In a traditional setup, managing employee performance has always been time-consuming and requires efforts on the part of the managers. As per a leading management exponent, managers spend an average of 210 hours per year on performance management, yet, only 14% of the organizations report being happy with their current performance management system and the related outcomes.
The reason for dissatisfaction with the traditional performance management system is that most companies consider annual reviews and appraisals a good idea to evaluate an employee’s performance. However, the year-end reviews always show a rear-view image of an employee’s performance and are often smudged with bias from reviewing managers.
Organizations have adopted several performance management systems and strategic policies to become more compliant and thorough in their performance evaluation. However, the results have often not been as expected, with employees still feeling disengaged and the process consuming far too much time.
If your organization also struggles with these, then it’s time to take action and measure the effectiveness of your current performance management system.
Before measuring how effective your organization’s performance management system is, it is important to understand what an effective performance management system is and why it is needed.
“Performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization.” – Berkeley University of California.
Firstly, we must understand that performance management is a continuous process with a two-way flow of interaction between manager and employee.
Rather than year-end reviews and communication, a company should focus on employing a continuous system for interaction throughout the year with a strategic focus on achieving business objectives.
Secondly, a performance management system is important for any organization for the following reasons.
When a company understands the context of having a performance management system, it will be able to measure the effectiveness of its performance management system more adequately.
Outlined below are the five steps that will help measure the effectiveness of your performance management system.
To understand where your current performance management system is falling short, you need to know what an effective performance management system looks like.
Thorough research is key in analyzing the elements to include in an effective performance management system.
Reading case studies of businesses that have successfully revamped their performance management strategies can give helpful insights for your system.
Analyzing prevailing performance management practices in your industry and leading trends in the market can also help you set a benchmark for what an effective performance management system should entail.
It is critical to define clear goals and objectives that your organization tries to achieve through the performance management system. Some of the common goals are:
Once you have decided on what you are planning to achieve through a performance management system, it is essential to know what constitutes the achievement of your objectives.
Simply put, you need to analyze what measures will be considered to declare that objectives were achieved successfully.
|PERFORMANCE MANAGEMENT GOALS
|Improve Team Performance
|Clarity of what is expected of employees
Alignment of employee performance
Increase in the profitability of teams
Growth in Customer Satisfaction
|Enhance Employee Motivation & Drive Engagement
|Results of Employee Engagement Survey
Acceptability of Performance Review as a useful tool
Better Employee Turnover Rates
|Performance Pay Decisions
|The ability of management to objectively and accurately measure performance
Link pay to performance
Additionally, organizations need to agree on measures to understand the effectiveness of the methods and tools employed to conduct performance management such as an automated performance management system.
Questions like the ones below need to be answered.
Once you have set the benchmarks, the objectives, and defined the success measures, it is time to collect data and start evaluating your current performance management system.
To fully comprehend the effectiveness of your performance management system and how to improve it, quantitative and qualitative data should be used.
It is important to get data about the benchmarks, objectives, and success measures, to the extent available. To collect this data, some methods that can be used are:
After collecting data, analyze the results based on the success measures you defined and the benchmarks you wanted to achieve.
Compare these results with industry benchmarks. This will help you understand how effective your current system for performance management is and where it needs to be improved.
Always remember that with the changing times and market standards, an organization’s performance management system should also be continuously tracked and modified. This will help meet the ever-changing employee needs.
At this stage, you have evaluated the actual capabilities of your performance management system, compared it to the benchmarks you had set, and found the discrepancies or shortcomings that you need to work on.
Now, it is time to take action on the results you found and take appropriate measures to improve the current performance management system.
It is important to include the stakeholders directly impacted by it, such as employees, managers, and senior management, in this process.
This will result in greater ownership from those who have to implement the system and be a regular part of it.
PMS aims to measure, evaluate, and improve employee performance. Organizations should be fundamentally clear on this distinction. The performance management system should enable organizations to drive employee performance and employee career development.
Usually, compensation is a by-product of this process. The performance reviews enable organizations to identify employees who are performing, are aligned with the organization and have the potential to grow with the organization. A good PMS can also empower the organization to effectively utilize components of Rewards and recognition to encourage positive behavior in employees.
For organizations to drive better performance, employees must be more aligned, engaged, and motivated toward organizational priorities.
An effective Performance Management System enables organizations to achieve this. Organizations must deploy an effective and efficient performance management system. Assessing the effectiveness of the current system, identifying what needs improvement, benchmarking with the industry, setting goals for improvement, and acting on that improvement is a process that organizations must follow.
In this digital age, a technology-driven continuous feedback-based performance management system has many of the components that make a system effective and efficient.
There is no one-size-fits-all kind of performance management system. However, we must realize that each organization is different and has its own set of goals to achieve and challenges to overcome. Each organization must adopt a system that is customized to its needs and desired performance goals.