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How to Build a Performance Management Program

Begin by defining role-based competencies and behaviors for every employee so they know exactly what is expected of them. These competencies should include the five or six qualities that define success for every member of the organization.

June 29, 2012
Related Topics: Employee Communication, Employee Engagement, Performance Management, Motivating Employees, Talent Management
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You can't just hire employees and assume they will do their job. They need guidance, oversight and periodic reviews to let them know what is expected of them, and to make sure they deliver their best performance. Companies that have effective performance management programs increase productivity, identify top performers and motivate employees to work harder. They can also ensure that their strategic business goals align with hiring and talent development plans.

But companies can only achieve these benefits if they approach performance management as an ongoing process rather than a single annual event.

One way to build an effective performance management program is to follow these four steps:

Begin by defining role-based competencies and behaviors for every employee so they know exactly what is expected of them. These competencies should include the five or six qualities that define success for every member of the organization, as well as job-specific skills and responsibilities for each individual. This process should occur as soon as a person is hired, and should be revisited annually.

"If you do this, you will get immediate performance improvements because employees will know what their boss expects of them," says Dick Grote president of Grote Consulting Corp. in Frisco, Texas.

Decide how often you want managers to deliver performance reviews. Most companies stick to an annual assessment, but others choose to do them quarterly or following important projects. Frequent reviews can make the assessment process more fluid and give managers the opportunity to address negative behaviors before they affect an employee's productivity. However, it can be time-consuming and difficult for managers and HR teams to manage so many meetings consistently.

Many companies today supplement traditional performance reviews with online talent management tools. Programs, such as Rypple, allow managers and peers to give feedback and acknowledgement of an employee's work, and to track performance ratings in online databases that can be used to generate talent management reports and metrics.

(And don't forget that old-fashioned, lower-tech feedback also is valuable. A quick conversation or email about what an employee did well or not so well in a meeting can have lasting impact. Don't overorchestrate the performance management process such that informal coaching moments get lost.)

If you are planning to conduct one formal annual review with all employees, consider scheduling them at the same time that the leadership team is completing the annual business plan. This way employee development goals can be aligned with strategic business goals for the year.

Once you decide when and how frequently you want to deliver assessments, hold managers accountable for completing them by a deadline, and make meeting that deadline part of their own performance assessment.

Before the assessment, managers should take the time to evaluate their team. Use some sort of a rating system, say a 1-to-5 scale (with 5 being the highest score), to assess employees for each goal, competency, and accomplishment they set at the beginning of the year.

Note: When managers give these reviews to employees, they should be clear about what these ratings mean. If a "3" is an acceptable performance rating, make sure employees know that, Grote says. Otherwise anything less than a "5" can be unnecessarily discouraging.

In the assessment meetings, managers should be as honest as possible with employees. They shouldn't feel like they need to sandwich bad reviews with compliments, or that they need to come up with problems for high-performing employees. If an employee is delivering good performance, they deserve to hear that, Grote says. And if an employee is doing a bad job, the manager should be frank with them about what they are doing wrong, and what they need to do to save their job.

To validate their assessment, managers should be prepared to provide examples of why they gave each rating. This ensures managers choose ratings thoughtfully, it demonstrates to employees why they are getting that rating, and it reduces the chance that employees will contest the assessment.

When the meeting is over, managers should secure acknowledgement from the employee in writing that they had an opportunity to review the evaluation—even if they didn't agree with it.

On the designated deadline for completion, the HR director should collect these assessments, then use the data to set their own talent goals for the coming year.

Performance assessments generate a tremendous amount of valuable data—but it only adds value if it is incorporated into the human resources-planning process, Grote says. "It's the manager's job to assess individuals, but it's HR's job to make strategic decisions based on those assessments."

Along with supporting compensation decisions, this data can be used to justify new training programs, identify candidates for fast track career development and help define long-term succession planning.

If you are going to take the time to conduct these reviews and rate your entire staff on their performance, then take advantage of the data. If you simply file the assessments away in a drawer you are wasting an opportunity to improve the business, and to increase the strategic value of the HR function.

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email editors@workforce.com.

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