Performance Management Dissected

I think the term ‘Performance Management System’ is intended to evoke images of a smooth system where you feed an appraisal form in at one end and a wonder-employee magically pops out of the other end.  In reality, I think most people hear it as hard work and needless form-filling.
Although anecdotally the reputation of ‘appraisals’ is not great, studies show they can be measurably valuable.  As well as employee benefits around increased communication and satisfaction, studies show that a good performance management system, “increases both organisational sales and profits, and reduces overhead costs by 25%”.
So, what does it actually mean and how do you make sure your performance management system isn’t a waste of time?
The primary differentiator of an effective performance management system is alignment to organisation goals and values.  Everything in rooted in the overall goals of the organisation.  If employees have objectives, they specifically correlate with their role in what the department or organisation needs to achieve.  Similarly for behavioural expectations.
This gives the sense of a complex bureaucratic process, but the most effective processes do this with little paperwork and lots of open conversation.  With effective alignment every employee is focused on, measured against and motivated toward achieving the right things for the organisation as a whole, and more importantly their managers are able to support them in doing that without undue conflict.
Get specific
In order to actually enable performance, expectations need to be specific.  This includes expectations as to what support will be required and available, what exactly the employee is expected to do and by when, and what the consequences are of good, bad or indifferent performance.  This is not the same as micro-management.
Many organisations find it difficult to get specific for more senior employees, particularly as a lack of prescribed direction and an ability to determine their own path can be an important part of the role.  This often needs a little more creativity but a clear specific result or expectations should still be agreed in order to enable effective performance management. The more clarity someone has on the result that is needed, the more autonomy they can have in how they get there.
Put down the appraisal form and talk.  Talk regularly, talk meaningfully, talk casually, talk about the specific objectives, talk about what is going well and challenges. Employees and their managers should always know how well they are performing, regardless of when the last formal appraisal meeting happened.
High performing organisations don’t just manage current and past performance but they set themselves up for optimum future performance.  This means understanding future needs and setting employees up to be able to meet those.  Whether it’s as part of a formal annual process, or over a cup of tea at the start of the day, regular discussions about employees’ development can be invaluable.  Particularly when those discussions are focused on recognising and making the most of employees’ strengths.  It can lead to increased engagement, higher performance and can actually lower spend on training, as opportunities for (far more effective) on the job development can be better recognised and leveraged.
Yes, as much as I try to avoid the dreaded appraisal form taking over the process, some records are beneficial.  A concise, focused and agreed review document that regularly captures the essence of conversations can be useful.  It ensures continuity for the employee through management changes, it enables reflection on longer term progress, and it helps the organisation to take action on poor performance or reward high performance.  But, please, let it be a small cog in the process, not the whole machine.
If you’d like to debate the pros and cons of your current performance management system take a look at one option here.