‍What is Performance Management? [2022 Guide]

October 6, 2021
8 Min Read
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Dmytro Novitskyi

Table of Contents:

What is performance management?

Performance management is how managers set employee goals, track their progress, hold them accountable for achieving those goals, and provide continuous feedback. The stated goal of the performance management process is to increase individual employees' performance through employee development.

The performance management cycle begins with employee performance appraisals, which managers use to hold employees accountable for their work. Managers then provide employee performance feedback through a process referred to as performance management or employee development. This employee feedback is designed to help the employee improve their skills and behavior to increase effectiveness at work. 

Ideally, this cycle of setting smart goals, tracking progress, holding employees accountable for achieving those goals, and providing employee feedback should continue throughout a company’s tenure.

Depending on the employee and organization, a performance management system can be relatively informal or very formal. The more complex the job, the more likely the managers will need to provide employee feedback in a formal setting; for example, employee feedback for a customer service representative may take place during an annual performance review conducted by the human resources department. On the other hand, employee feedback for a sales manager may occur informally throughout the year via brief daily discussions with their direct reports about their progress.

7 types of performance management programs

“A really effective Performance Management program is closely entwined with the needs of the organization and looks at talent development as central to the conversation, as well as embracing regular discussion and feedback.” – Kevin Lyons, Senior HR Manager, Pearson 

There are several different types of effective performance management programs, each with different goals for employee development. It is common to use several programs in succession until employee engagement reaches desired levels.

Below is an outline of the seven different types of continuous performance management programs:

  1. Developmental Feedback - Giving constructive feedback on how well someone is currently performing; may include both positive (e.g., strengths) and negative (e.g., areas that need improvement) elements
  1. Formal employee appraisal - A more formal process that typically occurs annually and results in the employee receiving a performance evaluation and an accompanying compensation adjustment (if any)
  1. Informal employee feedback - Employee feedback that is not part of a formal process; may be given throughout the year or after an employee completes major projects or assignments for the company
  1. Coaching Session - Coaching sessions are set up by someone who wants to develop their skills, uncovers strengths and weaknesses, identifies what needs to be improved, how to improve it. From both supervisor & employee perspectives: Supervisors should know why they gave certain instructions. An employee will get a better understanding of what others expect from them. Both employee & supervisor will improve employee's skills.
  1. 360-Degree Feedback - Feedback is collected from multiple sources, with people being asked to rate the individual being reviewed on several different performance dimensions. The 360 can be used in both employee appraisal and employee engagement contexts.
  1. Peer Review - Employees are asked to provide input toward another employee's performance, often in conjunction with an evaluation process or as part of performance management training for new managers.
  1. Workplace Observation - Managers observe employee’s professional behavior in action. Although there have been concerns about its reliability, observation has emerged as one of the most valid employee evaluation methods. This type of employee feedback is probably more common in call center settings, where employee behavior is easy to observe and harder in office settings.

The importance of employee feedback in performance management

To a large extent, employee feedback is what performance management is all about. Feedback is valuable to the employee receiving it and provides valuable information that can be used for a development plan. However, it does not have to be complicated or involved. Some employee feedback may occur as part of formal employee appraisals, whereas other employee feedback occurs informally between employee and supervisor.

In general, formal employee feedback can be very helpful in employee development and continuous performance management. When employees better understand what is expected from them at work, they become more productive. Additionally, when objectives are set up formally with employee feedback early on, employee satisfaction is greater, and employee performance is better.

Is performance appraisal part of performance management?

Although employee appraisals are typically associated with effective performance management, employee feedback - whether given informally or as a part of formal employee appraisals - is essentially all performance management since employee feedback is central to employee development and understanding what is expected from employees. In other words, it helps to create a performance management system.

In an employee development context, employee appraisal refers to a formal process that managers use to hold employees accountable for their work by setting goals, tracking progress, holding them accountable for achieving those goals, and providing employee feedback. When viewed through the lens of continuous performance management process instead of employee appraisal, employee feedback becomes a more fluid concept that can happen throughout the year or multiple times a year.

Performance management technique has evolved into a more proactive approach toward employee development than just doing annual appraisals with workers. The traditional appraisals have sometimes been described as "passive" because they typically occurred only once a year and required little employee input in the process, they were typically forced upon employees who had little to say about how they would be rated.

It's clear that employee feedback is important for performance management and employee development; employee appraisals are just one tool used by managers to get employee feedback. Feedback can come in many different forms depending on the particular situation and job function. Some organizations may use formal employee appraisal programs like 360-degree feedback or peer reviews instead of employee appraisals. Others will use coaching sessions to help employees develop performance improvement plans; others will use workplace observation to collect employee feedback.

Some companies have taken employee performance management strategies beyond annual performance evaluations, utilizing more frequent interactions like coaching sessions or holding informal meetings. These employee feedback opportunities allow monitoring employee progress throughout the year and help employees develop skills in different areas.

Performance management ideas

Ideas can come from employee feedback opportunities offered during employee reviews, employee appraisals, coaching sessions, or work observations. It's about providing employees with continuous communication about their progress to develop skills and achieve goals. Here are some employee development ideas to consider:

  1. Employee reviews - A formal process for managers to discuss employee performance. Although reviews occur infrequently, it's a good opportunity for employee feedback and employee development.
  1. A coaching session - When an employee wants to discuss something or needs help with learning a new skill, it may be useful to set up
Some performance management ideas include:
  1. Employee performance reviews/evaluations
  2. Employee appraisals
  3. Coaching sessions
  4. Work observations by managers, peers, or others.

Some organizations may choose to set up coaching sessions with employees to help them develop performance using some practical performance management tools or hire someone to come into the office and observe employee behaviors on a regular basis. These are all employee feedback opportunities that can help managers provide employee development and foster employee performance management.

Some of the different types of employee performance programs include:
  1. Formal employee evaluations or employee appraisals - This is typically done with employees once or twice per year. A portion of the meeting is devoted to discussing progress toward short-term goals. Another component involves identifying new skills that would help them improve their performance in the future.
  1. 360-degree reviews/feedback - Employee feedback comes from many sources, including peers, subordinates, customers, supervisors, etc., instead of just one boss sitting down for formal interviews with employees to discuss their job performance.
  1. Coaching sessions - Employee feedback come through coaching sessions where managers meet with their employee for 30 minutes to an hour frequently throughout the year to discuss employee performance and provide employee development.
  1. Work observations - Managers can watch employees in action and develop ideas about where they need improvement or how to better motivate them across all levels of employee performance review, from entry-level to executive meetings.
  1. Action plans - This is a step further than employee feedback because it involves developing a plan for employee development that could include getting extra training, working on communication skills, etc., targeted at areas for improvement identified at the formal performance appraisal meeting.

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