How to Effectively Manage Employee Performance (And What to Avoid!)

Eric Mochnacz
July 30, 2020

If you’ve ever been employed, you’ve probably engaged in some form of employee performance management.  When done well, the performance management process can be an effective developmental experience for workers, set the employee up for individual performance improvements, and help employees understand how they contribute to the company’s long term success.  When performance development isn’t treated as an integral part of the employee lifecycle or executed poorly, a company risks high levels of employee disengagement, workers with no clear metrics for success, and distrust and lack of investment for any other employee-facing processes.  So, a well run approach to performance management is critical to scaling your workforce and business success.  We’ll outline the dos and don’ts for an effective and comprehensive approach to evaluating employee performance and development.

What is Performance Management?

Performance management is the methods and processes by which an organization provides feedback to their workforce.  Often overseen by Human Resources, most individuals are accustomed to an annual performance review.   The employee fills out a self-appraisal, the manager fills out their portion and then it remains on file with HR.  In some companies, a positive performance appraisal has a direct impact on an employee’s receipt of a pay raise or bonus.  This traditional view of the performance appraisal treats performance feedback as a once in a year event.  The self-appraisal and manager completed appraisal are still important parts of performance management, as it is important to have formal documentation about performance feedback, but it’s time for employers to reconsider the way that it’s always been done when it comes to evaluating their team members.  

A more progressive approach to employee performance development is creating a structure where managers and employees feel empowered to regularly discuss performance, whether formally or informally.  With this approach, when an employee makes an error that impacts their performance toward goals, the manager doesn’t need to wait until the end of the year to discuss it.  In companies that support this type of feedback, the manager has been given the autonomy to address employee issues when they arise.  The manager is able to discern if the performance issue warrants a quick conversation, a warning, or some other step based on the company’s disciplinary process.  All ongoing conversations about performance – formal or informal, negative or positive –  are noted by the manager and inform and influence any formal performance appraisal process that occurs.  This allows for a more comprehensive snapshot of  the employees’ performance and lends itself to more robust development conversations.  Formal performance development conversations should occur more frequently than what the common standard is.  We recommend holding the formal evaluations quarterly, but if that isn’t possible, they should be held twice a year.  

The goal is to create an environment where honest feedback is part of the day to day operation of your business.  There are open and regular conversations between management and employees about performance improvement and supporting business goals by guiding the employee to perform towards Key Performance Indicators (KPIs) and performance metrics.  The ability to support employees more consistently is by training and supporting managers to move beyond the concept that once-a-year appraisals are the only effective way to motivate, challenge and engage your people.  Regular, documented feedback is still an essential part of a thoroughly documented performance history, but it’s not the only way employees should receive feedback and guidance about their performance.  

Why is Performance Management Important?

Red Clover is a NJ-based firm and NJ is an at-will employment state.  So, theoretically, employers are permitted to terminate employees without cause.  But, when it comes to building and scaling your workforce, having a solid performance management process allows you to identify your top performers and provide your low performers with guidance before opting to end the employment relationship.  In terms of employer brand, no company wants to be known as an organization that fires people without providing them the opportunity to fix mistakes or improve their performance.  Although at-will employment does allow for termination without cause, it doesn’t mean there doesn’t exist a need for documentation when employees are held accountable for poor performance.  Having a formal employee development process, where employee performance issues are well-documented, can help mitigate risk if and when you choose to terminate an employee.

Investing the time and resources into building a formal performance development process also helps your company identify the employees who perform well and have the potential to grow with the organization as it scales.  If you consistently have individuals who meet or exceed expectations in their day to day work, those are employees you want in your organization.  By consistently executing your performance development process, you are equipped to better identify those who excel in their positions and regularly contribute to the advancement of the business.  By knowing who those employees are, you can develop employee engagement and training programs to retain and develop those individuals.  

From the employee perspective, they deserve the opportunity to know where they are performing well and where they need to improve.  To keep workers engaged in your company, the feedback process needs to happen frequently.  The opportunity to receive performance feedback should be something employees can count on. Organizational managers need to be skilled (or be provided the training and support) to regularly engage in performance development conversations with their direct reports.  People don’t choose a job to remain stagnant; they choose a job to advance in their careers.  Performance management isn’t just about addressing things in the moment they go wrong; it’s about providing positive feedback and helping the employee map out their future with your company.  You invest in their professional growth by committing to regular performance improvement discussions.  The implementation and execution of a performance management process clearly outlines what employees need to do in order to advance within your organization.  When your workers can plan for their future with your company, they see a future with your company. 

