Many leading companies today have embraced a style of staff management known as 'performance management.' It's a continuous process of helping an employee to keep raising the bar on their performance. The employee and manager work together to set and document goals, which often align with specific metrics or company objectives - like increasing revenue or decreasing expenses.
There are different kinds of performance management goals. For example, job description goals are those the employee is expected to achieve continuously because they're outlined in their job description. And stretch goals are typically meant to help high-potential, highly motivated employees gain new skills and knowledge.
According to SHRM, employers that practice performance management should only set a few major goals for each employee to accomplish per year. In addition, to be effective, the goals that a worker and manager develop together should be created with the SMART framework in mind. That will ensure the goals are:
Specific, clear and understandable
Measurable, verifiable and results-oriented
Attainable, yet sufficiently challenging
Relevant to the mission of the department or organization
Time-bound with a schedule and specific milestones
Performance management also requires employees and their supervisors to communicate regularly throughout the year to gauge progress toward set goals and readjust timelines and other details, as needed. Coaching and education are also a big part of performance management, in addition to continuous feedback.
This process of sharing ongoing, constructive feedback keeps workers and managers on the same page, reducing misunderstandings and any confusion about expected outcomes. It helps to prevent small problems from turning into big issues or obstacles to success. It can also help to improve employee engagement and motivation, which also can boost productivity and retention.
What about the annual performance review?
Organizations that practice performance management don't typically conduct an annual performance review - or at least, not the traditional process you might have in mind. Performance reviews and evaluations still occur as part of performance management. But they are more frequent, and often more informal. Again, ongoing and open communication between employees and managers is a must for effective performance management.
If you don't think a performance management approach is right for you and your team, you may want to rethink your performance review process anyway. If you're evaluating performance only once a year, or even twice a year, you're missing out on many opportunities to guide and motivate your employees and build a productive work relationship with them.
Also, your team members likely want to hear from you regularly about where and how they're excelling or should strive to improve. It's also a good bet that they want regular reminders that they're an important and valued part of your organization - especially after all the disruption and uncertainty of the past year-plus. (If your employees have been or are still working remotely, the need may be even greater for you to provide those reminders.)
In short, your employees don't want to wait for many months or a year to learn what they're doing well, where they might be missing the mark, and whether the company appreciates their contributions.
Waiting too long to provide feedback and encouragement to your team members could lead to you losing them, too. Some may already be eyeing the door: Recent research from Robert Half found one in three workers plans to look for a new job in the coming months.
A new approach to suit new business demands
Another reason your organization may want to re-evaluate its performance management process is that you may be operating differently than you did in the past. Like many businesses, your firm may no longer have clear annual cycles; instead, it is driven by short-term projects. So, rather than setting employee goals 12 months in advance, it may make more sense to come up with milestones for them to achieve throughout the year.
Keep in mind, too, that creating a continuous feedback loop doesn't just benefit your employees. It can save you time once you adapt to the new process. You may find it's much easier to fit in short, casual employee reviews sprinkled throughout the year than carving out one large chunk of time to prepare for and conduct formal performance evaluations for your entire team.
If you decide to hold more frequent performance reviews, here are some strategies for success:
Make it a discussion
Remember that employees can find performance reviews - even informal check-ins - intimidating. That's why it's important to structure these meetings like two-way conversations. You want to share your feedback, but you also want to invite your employee to respond to it. You also want to create an environment where staff members feel they can be open and honest with you, too.
So, listen more and talk less. Instead of telling employees how they rated in certain areas and why they received the scores they did, turn the process upside down. Ask your workers to talk about their strengths and weaknesses, and to offer suggestions for both personal and department-wide improvement. And be sure to listen for hints as to their level of workplace happiness and satisfaction.
Focus on the future
Instead of dwelling on past successes or failures in a performance review, focus on the company's upcoming needs and how the employee fits into that big picture. For example, what technical training might the employee need to make the most of new technology your organization has implemented that is relevant to their job?
For your rising superstars, discuss mentoring and leadership training. Also, you may find these one-to-one meetings can help you to identify candidates who are a good fit for the organization's succession planning objectives.
During more frequent performance review meetings, you can help employees more clearly see areas for professional growth, such as the need to enhance specific skills or learn new ones. Upskilling is especially important today as technology continues to rapidly change the nature of work.
Upskilling is also important for recruiting and retaining professionals from Generation Y and Z: These workers are not likely to be satisfied in their jobs if they're not offered meaningful opportunities to learn.
Hold salary discussions separately
Many companies base financial rewards - annual or biannual bonuses, merit increases, retention bonuses - on formal evaluations. That doesn't need to change, although you may want to consider separating that conversation from the feedback process. The performance review is a time to acknowledge employees' strengths and discuss strategies for positive change and growth.
Make sure you're offering competitive compensation to your team by consulting the latest Robert Half Salary Guide data.
As a manager, you strive to foster a healthy relationship with your staff and motivate them to do their best work. But the annual performance review can be counterproductive in those efforts. Right or wrong, many workers dread these appraisals because they see them as a way for management to call attention to their shortcomings.
Even if you don't go all in on adopting a new performance management approach, there is value in rethinking the old-fashioned performance review, at least. More frequent feedback for your staff and a less-structured format for delivering constructive criticism and specific, timely praise can help keep your team focused on continuous improvement and feeling motivated to excel.