Do You Have an Effective Performance Management System?

To get the most out of your team members, it is important to have an effective performance management system in place. Most team leaders say they are aware of this. And yet, just because you have one does not mean it is working as well as it could. Even a well-intentioned system may be ineffectual, and for any number of reasons.

To build an effective performance management system, we must first define what that is and what it looks like.

What Is a Performance Management System?

When I talk about a performance management system, I am referencing the environment you create in your workplace. Specifically, I mean the extent to which that environment empowers everyone on the team to do their absolute best work. This includes the formal processes by which you articulate employee responsibilities, monitor their performance, and provide feedback and course-corrections as needed.

An effective system is one that is just, fair, efficient, and results in your team members making continuous improvements. This encompasses your own personal performance as well as the performance of your team members.

Does that description match what you currently have in place? If not, there are several reasons why, and it is in the interest of every team leader to close that gap.

Core Components of an Effective System

• Job descriptions. Establish clear job descriptions so each team member knows exactly what they should be doing and what responsibilities come with their role.
• Onboarding procedures. This is critical for new employees to get oriented with their environment. As a result, it gives new team members a foundation for success and enhances retention.
• Continuing education. A system that provides ongoing teaching, coaching, feedback, and professional development consistently attracts top talent.
• Career development. Ensure formal career development opportunities exist for your team. This, too, enhances the employee experience and increases retention.
• Compensation systems. Verify that your compensation is sufficiently rewarding. People who make a meaningful contribution to the team and the bottom line need to be recognized accordingly.

These are the big-picture items to consider. Crucially, though, an effective performance management system does not just have the right pieces. It also puts those pieces together in a way that is holistic and systematic.

What Are the Benefits of This Kind of System?

Putting an effective performance management process into place may seem like a daunting task. However, it comes with significant benefits. Here are some of the advantages your team can anticipate.

Consistency and Motivation

Consistency with your process. A more formalized system helps you apply a consistent standard to staffing decisions, whether that means choosing employees for new projects, transfers, promotions, or terminations. As a result, you ensure the right person is in the right role.

Motivation for all your team members. When you implement an effective process, you create objective standards for appraisal and review. Consequently, team members have a clearer sense of what they need to do and how they will be measured.

Morale, Retention, and Organizational Impact

Increased morale and employee retention. With improved motivation comes higher morale and better retention of your top talent. All of this makes your team more productive and efficient.

Positive impact on the organization. Organizational psychology has repeatedly shown that employees who recognize clear standards of accountability become more responsible. And when employees become more responsible, they tend to have a more positive impact on the business, including a stronger financial impact.

Training Needs and Legal Protection

Recognition of training needs. An effective system also helps you identify where employees would most benefit from formal training. In other words, it empowers you to make prudent decisions about when to bring in an executive consultant or coach.

Minimization of firing risks. Terminating employees can be risky, especially without documentation. When you have a system in place, however, formal standards of accountability let you document and prove that a struggling employee is falling short. This helps shield you from legal risk.

Common Reasons These Systems Fail

Delayed Feedback and Poor Goals

You do not offer feedback in a timely manner. If you observe an employee making a critical error, do you correct it immediately, or wait months for the annual review? Surprisingly, many team leaders save all serious feedback for that once-a-year review. This deprives employees of the ongoing, in-the-moment feedback they actually need. A related problem: companies that promise an annual review process and then fail to follow through on it.

You do not provide the right kinds of goals. An effective system always gives employees clear benchmarks to strive for. Common goal-setting problems include goals that are not objective or measurable, goals that are not ambitious enough to stretch top performers, and goals that are not aligned with company or team priorities.

No Path Forward, Ignored Problems, No Recognition

You do not provide a path to improvement. When an employee misses a goal, it can be demoralizing for everyone involved. Remember that the function of an effective system is to provide a clear path to improvement, not to be purely punitive. Document everything: set review times, share the goals and progress made since the previous review, and record any disciplinary action along with a clear justification.

You ignore problem employees. Nobody enjoys initiating disciplinary action. But a toxic employee, or one who consistently does not pull their weight, will inevitably damage team morale. An effective system always includes a framework for addressing problem employees directly rather than letting the issue fester.

You do not recognize your high achievers. People want their good work acknowledged. It does not require a ticker-tape parade, but taking a moment to recognize strong performance goes a long way toward boosting morale and keeping high achievers engaged.

"The only thing worse than an ineffective performance management system is not having a system at all."

How to Get Started

If your business does not yet have a system like this, here is how to begin.

First, evaluate your current processes for appraising and instructing employees. Do you have formal standards in place? What kind of feedback do you provide, and at what intervals? Next, identify your organizational goals and consider how this could help you progress toward them.

Then, draft formal performance expectations and share them clearly with every employee. Institute a system for providing feedback, whether that happens annually, bi-monthly, or weekly. Finally, evaluate your own process too. Take stock of what is working and what is not, and adjust accordingly.

There are many ways this can fall apart, so two final words of caution: the only thing worse than an ineffective system is having no system at all, and team leaders should be reviewing and reassessing their approach regularly. Make continuous improvement the goal.

About Dr. Rick Goodman, CSP

Dr. Rick Goodman is a Certified Speaking Professional, six-time Global Gurus Top 30 Leadership Expert, and author of five books including the Amazon number one bestseller The Solutions Oriented Leader. He has delivered more than 2,000 programs across all 50 states and 32 countries, helping organizations build systems that actually drive results.

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