The Complete Guide To Performance Management in 2021

Let’s start with the bad news. According to Deloitte Consulting, ‘Performance Management’ has a -60 Net Promoter Score. That’s bad! Yet done well, continuous performance management was shown to motivate employees to accomplish their goals, grow and develop the company and help employees develop a better relationships with their managers.

Part of the problem Deloitte found was that employees often don’t understand how they are being evaluated, feel that the process is unfair or inconsistent, and that there is a lack of transparency around how performance and compensation are linked.

This would indicate that if Performance Management is a set of formal and informal processes that are designed to create a culture where strategies are delivered, and goals are reached by happy, highly motivated and engaged employees, there’s something wrong. Really wrong.

What is Performance Management?

In an increasingly people centric workplace, the ideal is for the needs of the organization to align with the needs of each employee. Performance Management is a set of processes that facilitate two-way open communications on how each party’s objectives can be achieved. These performance dialogues are required to be both regular and objective.

It will not be a surprise therefore that the key issues and opportunities of Performance Management that need to be addressed with Performance Management are having processes and communication skills that support both consistency and fairness.

For the avoidance of doubt, it’s also necessary to mention what Performance Management is not. Performance Management is NOT an annual review, or Performance Improvement Plans (PIP) that aims to deal with employee underperformance.

Getting Started With Performance Management

So where might you start with creating a great set of Performance Management Systems and Processes? A good way of approaching planning better Performance Management is to consider the needs of the organization and the needs of the employee and get them to align.

What Does An Organisation Need?

Executive Teams are responsible for delivering improvements in specific KPIs like Revenue. To do this they need to create and execute their committed Strategy and aligned Company Objectives.

Company Objective achievement is measured by metrics (KPIs) that will determine whether goals have been achieved, and be expressed in Company Annual and possibly Company Quarterly OKRs.

Departments, teams, and if you’re using them, OKR specific team or Squads, will align their goals using frameworks like OKR. There is also the potential for individual goals to also be set.

Because not all work going on inside a company is part of a Strategic Objective, some employees will be working hard on business-as-usual processes and jobs-to-be-done that maintain and improve their areas of responsibility. The reality is most employees will have both BAU work and some OKR involvement.

The outcome you want is for every employee to have – goal, role and plan clarity, and to know how the work that they do contributes. This goal and role clarity provides purpose, is rewarding and drives productivity gains. Goals ensure what is being worked on is relevant and guides work away from irrelevant, lower impact activities.

Another aspect to this is an organization wants to retain its best talent. The cost of losing and recruiting every lost employee is significant, and estimates in the range of $30K are not uncommon. This means that the ability to attract and retain the best talent is central to what a company wants. So it’s especially important to consider what employees want and need to keep them from moving to another company.

Organization Needs

Strategy Delivery
Metric (KPI) Improvement
Goal & Execution Alignment
Ambition
Goal Achievement
Talented & Motivated Employees
Oversight & Reporting
Agility
Great Culture
Talent Acquisition & Retention

Book Demo

What Do The Employees Need?

The good news is that most employees welcome strategy, goal, role and plan clarity, and want the work that they are doing to be connected to outcomes that let them know they are doing a great job. So have goal setting and management processes that support autonomy and transparency are great starting points.

Individuals and teams can, given the right guidance and support, take responsibility for the achievement of OKR and the continuous improvement of BAU performance and processes.

Employee Needs

To Know What The Strategy Is
To Have Clarity On How Success Will Be Measured
To Be Empowered To Set Goals
To Work In A Psychologically Safe Team
To Be Supported To Achieve Goals
To Learn & Develop
Have A Great Manager To Coach & Develop Them
To Make An Impact
To Working In A Culture They Can Be Proud Of
To Recommend Their Employer

What Employees Need To Achieve Great Things

Skills & Resources Availability
Effective Systems, Processes & Technology
Team Support
Manager Support
Values & Behaviours e.g. Safety, Trust & Autonomy
Learning & Development Opportunities
Wellbeing Support
Recognition

The opposites and not desirable would include: Being under resourced, micromanaged, not being heard and having a voice, low levels of learning and development, obscured levels of contribution impact, and not being recognised for your contribution. 63% of employees that are recognized are “very unlikely” to job hunt in the next 3–6 months. In contrast, vs 11% of those who are “never” or “rarely” recognized.

Leadership & Managers Are Critical To Performance Management

Putting these elements in place is the job of leadership and managers. It’s the job of managers to connect and reinforce organisational, team and individual objectives, provide regular and timely employee feedback and support, helping them to improve, whilst of course holding them to account.

When you consider the diversity of roles that exist in a company you realise that the contributions we require, and therefore the measures of ‘performance’ are also diverse. This is where structure, systems and processes are needed. These need to provide consistency, but also be flexible enough to see the individual in the context of their roles, their teams performance, and the timeframe they are being evaluated in – think COVID for example – normal rules won’t apply.

9 Steps To Better Performance Management

Without structure, systems and processes, you can’t hope to provide clarity on what is required, what success looks like, and then collect the information and insights you need to performance manage an employee. ‘When you first agree to the criteria used in the assessment and then you make the evaluation, you are less likely to rely on stereotypes and your assessments are less biased.’

These are simple steps, and jobs-to-be-done that will help you create an effective performance management system. Many of these might even become OKRs.

OKR Management is part of Performance Management

#1 Clear Roles & Responsibilities

Most employees are recruited with a Job Description in mind and it then becomes part of their human resource profile. Organizations, teams and people evolve and it’s easy and actually normal for these to become out of date and lag behind the reality. Having a process for keeping these current and accurate is important to evaluating how an employee contributes towards a team or organization’s performance.

