What is Performance Management and Why Does it Matter?

Performance Management is the term used to describe the business process of aligning individual and team performance with that of the business.  It's typically an annual cyclical process which, theoretically, leads on from the Annual Business Planning process.  In reality, the annual business planning more often than not doesn't happen in many companies.  This typically generates the first (of many) friction point in the performance management process. 

What is the Performance Management Process? 

There are typically 4 stages to the performance management process:

Stage 1: Objective Setting 

Stage 2: Performance Monitoring

Stage 3: Performance Feedback

Stage 4: Performance Evaluation

The evaluation of the out-going year is intended to provides the starting point of the in-coming year, in terms of an individual's development and ability in their role while the annual business plan provides the starting point of what an individual should focus on.  Having worked with many companies across numerous sectors, the theory and reality rarely align, for lots of reasons! 

Why is Performance Management Important?

Performance management is seen as important for lots of reasons, including:

• Provides feedback process that can help individuals improve their knowledge, skills, mindset, abilities, confidence which, in turn, improves their performance
• For project-based roles, it prioritises projects focused on delivering business objectives
• Research shows that regular feedback increases motivation and performance and employees are actively looking for feedback
• Encourages career discussions and assists career planning
• Enables good performers to be stretched, to build their confidence in working at higher levels and demonstrate their potential
• Promoting talent internally is more cost effective and tends to be more successful.  Done well, performance management supports a talent-growth strategy

What are the Challenges with Successful Performance Management?

Done well, performance management contributes substantially to a company's business performance, culture, retention, growth, and reputation.  I  don't mean to be a Debbie Downer on this but unfortunately, the reality is that there are lots of practical challenges with performance management, such as:

• Poor performance management discipline
• Lack of buy-in by management
• Lack of clarity on purpose and benefits of performance management done well
• Lack of investment in manager training
• Skipping the annual business planning process, resulting in little to no business direction given
• Poor communication
• Lack of clarity on what "good performance" looks like
• Performance boiling down to one rating number/word at the end of the year
• A 1-5 rating scale that doesn't recognise the real performance scenarios managers regularly face
• Rating inflation
• Poorly designed objectives
• Little to no regular check ins throughout year
• Tick-box exercise to "keep HR off our backs"