Linked to Organisational Performance
If Performance management is implemented correctly with specific objectives tied to the Strategic and Operational plan, organisational performance outcomes should increase. For example if the CEO asked for a 3% increase in profit, this objective would be cascaded down to every department, team and individual who can influence the increase in profit. Those who are successful at achieving this objective will get a favorable review, those that could not will get an unfavourable review in the absence of extenuating circumstances.
The process of Performance Management therefore drives organisational performance outcomes. Employees that achieve the organisational goals are rewarded with favourable reviews and bonuses in line with their performance and contribution to the organisation.
The employee and manager communicate more frequently and agree on changed objectives to suit continuing changes in conditions and priorities. This is an inclusive and collaborative process, which ensures that the employee has input and does not feel they have wasted the year. The employee works to specific objectives that have been thought about and are relevant. If the organisation is using a Performance Management product that has a Performance Diary, both the manager and employee attend the review meeting with copies of their Performance Diary. This contains content from the Performance period about to be reviewed. Given that both have content, they feel much better prepared and stress is lower than if attending a meeting and waiting for surprises.
Moderate to High Levels of confidence
Where there is a well-structured Performance Management System that is well communicated, both the employee and manager enter the process with better levels of confidence as there are “rules” that clearly spell out what is being assessed and how. Employees are assessed on achievement of objectives that have been clearly spelled out and agreed to. Managers have a better framework to assess an employees’ performance as they know on which criteria to assess the employee. The outcome is that both individuals have an informed discussion and focus on achievement of both personal and business objectives, not on issues that are not relevant.
If the organisation has a system with a Performance Diary, then both parties are very well prepared with relevant content to discuss. They have diary notes that relate to performance during the entire Performance Period. This raises confidence and reduces stress and both parties know they can have a content rich and factual discussion about performance.
Focused on performance
Given that these performance reviews happen more frequently, the discussion centers on performance of objectives rather than being dominated by the employees’ needs. The employee’s needs are talked about more frequently as are the needs of the business to achieve specific performance outcomes. This means both the employee and manager communicate more effectively and achieve better outcomes. Emotionally charged discussions tend to be displaced by business focused discussions on achievement of objective outcomes.
Aligned to the corporate plan
As expectations are modified when a Performance Management system is introduced, most organisations switch to defined performance periods. This means that strategic and operational objectives are set at the beginning of the performance period. Formal performance reviews are then conducted quarterly or half yearly and enable management to direct and fine tune effort in relation to the objectives.
By performing frequent Performance Reviews, visibility is increased dramatically. Areas of non performance receive much more focus and attention and problems can be acted upon much quicker. Most Performance Management systems provide reporting as to who has or has not achieved their objectives (departments and individuals).
By reviewing more frequently, all managers and staff start to plan and execute to well thought out objectives. This results in better resource management, less fire fighting and enables managers to work on the business, not in the business.
Human Capital Development
Given that most Performance Management systems require that managers and employees commit to a Development Plan, employees experience real personal development and become more engaged with the organisation. They feel part of the organisation and start to understand that they and the organisation are interdependent. The organisation is developing the employee and the employee is working towards developing the organisation by achieving its goals.
Most Performance Management systems are able to provide graphical compliance reports. Therefore, the setting of Objectives and a Development plan for employees can no longer be ignored. Employees see real planning, are involved in setting meaningful objectives and have input into personal development plans which benefit both themselves and the organisation as well. In all, this results in a more engaged workforce who are more committed to achieving real outcomes for the organisation.
The major differences between appraisal systems and Performance Management are:
- Performance Management is tied to achieving increased organisational performance, appraisal systems are not tied to organisational performance
- Performance Management Reviews are conducted more frequently than annual appraisals
- Performance Management Objectives are aligned to strategic or operational plans
- Performance Management systems typically have better compliance due to reporting (who has set objectives and development plans, conducted reviews etc)
- Performance Management focuses employees on the Performance of objectives, not how well they are liked by their manager
- Performance Management systems are accessible by all parties, all through the year and this means that both parties attend review meetings better prepared and less stressed
- Performance Management increases staff engagement as they are recognized for their efforts and receive meaningful development
Technology has enabled organisations to move from annual appraisals/reviews to Performance Management. Annual appraisal systems are currently the norm in most organisations as they have not yet adopted new technology which enables Performance Management processes.