Performance Management: A Key to Employee Development and Retention

Performance management entails the ongoing exchange of communication and feedback between a manager and an employee, aimed at attaining organizational objectives.

What is performance management hero image

What is Performance Management?

Performance management entails continuous communication between a supervisor and an employee throughout the year, aimed at supporting the achievement of the organization’s strategic objectives. This communication process involves clarifying expectations, setting objectives, identifying goals, offering feedback, and reviewing results.

In today’s dynamic work environment, performance management has evolved into an indispensable tool for fostering a culture of employee engagement, improving employee retention, and enhancing business results. Effective performance management empowers your team by prioritizing a people-centric approach that recognizes the individuality, aspirations, and talents of each employee.

As performance management shifts away from traditional annual reviews towards a more holistic, ongoing, and agile view of employees and the workplace, it’s vital to adapt to your team’s changing priorities. Our comprehensive guide is tailored to understand the performance management process and building blocks, while helping you  choose a system that seamlessly aligns with your company’s needs and objectives.

Key Takeaways

  • Performance management is a tool that helps managers keep track of and assess employees’ work.
  • Performance management can help strengthen performance and employee engagement. 
  • When choosing a performance management platform, organizations should ensure it has 5 main components: Goal and OKR management, continuous feedback, individuals development plans, performance reviews, and leadership succession planning framework and talent calibration. 

Top Benefits of Performance Management

Performance management is the cornerstone of a thriving workplace, giving leaders and managers the tools they need to support, develop, and guide their teams effectively.  Amidst challenges such as the Great Resignation and the Great Reshuffle, a robust performance management process helps strengthen performance and employee engagement

According to Bain and Company, over a period of seven years companies with more engaged workers grew revenue 2.5x as much as companies with less engaged workers. Similarly, Gallup found that highly engaged workplaces see a 10% increase in customer ratings and a 20% increase in sales.  Additionally, SHRM states that the average cost per hire was roughly $4,700, but many employers estimate that the total cost (time spent by department heads helping HR fill the role, sourcing, interviewing, etc.) can actually be 3 to 4 times the position’s salary. 

When roles have to be replaced, multiple employees must contribute to filling that position, resulting in precious hours and energy being taken away from other important areas.   In short, employee turnover is costly, and an effective performance management process can help your company increase employee retention and employee engagement, while achieving improved business results.

A strong performance management process aligns your workforce with organizational goals and values, bridging the gap between individual growth and company success.   By implementing a performance management system mapped to your organization’s process, you can save time and money, while powering employee engagement and employee development, improving real time feedback and communication, and helping your team retain top talent. 

6 Steps in Performance Management

The performance management process is a systematic approach to improving employee performance and achieving organizational goals. It consists of several key steps:

1. Plan:

This involves setting clear and measurable goals for employees, aligned with the organization’s overall objectives.

2. Monitor:

Managers should regularly monitor employee performance against their goals. Utilizing appropriate performance management software enables real-time performance tracking and necessary adjustments.

3. Develop:

Based on the monitoring phase, managers should identify areas where employees need support and development. This may involve providing coaching, training, or other resources.

4. Rate:

Regular performance ratings are essential to identify the state of employee performance and implement necessary changes. This rating should be fair and objective and can be provided by both peers and managers to provide a holistic view of the employee.

5. Calibrate:

Calibrating in performance management is a critical step that enhances objectivity and ensures consistent standards for all employees. It promotes fairness in evaluations and reduces bias, helping employees gain a clearer understanding of their performance and facilitating more effective improvement efforts.

6. Reward:

Recognizing good performance is key to employee engagement and a well-managed performance process. Rewards can take various forms, from simple expressions of gratitude to comprehensive employee rewards programs

Additionally, we find that companies that are implementing best-in-class performance management and are driving employee development, engagement and growth follow some best practices:

  • Set Strategy: A well-designed performance management system should clarify how often employee performance will be evaluated, what methods will be used to evaluate employee performance, and how feedback will be provided to employees.
  • Foster Open Communication: Create a culture of open communication throughout the company, starting with leadership. This means setting clear expectations, providing coaching and specific feedback, and recognizing employees for their achievements. Feedback should be specific, timely, and actionable.
  • Monitor: Continuously track employee progress and sentiment in real time to identify and address any issues quickly. Automated performance management software can provide objective data, which can help make employee discussions more approachable and less intimidating.

Pillars of Performance Management

The pillars of performance management include goal setting, providing continuous feedback and employee engagement, nurturing employee growth and development, and tracking progress towards goals.

Performance management isn’t just about annual assessments; it’s about maintaining alignment with the organization’s mission and vision, creating a culture of ongoing coaching with one-on-one meetings/performance check-ins, and investing in employee growth. Companies that plan, execute, and continuously improve their performance management process  make the most of their workforce, boost productivity, and deliver high workplace satisfaction.

Effective performance management consists of the following components:

  • Setting and aligning company, department, and individual goals/OKRs 
  • Goal tracking to monitor at-risk or near completion goals
  • Continuous feedback and employee engagement
    • Performance check-ins/one-on-one meetings with employee sentiment checks –  This fosters communication between managers and employees and monitors sentiment trends to retain top talent.
    • Employee engagement surveys – eNPS surveys to identify areas for improvement and take action.
    • Individual development plans – Create target development areas, highlight success measures, and establish clear action items.
    • Recognition – Publicly praise your employees for accomplishments
  • Performance Reviews 
    • 360s – Capture peer, manager, and external views of an individual’s skills, competencies, and workplace behaviors.
    • Performance Reviews – Self and manager assessments to visualize employee performance and value fit. Evaluate workplace satisfaction to identify and develop at-risk employees.
  • Talent review calibration
    • Calibrate your performance reviews and 9-box grid placements to reduce bias and have a fair and consistent way of measuring performance and finding future leaders.

