Performance Management Process | 4 mins read

Step-by-Step Guide to Create a Performance Management Process

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Hanh Truong

By Hanh Truong

What is a Performance Management Process?

A performance management process is a cornerstone for successful businesses. This practice enables employers and employees to give and receive constructive feedback on how both parties can improve and leverage skills. Generally, the process entails a series of steps where managers and staff members collaborate and review achievements and set new objectives.

Having a robust performance management process is important for all people and departments across a company. According to a study, organizations that provide employee feedback regularly have turnover rates that are almost 15% lower than companies that do not. This can be attributed to the fact that effective evaluations can boost employee morale and engagement. Through the performance management process, employees can identify growth opportunities and refocus their career goals. As a result, employers can retain their top talent and effectively grow their company.

4 Steps to Create a Performance Management Process

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Performance management processes will vary from business to business, as it depends on the technique and company mission. However, there are various steps that serve as a foundation for most practices. The following 4-step guide is the most common performance management system.

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1. Planning Ahead

To begin the performance management process, employers must plan. With a well-defined outline, companies can conduct reviews and set goals without any delays. This stage entails 3 key pillars - defining goals, giving feedback, and finalizing.

  • Defining - For this part of the planning stage, management and human resources representatives must delineate job responsibilities. It would be helpful to write down a thorough description, as well as objectives and key performance indicators (KPIs). Having KPIs will make it easier for employers and employees to measure their goal achievements in the future. Experts recommend that the goals are formatted using the SMART format, which means ensuring objectives are specific, measurable, attainable, relevant, and time-sensitive.
  • Feedback - After defining goals and KPIs, employees should then be given the chance to review them. At this step, they can give feedback and share insight into what other skills and goals are necessary for their position.
  • Finalize - At this step, managers and employees finally agree to the purpose of the role and its goals. By planning collaboratively, employees will feel involved in the performance management process. It also ensures their concerns are taken into consideration from the start.

2. Coaching Staff

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The coaching step entails training employees and having regular discussions. Typically, businesses will have quarterly check-ins, however, monthly meetings are helpful as well. By coaching, employers can make sure that expectations are communicated well to employees and that they are internalizing the feedback given.

It is important that during the coaching phase, managers ask employees for honest feedback. Since they are working directly in the role, they will have real-time insights into whether goals are attainable or not. If necessary, objectives should then be revised and adjusted according to company and employee needs.

3. Conducting Reviews

Usually, by the end of the year, managers will conduct performance reviews. Also known as performance appraisals, these discussions will reflect the employees' work over the span of the year. Managers should have concrete examples to supplement their evaluations and touch base on the staff members' strengths, weaknesses, and areas for improvement. Other factors employers should incorporate for this stage include the following.

  • Assess the performance management process - This is an ideal time for employees and employers to look back at the performance management process and determine if it was effective. Some questions to ask include - Did employees face any challenges? Could the training program be improved? Did the check-ins help employees?
  • Review goal achievement - The reviews should assess whether or not employees reached their personal and organizational goals. This will help managers determine which employees need additional training and which succeeded and should be rewarded.
  • Provide actionable feedback - During the performance appraisal, managers should give actionable and meaningful feedback that employees can use to improve their capabilities. Staff members should also get the chance to review their managers and help them identify room for improvement.

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4. Taking Action

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Finally, after conducting the face-to-face evaluation, managers can conclude the performance management process by rewarding top employees. This is a proven way to keep employees motivated for the next review period. Some ways employers can recognize employees' hard work include raising salaries, giving bonuses, increasing time off, or offering promotions.

Managers should also start planning for the next year's performance management process by establishing new goals. Feedback from the third stage will be useful for this step, as managers can also revise their evaluation cycle. With an eye on the future, companies can effectively grow and thrive.

Key Takeaways for Performance Management Process

  • A performance management process is a series of steps where employers and employees work together to measure goal achievement and share feedback.
  • Successful companies will have a performance management cycle to communicate goals and ensure employee productivity.
  • Employees who regularly receive feedback are also more likely to have job satisfaction.
  • The 4 key steps to creating a performance management process include planning, coaching, reviewing, and taking action.

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