Managing employee performance deals with an organization's strategy, policy and practices with respect to establishing performance expectations for its employees, along with measuring and monitoring the results. A comprehensive performance management system can play a strategic role in attracting and retaining key employees. It can also help significantly improve a company's overall business performance. The article does not deal with disciplinary actions or termination for poor performance.
Elements of Performance Management
Effective performance management systems typically include the following three broad elements: goal setting, performance review and a performance improvement process. Employers may use a multitude of options in the execution of the performance management process, but an effective system will incorporate the three basic elements in some form.
Element one: goal setting
Goal setting is a process of establishing objectives to be achieved over a period of time. It is the performance criteria an employee will be evaluated against. Performance goals for individual employees should ideally align with organizational goals.
Common types of goals include the following:
- Job description goals: Goals may be based on the achievement of a pre-established set of job duties from the description. These goals are expected to be accomplished continuously until the job description changes. Examples might be financial, customer oriented, or process- or system-oriented goals.
- Project goals: Goals may be based on achievement of a project objective. These goals may be set for a single year and changed as projects are completed. Job description and project goals are "what" needs to be accomplished.
- Behavioral goals: Goals may be based on certain behaviors. These goals are expected to be accomplished continuously. Behavioral goals are "how" things need to be accomplished.
Element two: performance review
Performance review is the process of assessing an employee's progress toward goals. Strengths and weaknesses of all employees are recorded regularly so that the organization can make informed and accurate decisions regarding an employee's contribution, career development, training needs, promotional opportunities, pay increases and other topics. Performance review and evaluation involve the objective and subjective consideration of how to measure and evaluate employee performance results.
Recommendations for an effective performance review process include:
- A feedback process that is continuous and timely throughout the review period so that employees know how they are doing and what is expected.
- A dialogue that includes performance feedback measured against clear and specific goals and expectations established at the outset of the performance management cycle.
- A process for acknowledging the outcomes of the performance review process that is documented between the manager and the employee.