How to Choose The Best Performance Management Platform

Performance management is a comprehensive approach encompassing several key elements, each contributing to its effectiveness. Though performance reviews continue to hold significance, the realm of performance management has expanded beyond conventional annual assessments, now integrating agile and continuous 1-on-1 performance check-ins, 360° reviews, holistic development and talent planning, and meticulous goal management.

Choosing the right performance management software is a significant decision for your organization, and it’s essential to carefully consider your specific needs and objectives. Seek a system that aligns with your performance management needs, allowing you to integrate, create, and customize templates that fit your company’s unique processes. Configurability is crucial because no two companies handle performance management in the same way.  Below, we offer suggestions as you select your performance management tool:

1. Goal/OKR Management:

Performance management involves setting individual objectives and goals that drive performance while reflecting and supporting the organization’s mission and values.   Objectives and Key Results (OKRs) provide the structure for setting both high-level and granular goals, allowing companies to measure and monitor progress, while ensuring that everyone is working towards a shared purpose.

2. Continuous Feedback:

Ongoing real time feedback through check-ins, employee sentiment tracking, and surveys is a crucial element of coaching-centric performance management. It involves continuous communication between stakeholders to discuss progress, address challenges, and reinforce behavior aligned with the organization’s values.

Scheduled performance check-ins/one-on-one meetings streamline and document routine communication and coaching interactions. Consistent manager and employee feedback play a pivotal role in maintaining alignment between managers and employees throughout the performance management cycle. Elevate these discussions by collecting real-time data on employee sentiment, enabling ongoing monitoring and in-depth analysis.

check-ins for performance management

Further, employee engagement surveys unlock valuable insights about your organization through tailored surveys and visual reporting tools. Evaluate eNPS, pinpoint areas for enhancement, and initiate actionable steps.

And last, employee recognition helps cultivate a positive workplace culture by celebrating achievements, expressing gratitude, and acknowledging team members who exemplify your core values through recognition. This approach emphasizes the significance of core values in the workplace, honoring accomplishments and alignment with these values.

Employee recognition for performance management

3. Individual Development Plans and Personal Improvement Plans:

Performance management involves crafting individualized development plans to aid employees in acquiring new skills, improving performance, and aligning with organizational values. This approach fosters continuous career development, enhancing employee growth and reducing attrition. These plans should target specific development areas, integrate clear success metrics, and outline actionable improvement steps. 

4. Performance Reviews:

High-quality performance review software should offer customizable templates, automated reminders for efficient review cycles, and integrated views for consolidated feedback and goal tracking. Evaluate the tool’s ability to provide a comprehensive and well-rounded understanding of employee performance and also support your team in guiding and coaching them effectively. 

For example, in addition to traditional reviews, the software should support 360-degree feedback to gather holistic insight on an individual from diverse sources, including peers and external contributors. This feedback aids in fostering team members’ development and monitoring their progress, whether within or beyond the formal review process.  Further, the tool should allow your team to visualize talent assessments, calibrate, and make unbiased evaluations.

Tools such as WorkDove’s Performance-Values Matrix empower performance evaluations by allowing the integration of performance-based and value-fit criteria. This matrix allows organizations to identify high-performing employees and assess value alignment within the organization.

And finally, it is critical to compare employee performance evaluation with workplace satisfaction to address potential dissatisfaction among high-performing, value-aligned employees. This ensures that you are more likely to retain your top talent!

Performance-values matrix scatter plot

5. Leadership Succession Planning Framework & Talent Calibration:

Leadership succession planning frameworks play a crucial role in recognizing both top performers and those who may require additional support. It is crucial that performance reviews and employee development frameworks work together harmoniously, as they jointly contribute to supporting employee growth and development.

WorkDove’s 9-Box Software and similar matrix tools can be used to evaluate employee talent based on two key factors, typically performance and potential. You can calibrate your performance reviews and 9 box grid placements to reduce bias and have a fair and consistent way of finding future leaders.  By using this tool, organizations can pinpoint future leaders by analyzing employee placements within the matrix, helping identify the highest potential individuals, those in need of development, and those who require coaching for performance improvement.

9-box for performance management

WorkDove: Elevating Your People Enablement

WorkDove’s platform streamlines critical processes, such as performance reviews, coaching conversations, feedback collection, and leadership planning, and thus makes your team more efficient.  There are a few things that set WorkDove apart, including the platform was built over many years working with leading HR professionals.  Our highly configurable platform can be tailored to your specific needs, whether refining existing processes or implementing new practices.  

And, we have a world-class customer success team to help your team effectively implement and support your team. Offering dedicated support is essential for helping organizations effectively implement a portfolio management system. After the onboarding process, access to product experts during office hours can provide valuable assistance and enhance your experience. With all these benefits and a savings of $1,000s relative to other alternative performance management softwares, WorkDove offers powerful performance management software our customers love.