into ways they can train the talent in your company to fill skill gaps necessary for higher ranking positions.
Are You Ready to Improve Your Performance Management Processes?
There are a lot of factors that go into creating a great performance management system. Although there are many key components to creating a winning strategy, using data to make informed decisions for your business is always the best place to start.
Gathering the information you'll need to update your processes can be a daunting task, but we're here to help!
Do you want to learn how PI can optimize the talent in your company? Try our free demo to see just how easy leveraging your insights can be!