Performance management strategies and best practices – future-proof your workforce

When it comes time for a performance review, both employees and managers are likely to let out a sigh. Employee reviews tend to be time-consuming endeavors, with managers and employees spending time scraping through emails for examples of successes and shortcomings. And anyone who’s been in the workforce long enough to experience performance management at different companies has received limited feedback followed by a big pay bump or glowing praise and limited compensation.

A performance appraisal can feel like a black box, which is why some companies abandon employee evaluations altogether. It’s hard to blame them, especially if, due to the COVID-19 pandemic or an unrelated shift in business strategy, the manager and employee haven’t interacted for months – making an assessment seem awkward at best.

Instead, companies should reevaluate their strategic approach and consider shifting some functions and roles to continuous performance management (sometimes referred to as CPM, but often confused with other acronyms). It’s an always-on approach that’s a smarter, faster form of performance assessment that benefits both people and the company.

An always-on approach might sound like a scary concept, but once everyone understands it and how it helps their careers, it’s an easy idea to embrace. Not only is continuous performance management less time-consuming, it also removes ambiguity and creates a culture of trust that extends throughout and across the organization. And that’s always good for business.

What is the traditional performance management process?

The classic model of performance management involves managers and employees working together at the start of the year on defining a set of objectives and aligning on the measurement against those goals. On a regular basis, either quarterly or twice a year, the manager and employee meet to determine progress made against the objectives.

A shift in performance management strategy

At a high level, a continuous framework to performance management isn’t about doing employee evaluations all the time. It’s about using performance technology to set and track goals in an open and efficient way in real time and to support ongoing coaching, feedback, and alignment as priorities shift over time. Then it’s clear who accomplished what and when; if a task was re-prioritized or wasn’t completed, everyone involved understands when or why.

Diagram of the stages in a continuous performance management process.

Over time, this strategy feels less like having goals and more like having a to-do list – which most everyone has already. From there, it becomes easier to fold in all the other aspects of employee performance management that can help people feel like the review process is less a burden and more a benefit. Compensation can be tied directly to areas of performance and initiative, and coaching and feedback programs can address areas where people need to improve or want to advance their careers.

Telling an employee, “You did a great job this year” isn’t particularly helpful if the details aren’t apparent to manager and worker alike, especially if the recipient of such feedback is looking to improve even further. Essentially, CPM becomes the enemy of ambiguity and a welcome assist for anyone looking to grow and become more successful.

What is continuous performance management? A strategic approach to employee performance management that is less like a formal review and more like a to-do list.

When organizations adopt a CPM model, several changes materialize quickly along with creating an environment of accountability and a true meritocracy. For one, retention improves because people feel more satisfied in their work and their growth – especially if goals clearly ladder up to a strong set of environmental or social values the company has woven into its strategy. Additionally, internal mobility and promotion rates improve because people are able to recognize the paths for moving into new positions of interest. And more broadly, people become more productive because the entire system is geared toward effectively communicating outcomes. When using a continuous performance management system, the annual review practically “writes itself” since all the supporting information about the year’s achievements are already fully documented. It’s easy, then, to draw a direct line from the annual review to compensation planning.

How to roll out continuous performance management

It’s important to note that a company shouldn’t shift from no review process or a traditional one to CPM overnight. It requires time and a comprehensive strategy with a few key pillars, all enabled with the right technology so performance management becomes easier, faster, and more transparent.

Here are some key employee performance management best practices:

1. Set up cascading goals.

In a modern performance management system, goals start at the top, with the C-level, then cascade down. Under each goal is a set of activities that are required for completion, and, in theory, any individual can track their activities and goals back to the top. As people complete their activities, they simply check them off. And if the business needs to change at some point, so can the goals – without ambiguity or delay since the technology allows for the quick revision and distribution of new goals and KPIs, top to bottom.

Cascading goals help ensure employee and team goals are aligned with overall company objectives to maximize organizational success.

2. Add learning to the mix.

Goal setting shouldn’t be limited to the idea of hitting targets solely for the good of the company. Personal goals matter as much as business goals. Incorporating upskilling and training initiatives into the performance management framework shows that the organization cares about every individual’s career growth. What’s more, keeping track of people’s development and the expansion of their skills expands a pool of internal talent and creates a more engaged, agile workforce ready to adapt in the face of change.

3. Keep it simple – and go mobile.

Ease of use is one of the most important aspects of any performance management software. One of the biggest inhibitors to any performance strategy is complexity. Where things get difficult and time-consuming, adoption drops off. Any system should be cloud-based and have a user-friendly interface so people spend less time filling out reviews. Better yet, putting your performance management solution on people’s smartphones makes tracking, changing, or completing an activity or goal as easy as sending a text.

Change to employee performance management is necessary, but not instant

The better people understand their own goals and achievements, the more they’ll understand that performance management is as much for their benefit as it is for the company’s. When performance reviews are too time-consuming or convoluted, people and the organization alike can start to become rudderless. That’s why it’s important to adopt a new approach strategically and at a comfortable pace.

Because annual employee reviews have been around for so long in their mostly imperfect form, it’s very difficult to change behavior and, ultimately, an entire culture. People are often afraid to give constructive criticism as well as receive it. But if an organization starts in a department where there’s the greatest appetite for a culture of continual feedback and growth, eventually a continuous performance management strategy just becomes a part of daily life. And the system can be evolved or iterated upon – based on listening to employees and acting on their feedback – as it trickles out to other departments and disciplines.

In a time more or less defined by disconnectedness and constantly shifting strategies, there’s really no better situation under which to begin instituting a new approach to performance management – and leveraging technology to do it well. If the traditional ways of assessing people’s performance (or not even bothering) weren’t effective under normal business conditions, they certainly aren’t now – and probably won’t ever be.

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Performance management FAQs

Performance management is the process of a manager and direct report aligning on a set of goals, as well as how the employee should be measured against those targets. At regular times (traditionally, quarterly, every six months, or annually), the manager and employee meet to determine how effective the person has been at reaching the agreed-upon goals – and if not, what changes need to be made to improve performance.

In a continuous performance management process, goals are set at the corporate level. These goals are then broken down into components, or “cascaded” down through the appropriate functions. Managers then assign goals to the employees responsible for tasks or objectives that have cascaded down, but employees also create their own personal and business goals to supplement the larger objectives. People regularly review their goals with their managers and discuss tactics on how to achieve each of them. As employees complete their goals, there’s a clear chain of how each goal contributes to broader targets that originated at the corporate level.

In a traditional performance management process, goals are typically set at the beginning of the year. Brief assessments may occur at regular times throughout the year, but a full employee review tends to take place after 12 months’ time, when the person is assessed in terms of having achieved their goals. Other factors may come into consideration as well, such as agility, creativity, and collegiality.

In 360 reviews, employees tend to review each other, usually within their own department and even their own manager. These reviews tend to take place on a biannual or annual basis and tend to be anonymous. But, they are viewed as a good way for peers to improve their interactions with each other to foster a more collaborative and productive environment.

In continuous performance management, measurement against one’s goals happens on a rolling basis. When people meet a goal or objective, they simply mark it as complete. This then informs the manager that the goal is met; and this can be radioed all the way to the C-level, identifying which pieces of larger strategies and objectives are being achieved and which are not. When the time comes for the annual review, it’s easy to see which goals were achieved and which were not.

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