How to Successfully Manage Your Employees

Do’s

  • Integrate your company core values into your performance development plan and materials.  If you hire based on your company values, employees should be able to articulate how and when they work to those values.  You want people who live your core values at work.  In their self-appraisal, employees should be given the opportunity to write how they embodied the core values in execution of their duties.  The manager should also focus on these items when they put together their subsequent evaluations and should highlight them in their informal interactions as well.  On a larger scale, introduce awards and recognition events for employees who consistently demonstrate their core values in their work.  If values become the center of your company, then people will accept them as central to their performance.
  • Get used to hiring new managers or training current managers to integrate performance feedback into their normal interactions with their direct reports.  Your managers need to be comfortable and confident enough to directly, but professionally, address serious and minor performance issues as they occur.  They need to be skilled in delivering difficult messages while also providing positive reinforcement as needed.  Feedback should be well-rounded, and if someone’s performance doesn’t warrant positive feedback, then managers need to be skilled to enact progressive discipline and potentially have tougher conversations with an employee if it just isn’t working out.
  • Although we discourage you from having the annual performance appraisal be the ONLY time and way managers provide performance feedback to their supervisees, there should be a set process and schedule for formally documented performance reviews.  Reviews should be scheduled held during the same time throughout the year where employees and managers have a two-way dialogue, guided by the appraisal documents, about their performance since the last formal appraisal.  It should be expected, and if you’ve been doing performance management correctly, the employee shouldn’t ever be surprised by something discussed during the appraisal meeting or included in the review documents.  
  • Provide the opportunity for employees to complete a self-appraisal.  As the manager, it provides you insight into their experience.  In fact, you may find employees are too hard on themselves, and the manager can really use the self-appraisal to provide positive feedback in areas where the employee thinks they are struggling.  It also helps see if the employee and managers’ beliefs about their performance are aligned or discordant.  Although the self-appraisal may have the manager look at an employee issue a different way, it shouldn’t dictate or completely alter the manager’s formal appraisal of the employee, but it may have some influence on how the manager outlines a situation in formal documentation.  
  • Conclude the appraisal by setting goals and KPIs.  If you’re committed to helping your employees succeed, set clear goals for success between the performance management discussions.  This helps both parties clarify what success is supposed to look like.  Short-term and long-term goals, created with a manager, help the employee know the manager is invested in them, and the employee feels invested in their long term prospects with the company.  Also, if the employee isn’t performing well, they need to be given clear goals and KPIs to work towards.  They need guidance on how they can improve their performance.  If this employee continues to underperform, having formally documented goals (that they aren’t meeting), helps make a business case if you find yourself in the unfortunate position of having to end the employment relationship.  Either way, goal setting between employees and managers is an effective practice worth integrating into your performance development process.
  • As the manager, open yourself up for feedback.  If your performance management process truly is about supporting the employee and holding productive dialogues through the course of their employment, allow them the opportunity to provide you feedback.  If you are expecting them to perform in a certain way, allow your employees to identify how you, as their manager, can best support them and what they need from you in order to be successful.  Two-way communication is essential to creating a relationship where ongoing performance feedback is accepted and welcomed.

Tactics You Should Avoid

Don’ts

  • Treat performance management as a once a year event.  Helping employees perform to expectations and move the needle forward in your business isn’t something that can only be addressed once in a calendar year.  Feedback needs to be given in a timely manner.  When something goes wrong, employees need to know immediately, and need to be able to take the steps to fix it.  Conversely, employees need to know when they are performing while it is happening, so they know to continue those behaviors as they take on new projects and start mapping out their potential for growth in the company.  By treating performance management as an ongoing process and part of the fabric of your company, the formal performance appraisals your company holds at set times during the year is and extension of your employee support system rather than a make or break event for the employee.
  • Use a number rating scale.  This is common, both in paper forms and in performance management software.  The issue with rating scales is it reduces the employee to a number.  If we’re talking the traditional “1 – Does Not Meet Expectations  to 5 – Exceeds Expectations” scale, managers often have different perceptions and philosophies about what constitutes each rating for an employee.  With that lack of consistency, it’s difficult to know if every employee is being held to the same standard and if managers are having quality developmental conversations with their people.  We’ve all worked with a manager who insists on giving “3 – Meets Expectations” for every employee because the worker shows up and does their job – and any of their direct reports would need to do spectacular things to receive a rating any higher than a 3.  This is a total cop out and it’s evident the manager isn’t spending time observing and discussing behaviors and expectations with their workers.  Employees should have a clear understanding of what they need to do to exceed expectations.  Otherwise, they will continue to do the bare minimum, because nothing they do will ever warrant them more recognition. By using the common numeric rating scale, it stunts the possibility for performance development conversations.  Someone’s performance at their job is more than a number and performance development is more effective if it’s consistent conversations about accomplishments, challenges, and achievements that move the business forward.  By describing these things in a performance appraisal document (rather than just clicking off a number), it forces the manager and employee to discuss specifics about someone’s performance; rather than just tabulating someone’s score and telling them it warrants another year of employment.  
  • Performance development and pay increases should not be so inextricably linked that employees are unable to see the difference between the two.  We’ve worked with a number of clients who equated a positive performance appraisal with a compensation bump.  Unfortunately, the workforce began to focus on the annual pay increase rathern than improving their performance from year to year.  The challenge became that every time the employee felt they did something outside of their job description or went above and beyond for a client, it warranted more money.  In this case, it’s a matter of refining the definition of these two processes.  Performance development should be an ongoing process, with formal appraisals done quarterly or bi-yearly.  The organization should adopt  the philosophy that performance development is about reflecting on the past, but setting goals for the employee to be successful in the future.  The goal of compensation review (traditionally held yearly) is to focus on the individual employee’s contribution to business goals over the past year.

How Red Clover Can Help

Red Clover is a talented team of certified HR and Change Management consultants with direct experience in helping startups, small and medium-sized businesses overhaul their performance appraisal form into a performance development process.  We take a multi-faceted approach to performance development.  Red Clover consultants provide guidance in reviewing your current process, make recommendations for change, and assist with communication planning and implementation of your new process to the entirety of your workforce.  We work hand in hand with new and seasoned managers in your organization to provide them guidance on adjusting to the changes in your approach to performance management.  If you’re an organization who can’t seem to shake the connection employees make between performance feedback and pay increases, we are qualified to develop the business case and communication plans associated with separating the processes while creating a company-specific salary band and compensation structure that suits your business goals.  Red Clover also offers interim HR management services for when you find yourself without an HR head during the crucial performance appraisal period.  We can provide a dedicated consultant on-site to help navigate the performance appraisal process as well as any other people operations issues and procedures that need committed attention.  
Reach out if you’d like to learn more.

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