Business performance or how business grows is critical to every organization and that is the reason an organization needs its vision, goals and agenda to be aligned with the strategies as well as operations of their day to day activities. Every organization seeks to create a high performance culture that encourages every employee to deliver their performance commitment in order to deliver the organization's vision. As such all employees need to know and align with what the organization wants to achieve, how business priorities are going to be achieved and how these priorities or key performance indicators (KPI) are going to be evaluated. It is this process of dissemination of business goals/KPI from executive level to employees, how the right tools and resources will be utilized and what specific behaviours will aid the achievement of this goals/KPI which is termed performance management. Again, performance management is the efficient and effective way of comparing actual individual performance/ contribution and their behaviours to improved business performance.
Usually, small and medium scale businesses do not prioritise managing performance early in the business and leave it until they have employed more people. They leave the hiring/ consulting of an HR expert until a later time. The best time to introduce PM systems in any organization is at the start of the business; when the founder decides to start a business PM systems or how to effectively manage performance must be part of the business plan. This will create a performance-based culture in the organization from day, starting with the first employee (the founder).
There are enormous benefits of setting up PM systems at the workplace. There have been several surveys and evidence which confirms the correlation between using performance management programmes and improved business outcomes. Some of the benefits are:
- Increased in the bottom line. There will be growth in sales and revenue of the organization. Every organization is in business to grow, make profit and build a brand. Performance management ensures these are achieved with effective monitoring and evaluation of individual employee contribution to business goals. Thus, bringing financial benefit to the organization.
- Employee goals and aspirations will be aligned to the organizational goals. Employees become clearer on expectation of the organization as well as their career aspirations. This will make employees motivated and employee engagement will increase.
- PM systems help to reduce cost. Managing performance well will help the business identify non-performing employees and support them quickly or exit them from the business. Then again, employees will be working at their optimum level and thus, productivity will be up which will then reflect on business profit. Workforce planning can be optimized so that hiring would be done on critically-needed basis.
- With performance management systems there will be factual basis for compensation and reward. In terms of pay raise, bonuses and promotions will be based on outcome/ evaluation from performance management systems. This will help in reducing doubt in employees and build trust in the PM systems and how performance is managed, creating factual basis for career progression of employees within the organization.
- PM provides platform for line managers and their direct report to engage, coach and build trusting relationship at the workplace. It assists line managers to spot great talents within the team, nurture potential and grow team spirit.
This article has outlined the steps to set up performance management systems and also provide clarity on managing performance consistently.
THE PROCESS FOR THE PM SYSTEM
Planning and setting performance expectation
At the beginning of each financial year line manager and employee meet to discuss and set goals as well as agree on the behaviours required to deliver the goals. The goals must be aligned to overall business strategy. Goals must be documented and signed by both parties.
Managing employee growth
Employees must document their career aspiration as part of their goals and also what support they would need to get there. This is about employees' personal and career development.
Throughout the year line manager is responsible for tracking and monitoring performance of his team members. Thus providing feedback and reinforcing behaviours.
Regular performance conversation must happen throughout the year. Informal conversations on feedback must be provided. Formal review must be done at Mid-year and also end of year. Each formal review/conversation must be documented using HRIS or in a Manual form.
This is how the individual employee has delivered against the target which was set at the beginning of the year. Assessment is done at Mid-year and end of year of the financial year of the organization. Employees are rated on a scale. For example, employees can be evaluated on outcomes such as Achieved, Not Achieved and over Achieved.
Following sign off of all assessment scores employee may be eligible for bonus and at what percentage is based on their assessment rating.
Managing poor performance
Every line manager is responsible for managing his/her employees' performance. Once an employee's performance falls short of expectations the line manager must invite the said employee for performance conversation. Both should be able identify the cause of non performance. Line manager should be able to coach and guide employee to return to high performance. If the employee, after several supports, fails to deliver expected standards will be put on PIP (Performance Improvement Plan) for at least, 3 (three) months. If there is no success to meet expectation then that said employee's employment contract is terminated.
In conclusion, performance management is the engine that grows every business. For help to speed up productivity and increase net profit do engage an HR expert for support in setting up performance management systems in your organization.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.