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How a Performance Management Process can Make or Break Your Business

Updated on March 29, 2012
An effective performance management process can be the difference between success and failure.
An effective performance management process can be the difference between success and failure. | Source

Whether you are a business owner, manager, employee, supplier or customer- employee performance, good or bad, affects you. Your business or organization may have the best product or service available but if employee performance is poor, substandard, or completely lacking then look no further than your performance management process as the culprit.

An effective performance management process guides hiring managers to select the most qualified person not just for the job but for the business and engages the new hire in a positive relationship that grows the business profitably.

An ineffective performance management process forces management to deal with frequent turnover, disengaged employees, harassment and other legal problems, low morale, customer complaints and the list goes on and on. In other words your human resources department becomes the busiest and costliest department in your organization. Managers will send less time doing their “real” job and more time in damage control. Employees are also impacted negatively by having to work harder to make up for the poor performer and constantly deal with poor behavior. Eventually an ineffective performance management process will break your business.

Elements of an Effective Performance Management Process

An effective performance management process begins with a clearly defined business vision, mission, goals, values, and core competencies. This information provides managers and employees the foundation on which the business is built, how it will grow, what will make it successful, and what are the job performance expectations. The new hire orientation session is where an employee is first introduced to this information but is not the last time they will hear about it.

The next element of an effective performance management process is to have each business process mapped out and documented. When business processes are mapped out, employees can see how they individually contribute to the business in other words they can see the big picture of the organization and their role in the operation of the business. Once you know how the business operates in each of its functions will you then be able to create job descriptions. The job descriptions will align with the businesses process and communicate to each employee their job performance expectations.

Providing on-going feedback will sustain a higher level of productivity and is the next important element of an effective performance management process. The purpose for providing feedback is two-fold: (1) to motivate employees and (2) to correct or improve performance.

“Provide employees with honest, objective feedback so they understand their strengths and areas that need improvement and can reach their full potential. Feedback is the Breakfast of Champions. Allowing marginal performance to go uncorrected isn’t fair to employees or the organization.”

Source: Performance Improvement: What to Keep in Mind, by D. Fox, V. Bryce, & F. Rouault, Training & Development, August 1999.

An optimal feedback system includes 360° feedback, which provides performance feedback from the employee’s manager as well as any direct reports, peers, and external sources. This feedback may be communicated through an annual performance appraisal or a formal survey based on the company’s core competencies. The feedback will help employees see how they are performing in accordance to the first element- performance in relation to the business vision, mission, goals, values, and core competencies.

The feedback process should also include informal feedback provided on a weekly and/or monthly basis. Documenting the informal feedback will provide valuable information when preparing the annual appraisal and thus provide a richer appraisal based on an actual year’s performance rather than what is in the manager’s recent memory.

Finally, to have a truly effective performance management process includes employee engagement programs. These programs may include rewards and recognition, opportunities to express creative and innovative ideas, volunteer work, training and development, and any other program that works within your business culture.

Employee engagement also includes keeping employees informed about the business is performing- good or bad. Communication is a critical part of employee engagement so establish opportunities to provide feedback or to express their concerns or issues. Get employees involved in addressing and solving those concerns and issues. Use employee satisfaction surveys or focus groups to deliver this valuable feedback.

In Summary – The Elements of an Effective Performance Management Process

  • Clearly defined business vision, mission, goals, values, and core competencies.
  • Business processes mapped out and documented
  • Systems for on-going feedback
  • Employee engagement programs

An effective performance management process is certainly not limited to the elements listed here nor will these elements ensure complete business success. Other factors play into whether a business is successful or not, such as the current economic environment, market trends, waning need for product or service, etc. However an effective performance management process is a major factor in a business’s success and can help a business navigate through difficult times. Even implementing one of the elements mentioned in this article will go a long way in improving business performance. Doesn’t it make good business sense to have an effective performance management process in your business?

What does your performance management process include?

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      David 5 years ago

      Excellent insight, particularly the emphasis on ongoing feedback. Too many organizations that I have encountered work on the assumption that the once a year appraisal system is sufficient.