If Performance Management is implemented correctly with specific objectives tied to the strategic and operational plan, organisational performance outcomes will likely increase very quickly. For example, if the CEO asked for a 3% increase in gross margin, this objective would be cascaded down to every department, team and individual who can influence the increase in gross margin. Those who are successful at achieving this objective will get a favorable review, those that could not, will get an unfavourable performance evaluation 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.
Communication Improves 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 towards specific objectives that 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 notes. This contains content from the performance period to be reviewed. Given that both have content, they feel much better prepared and stress is lower than if they were attending a meeting not aware of the subject matter.
Everyone Knows the Rules
Where there is a well structured Performance Management system that is effectively communicated, both the employee and manager enter the process with better levels of confidence as there are “rules” that clearly stipulate what is being assessed and how. Employees are assessed on achievement of objectives that have been clearly identified and agreed to. Managers have a better framework to assess an employees’ performance as they are familiar with the 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 irrelevant.
Better Recording Opens Up Communication
If the organisation has a system with a performance diary, then both parties are 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 levels. Both parties feel more comfortable and they can have a content rich and factual discussion about performance.
Frequent Communication Reduces Stress
Given that these performance reviews happen more frequently, the discussion centers on performance of objectives rather than being dominated by the employees’ needs. The needs of the business are discussed more frequently 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.
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.
Appraisals Become Relevant for Everyone
By conducting more frequent reviews, objectives can be adjusted and modified to suit changing business conditions. This dramatically increases the probability that the objectives are relevant and are able to be acted upon during the performance period.
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). Adjustments to objectives or strategy can then be made to ensure expectations can be met. Alternately, expectations can be modified as appropriate. By reviewing more frequently, all managers and employees start to plan and execute to clearly thought out objectives. This results in better resource management and enables managers to work on the business, not in the business.
Employee Learning and Development Starts to Happen
Given that most Performance Management systems require managers and employees to 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. The majority of Performance Management systems are able to provide graphical compliance reports. Therefore, the setting of objectives and development plans 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. In all, this results in an engaged workforce who are extremely committed to achieving real outcomes for the organisation.
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