When you review the job-to-be-done, tasks and deliverables that need to be completed in a team and to accomplish roles and goals you have, you are likely to find gaps. You can use simple methods like labelling who is ‘responsible for’ and who ‘supports’ or a RACI matrix.

Improving role fit is another important dimension to setting roles and responsibilities. Employees are probably going to perform better if they are doing work they are best suited to and most passionate about.

#2 Culture, Values & Behaviours

Culture trump strategy for breakfast is a well known phase used amongst management. There is also broad agreement that cultures impact on strategy delivery and performance is profound.

It’s therefore ironic that you read statistics like “Nearly half of employees (45%) say leadership is minimally or not at all committed to improving culture.”

Perhaps part of the issue is that knowing what kind of culture you want is only part of the problem. Having ‘your’ perfect culture requires you to know what kind of culture you have now, which won’t be consistent between teams and offices. What kind of culture do you want, which is more complicated than a few value statements. And how you can go about building and maintaining the culture you want. Unpacking this is not what we want to do here but here’s a useful article if you do want to start the process.

#3 Share your Mission Vision & Purpose

Your Mission, Vision and Purpose are how you share your long-term Strategy for the company. Your Strategic Pillars are specifically geared to communicating the key battlegrounds you must win over the coming year.

#4 Set Annual Company & Supporting Quarterly OKRs

Based on your long-term mission and annual strategy, set annual company OKRs and invite your teams to debate, create and align their OKRs with these. These will be their commitments to help the company achieve its Objectives, outside the normal BAU of running the business. Depending on roles and responsibilities, and the OKRs set, employees might be owners or collaborators on OKRs. Everyone should know the companies and their teams OKRs in any case.

When you get this right, employees know how their work contributes to the organization. OKRs therefore help you provide that clarity and support the development of a culture that reinforces the important part each employee role and work plays.

#5 Ask For Initiative Ideas

Once you have clarity on OKRs, ask for your teams best ideas for achieving them. These are the things you’re going to do that will progress the measurements in your Key Results. Some employees biggest contributions can be from their ideas and / or execution and delivery of key Initiatives.

#6 Personal Development Planning

When you’ve got Roles and Responsibilities, clarity on what is BAU and what is an OKR, you can discuss how the company and team needs people to develop, and an employee can share what they have learned and how they have developed as well as discussing what they’d like to learn and how they’d like to develop. Making Personal Development Plans (PDP) quarterly to align with OKRs is a good idea. Personal OKRs can be set as part of the PDP setting process.

#7 Keep To The Agreed Cadence

Performance Management and OKRs both rely on regular two-way communications to optimise alignment and maintain agility. There is a perception that this comes with a big meeting overhead and will impact the amount of ‘doing’ or execution time. The actual impact of well planned and run meetings is the exact opposite. More execution time and fewer unnecessary meetings.

Independent Check-ins (5 minutes per week – 1 hours a quarter)
Manager Weekly 1-on-1’s (30 minutes per week – 6 hours a quarter)
Short Weekly Team Meetings (30 mins per week – 6 hours a quarter)
Monthly Review Meetings (45 – 60 mins – 3 hours a quarter)
Quarterly OKR Planning Meetings (2 hours a quarter)
Quarterly Personal Development Planning (1 hour a quarter)

This is a typical OKR / Performance Management meeting schedule. It shows that you’re actually committing to about 19 hours of meetings over a quarter. An employee works for about 420 working hours in a quarter. This means that less than 5% of time is spent aligning, collaborating, praising, solving problems, planning, learning, developing, building friendship bonds, and absorbing culture. Probably way less than is spent in meetings now. That leaves over 95% of an employee’s time for BAU and OKR.

#8 Collect Continuous Feedback

Asking and giving feedback, whether it’s on the people we manage, our managers or colleagues, only annually, is a recipe for disaster. It can’t be objective and therefore can’t be fair. You simply can’t remember the details and you allow for all kinds of biases to come in.

Performance goals and feedback on all levels are best given and received on a continual basis as then used to develop an objective and fair picture of an employees year when appraisal time comes around.

#9 Use Performance Management Software like ZOKRI

ZOKRI is a Performance Management software platform that aligns the needs of employers with the needs of employees. Create a culture of performance and achievement, and a workplace where everyone has an opportunity to thrive. Find the OKR software that works best for you.

Further Performance Management Reading

How to Do Performance Reviews Remotely

Learn how to evaluate employees during challenging times such as the Coronavirus pandemic. Think about why you’re conducting reviews.

Transform Performance Management? Pt. 2

Start with the end in mind.
Answer the 5 questions in this article to see the purpose of performance management – and what’s right for you.

Transform Performance Management? Pt. 3

Invest for success. Read about the implementation and adoption phase of performance management and the critical steps to ensure success.

Performance Management

Understand and implement the fundamentals of performance management with these resources that include factsheets, podcasts and reports.

Performance Management – Wiki

Read this Wikipedia post on the topic of Performance Management that covers application, how it can fail and organizational development.

Agile Performance Management

This article explores Performance Management in agile organizations. Learn about the three changes that are essential to success.

A Shift In Performance Management

Unlock how team-based organizations operate at full potential with a performance management system that recognizes teams who achieve great work.

The Real Cost of Micromanagement

It turns out the “hidden costs” of micromanagement aren’t so micro. Here’s a powerful fix with examples on the real cost and pitfalls of Micromanagement.