Performance Management: A 4-Step Process and More Tips
Two people standing at the bottom of two ladders, one with more rungs than the other, representing performance management.
The 4-Step Performance Management System (Plus Extra Tips)
Two people standing at the bottom of two ladders, one with more rungs than the other, representing performance management.

The 4-Step Performance Management System (Plus Extra Tips)

It’s not tools, processes, or platforms that help great organizations get ahead of the pack. It’s people. Having the best people involves recognizing talent and developing it over time. That can’t be done without performance management. It’ll help your team members understand their objectives and what’s expected of them, and improve their relationship with you — their manager.

The key is to implement it properly. If you’ve never used performance management with your team before, start by making sure everyone understands how it works and what they’ll get out of it. By showing them why it’s a win-win situation, you’ll minimize the chances that they get defensive or dislike the process. Consider inviting your team to participate in deciding how their performance will be assessed — people tend to support what they help create!

So what are the steps of the performance management process and how does one go about implementing them?

4 essential characteristics of performance management systems

Before you figure out your performance management process, you need to make sure you’re starting off on the right foot. Are you approaching this issue with a service mindset, meaning that you’re thinking about what this process will do for your employees? Or are you more concerned about their output? The two do not have to be mutually exclusive, mind you, but if you only care about what your employees can do for you, they’ll know. That can make them less willing to participate in the process, and the whole thing won’t be as valuable for either of you. With that in mind, here are the essential characteristics to keep in mind when designing your process:

Fairness

For any performance management system to work, it has to feel fair. After all, if you’re trying to get a better sense of how well your reports are doing, you need a way to compare their output to people in a similar role. If your system isn’t applied fairly across the board, the data you get won’t be as trustworthy. Worse, your reports won’t want to participate if they don’t feel like their performance is being judged fairly.

How can you keep things fair? Standardize your system. That can be a bit tougher to do across roles, but it’s important to find metrics that are broadly applicable to your whole team. There’s nothing stopping you from drilling down on a specific person’s performance with data more specific to their role — like the number of pull requests a developer contributed to — but you need broader metrics as well.

Transparency

If you want your employees to trust the performance management system you implement, they need to understand how it works. It can be tempting to keep your cards close to your chest and worry that any knowledge you share will somehow be used to game the system. While having those fears is natural, you shouldn’t let them run your decisions.

Whether you’re putting in a new system or making changes to an old one, clearly communicate how it’s going to work and why you’re doing it. No system will make everyone happy all the time, but by explaining the reasoning behind the system, you get in front of potential objections from your reports.

Support

No performance management system is complete without a built-in way to help your employees, whether they’re dealing with low performance or just want to push themselves. This part of the system is often relegated to “afterthought” territory, but doing so isn’t fair to your people. The way you put this into action is largely up to you, but you need a clear action plan for employees who don’t perform at the level you expect.

You might decide to make extra training available the moment a report’s performance falls below a certain threshold, provide resources and other learning opportunities, or even encourage them to take some time off.

Feedback

If your performance management system only gets revisited once a quarter — or worse, once a year — you might find yourself creating more problems than you solve. Whether you’re in an early-stage startup or an enterprise-sized business, you need to continually work on this system so it can adapt to the evolving needs of your reports — and broader management trends. But this shouldn’t be done in a closed room; open up the process to your reports.

Why? Well, who knows the job better than the person doing it? Your reports have knowledge that you don’t. Use it.

The 4-step performance management process

This four-step process comes right out of Herman Aguinis’ book on the subject, and it’s applicable to all roles and departments. You can make adjustments depending on your industry — and your personal relationship with your reports — but should generally follow this process.

Performance management step 1: set expectations

Performance management starts with meeting with each employee to discuss which results and behaviors are expected of them. Don’t list off what you want and expect your team members to quietly obey. Instead, ask your employee to participate in deciding what is realistic for them to achieve. Be as specific as possible to ensure everyone is on the same page. This avoids an “I didn’t know I was supposed to do that” situation a few months down the line.

Results: 

Specify what you expect the employee to deliver. Be sure to clarify:

  • Accountabilities: What are their responsibilities?
  • Objectives: What should they aim for? Objectives should be challenging but achievable. Let the employee participate in setting them. After all, they’re the one doing the job and could know better than you what is feasible and what is unrealistic. Set some deadlines and milestones, and decide together which ones are priorities. Side note: don’t overwhelm them with too many objectives that they may have trouble managing. Five to 10 per review period is best.
  • Performance standards: What is the minimum quantity and quality of work you expect? Are there financial benchmarks they need to hit? How much time do you expect them to take to accomplish these things? Performance standards should be observable, measurable, and relevant to the purpose of the job. They should also be achievable.

