What is Performance Management? & Why Do You Need It?

What is Performance Management?

You may not have heard of this term before but most people will have likely experienced different elements of performance management either as a manager or as apart of a team. 

In this article, we will breakdown what performance management is and isn't and the benefits of implementing effective performance management.

What is Performance Management?

Performance Management is the term for systems established in the workplace that are specifically designed to help your team contribute to business objectives and strategic goals to the best of their abilities.

It is the way in which leaders are able to motivate and focus their team members through communication and feedback in order to achieve business objectives.

Performance Management at its best forms an integral part of an overall management system.

What's The Difference Between Performance Management and Micromanagement?

Performance Management is not a synonym for micromanagement.

In fact, with effective performance management in place, managers should not feel the need to micromanage as they will have all the information they need for effective delegation, resource deployment and project oversight.

Using performance management techniques should instil managers with the confidence that they are fully aware of staff performance levels and how their team is progressing with given projects.

Why is Performance Management Important?

When Performance Management is done well it can help in both visible and less visible ways, and they are intrinsically linked together.

3 Key Ways Performance Management can help in the workplace:

• Saves Time
• Increases Communication
• Increases Productivity & Effectiveness

How Can Performance Management Save Time?

Performance management, performance appraisals, one-to-ones, coaching. They can all just sound like yet another thing to add to your already overflowing to-do list.

However, with appropriate planning and implementation, they can and should be, time-saving additions to the workplace.

After all, they are about making sure your people do the right things right.

How does Performance Management save time? Aside from allowing managers to receive updates, effective performance management helps open lines of communication between management and their teams.

When performance management is done well it can help increase the effectiveness of staff in the workplace, by increasing communication, helping resolve problems early on, and help keep everybody on the same page.

Performance Management Increases Communication

We’ve established that performance management when properly executed, can help bridge communication gaps, which in turn can save time.

The increased communication also provides employers with the opportunity to share their plans, goals, and expectations with staff. This means that staff know what is expected and what is considered an acceptable standard to reach.

This is important as a lack of communication can be identified as the root cause of many of the sources of stress at work.

Dr Susan Michie identified the sources of stress at work [1]. "It is an extensive list including role ambiguity, little to no participation in decisions and thwarted ambition." 

For more reading around causes of stress at work, see our blog ‘How Does Stress Effect the Workplace & What Can We Do About It?’.

With regular communication, the sources of these difficulties can be identified before they became too large, and less manageable, saving significant amounts of time.

Equally importantly, it allows staff to contribute directly to the company and make suggestions for improvements and alternative ways of doing things

Van der Hoek et al (2018) found that along with allowing staff space to self-manage, it was ‘beneficial for teams to make an effort to clarify their goals and create a good common understanding of them’[2]. To achieve these goals, good lines of communication is vital.

Performance Management Increases Productivity & Effectiveness

An automatic side effect of the time saved and improved communication resulting from good performance management is that productivity and effectiveness will naturally be improved.

However, the increased communication and staff feeling like they have input can also lead to a huge increase in the amount of discretionary effort people are prepared to put in, increasing focus, productivity and the health and wellbeing of the workforce.

Numerous studies [3] have found that the effectiveness of this increased communication, particularly in Personal Feedback, is also a key component.

What happens when Performance Management is done badly?

Many companies seem to take the view that performance management is the same as an annual performance appraisal for staff. These can be tied to bonuses, pay rises, contract renewals.

Whilst that’s okay, the problem is that a big opportunity for two-way communication and development can be lost if people are worried about money or retaining their position with the company.

Even worse, performance appraisals can actually be damaging if done badly. Often, both managers and staff are given appraisal forms to complete beforehand, without any explanation of what the process is about, what the categories mean, and why it is important.

Without the why it is little more than a tick-box exercise.

It is essentially useless. You will sit there for half an hour or more. There may be some chastisement, there might some praise. You will go through each other’s scores, comparing the self-assessment with the manager’s assessment, and you may even have an ‘agreed’ score column. Often, you’re not quite sure what each 2-word phrase even means.

There is nothing intrinsically wrong with annual appraisals provided they are done well. But it’s important to remember that they are a small part of the performance management process.

The overall aim for performance appraisals, and performance management as a whole, is not to catch people doing things wrong but to help them do things right and for that, you need to provide:

• Opportunities for regular informal conversations
• Early and relevant feedback on progress
• Coaching and skills development

In short, Performance Management isn’t about criticism and focusing on under-performers. Although that may have to feature, it is about -

• Keeping staff focused
• Keeping staff motivated
• Keeping the team as a whole on track and connected

To learn more about how to conduct effective appraisals, 1 to 1s and coaching, check out our 1-day Advanced Leadership & Management course.

[1] Michie S. 2002. Causes And Management Of Stress At Work. Occupational and Environmental Medicine 2002;59:67-72.

[2] Van der Hoek, M., Groeneveld, S., & Kuipers, B. (2018). Goal Setting in Teams: Goal Clarity and Team Performance in the Public Sector. Review of Public Personnel Administration, 38(4), 472–493.

[3] Clampitt, P. & Downs, C. (1993). Employee Perceptions of the Relationship Between Communication and Productivity: A Field Study, 11-12.