25 March, 2021 | Rebecca East

What is performance management? And why is it important?

Performance management is a leadership framework that helps employees develop their skills and realise their potential which, in turn, supports business growth. To quote the Chartered Institute of Personnel and Development, effective performance management is:

“A holistic set of processes centred around two-way discussion and regular, frank, yet supportive feedback relative to established objectives.”

That’s a helpful definition. But to really understand what performance management is, we must also understand the purpose behind it.

Personal and business success

The purpose of performance management is twofold:

  1. To create a nurturing environment that helps people achieve their goals
  2. To improve team performance and drive business success

Effective performance management isn’t an annual activity. It’s a multi-stage process that allows you to:

  • Identify areas for development
  • Set SMART goals that align with personal and organisational goals
  • Encourage and support people to grow
  • Provide actionable feedback

In the hybrid workplace, employees expect a work-life blend. Done well, performance management should provide continuous support for every person in your team – delivered through tailored wellbeing and engagement strategies, and regular performance conversations.

Why do you need regular performance conversations?

Regular check-ins or informal performance reviews enable managers to hold employees accountable by tying performance to career progression. This isn’t a one-way street. Modern performance tools should also hold managers accountable.

Performance and the bigger picture

Regular conversations and feedback help employees understand the purpose behind their work: the bigger picture. It tells them why their work matters and how it helps the business succeed. This is key to motivation and engagement.

As Dan Pink explains in his three-step motivation model, understanding this purpose is essential for intrinsic motivation and high performance. And it all starts with setting relevant goals that align with the organisation’s mission and wider objectives.

Discover a holistic, people-centric approach to performance management. Get in  touch to learn more about OpenBlend.

The history and evolution of performance management

Performance management, in one form or another, has been around for a long time. But it’s transformed rapidly in recent years. According to Gartner, a massive 81% of HR leaders are making changes to their performance management processes.

So, what’s behind this shifting landscape?

It’s not what you can do for your employer…

Today, performance management is as much about what the organisation can do for the employee, as it is about what the employee can do for the organisation. This fundamental shift in thinking signifies a growing understanding of the relationship between wellbeing, engagement, and performance.

To enable performance today, organisations must understand the unique factors that motivate every employee.

“We have changed our one-to-one conversations with OpenBlend. We now recognise our people as individuals and are evolving to the needs of today’s workforce.”

Karen Williams, CFO, Avios

It’s an ongoing process

People have traditionally viewed performance management as a single activity. It belonged in the same bucket as the annual performance review. But today, we know it’s an ongoing process or, as we like to think of it, a journey.

The destination? More engaged employees who have the support they need to perform at their best, every single day. The era of continuous performance management (CPM) has well and truly arrived.

What is continuous performance management?

CPM differs from traditional performance management in that it’s an ongoing, cyclical process – as opposed to a linear process with a pre-defined start and endpoint. CPM is the antithesis of the annual appraisal or performance review.

At OpenBlend, we believe CPM should include:

  • Collaborative and agile goal setting within best-practice frameworks
  • Regular performance check-ins and one-to-ones
  • Meaningful conversations that lead to positive action
  • Frequent feedback between manager, team, and employee
  • Ongoing coaching and support
  • Real-time recognition
  • Continuous performance and career development

Key drivers of effective performance management

Collaboration

Collaborative goal setting empowers employees. It actively involves the employee or team in the process, so they can set their own objectives to improve employee engagement, motivation, and performance.

Agile goals

For the best results, goals should be agile. Things can change rapidly in the hybrid workplace. A ‘set and forget’ approach reduces the relevance of goals and diminishes the level of motivation the employee has for achieving them.

Managers should review goals regularly to ensure they remain relevant to the employee and the organisation.

“The feedback from the team has been great. Replacing a 6 – 12-month appraisal process with regular monthly conversations means we are much more connected.”

David Ramsey, CEO, Radcliffe Group

High employee utility

How valuable is your performance management process?

Employees are four times more likely to view performance management as worth the time and effort if the process delivers high utility, according to Gartner. Effective, continuous performance management programmes are a must to keep employees engaged and motivated.

Manager capabilities

No matter how robust your process, manager capabilities have a direct impact on the effectiveness of performance management. Providing constructive feedback and participating in meaningful performance conversations is a skill in itself, which is why organisations need to coach their employees in the art of effective performance reviews.

Here are some of the key things you should be mindful of when participating in a performance conversation:

  • Be consistent and fair
  • Focus on the solution rather than the problem
  • Look forward, not back
  • Understand the potential for unconscious bias
  • Separate compensation from performance management

...this last one is crucial. No employee is going to speak about their weaknesses if they know that admission could hurt them financially.

Performance tech that empowers

It’s all well and good knowing what good performance management looks like. But how do you realise the benefits in your organisation?

For starters, you must have the right platform.

At OpenBlend, we’ve developed a coaching-led performance enablement platform that supports and encourages regular conversations and collaboration. Our people-centric approach empowers employees and managers by delivering deeper insights into the key drivers that matter most to them – at home and at work.

But OpenBlend isn’t a set and forget solution. We accompany you on every step of the journey towards fully integrated performance management and enablement. We provide ongoing advice and support to ensure you have the right conversations, with the right people, at the right time. Because when people succeed, the business succeeds.

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OpenBlend Reaching Objectives Infographic