Behaviors:

Results are important, but focusing only on results may give you an incomplete picture. For some jobs, it can be hard to establish objectives. With other jobs, employees may have control over what they do, but not the results. For example, a sales specialist’s figures may be influenced as much by their assigned sales territory as by their level of effort. In such cases, specify what actions are expected of them, not just the outcomes.   

Development plan:

You’ve both agreed on results and behaviors. Now what? Take some time to chat about areas that need improvement and set a few developmental goals for the term. Ask the employee how they think they can do better, and provide them with an opportunity to discuss growth. Most people don’t want to work for a paycheck alone, so take this opportunity to discuss how the job could be a more enriching and motivating experience. Be sure to specify a few resources or strategies they’ll be given to help them achieve their goals, such as training or useful articles.

Step 2: observe

Performance management doesn’t end when the meeting does. Now that you’ve laid out your expectations, and your team participated in setting their objectives, take a step back and observe how the plan takes shape, helping out as necessary and maintaining regular communication.

  • Give ongoing feedback: Rather than waiting until the review period is over, be sure to give feedback and coaching on a regular basis.  This ensures the employee develops and helps them reach their objectives. Give advice or constructive criticism as needed.
  • Reinforce: Likewise, make sure he maintains good performance by making it clear it is being noticed. If good performance is not praised, employees will lose motivation. This is especially crucial when an employee exceeds their performance standards or expectations. If you don’t acknowledge it, they might wonder why they’re working so hard.
  • Give updates and resources: As your project goals change, so might the employee’s objectives. Be sure to update them on any such changes immediately. Provide them with all the resources they need to facilitate goal-setting or to maintain their performance during the shift. Whether it’s training, tools, or readings, make sure they have what they need to do the job.
  • Observe and collect performance info: Keep track of examples of good and bad performance on a daily basis. These examples will be used during the performance review process to highlight what improvements are needed, and what they’re already knocking out of the park.

Step 3: assessment

Now that you’ve observed how the employee did throughout the review period, it’s time to use performance management to assess their results and behaviors.

Should you assess results or behaviors?

As we explained earlier, for some positions it may be appropriate to evaluate results, the behaviors of others, or both. To help you figure out what to assess for what employee, consider this:

  • Assess results if: Effort will always lead to results; results show consistent improvement over time; or if there are several different ways to do the job right and get good results.  
  • Assess behaviors if: Effort and results aren’t connected in an obvious, very direct way; results take months to develop; or if bad results can come from factors outside of the employee’s control.

How to assess behaviors:

While assessing results is pretty straightforward, you may be wondering how on earth to assess behaviors? One option is to simply write an evaluation, describing the employee’s strengths and weaknesses and where they need to improve. Another option is to do a behavior checklist. Here you will be able to check off whether the employee showed each behavior never, sometimes, often, or always. There are many great options your team can choose to evaluate behaviors. It doesn’t matter which one you pick — as long as your team is part of the selection process and have agreed to the metrics.

Appraisal forms:

A valuable way to assess performance is to fill out a template or complete an appraisal form. You can also invite an employee’s peers to complete one, as this can be a great way to assess teamwork or how the person acts when you aren’t around. However peer evaluations can be subject to bias and context, so don’t rely on them as your sole source of information.

Self-appraisals:

Let the employee do a self-appraisal as well, or give them a chance to explain how they think they did. Self-ratings pinpoint discrepancies between how a team member views themselves, versus how others view them. These discrepancies provide teaching moments, and highlight areas needing development. Self-evaluations also minimize defensiveness, help team members learn, and ensure they feel the performance management process is fair.

Step 4: review

The final step of performance management is to sit down with the employee and discuss their performance during the review period. Share your observations, assessments, and feedback, and ask the employee for their opinion on what they did well and what they need to improve on. Then brainstorm ways to improve performance during the next term. You should also discuss their development and plans for the future.

Clarify which goals you expect them to achieve in the next term. A big part of this step is to adjust future goals based on their experiences this term. Perhaps you’ll realize that some of their objectives were unrealistic. You’ll need to make sure the next ones are achievable. Maybe the goals were all too easy, and you need to level up the challenge for the next term.

Here are steps you can take for an effective review.

  • Explain what the employee did well or poorly, and give specific examples of wanted/unwanted behaviours.
  • Ask the employee for feedback about these behaviours and listen to their explanations.
  • Explain the implications of changing or not changing those behaviours. If the employee did something well, give praise and explain how that benefited the team. If they did something poorly, make sure they’re aware of what will happen if it continues.
  • Give advice on how they can perform better.
  • Agree on an action plan.
  • Set a meeting to follow up and agree on measured behaviors and results.
  • Adjust goals and objectives for the next term as needed.

How often should the performance management process be done? A review period can occur monthly or quarterly; the choice is ultimately up to you and your team. It’s worth noting that the shorter your feedback loop is, the faster you’ll be able to improve your team members’ performance.

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