How do performance management systems work

How to improve your performance management process in 5 steps

Performance management is about controlling or influencing the performance of employees. But what is a good performance management process based on? In this article, you will learn how to give performance management the right framework and which four factors you should definitely consider.

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What is the definition of performance management

Performance management is the control of performance. It is about positively promoting the personal development of employees in order to fully exploit the potential of the company. Annual target agreement discussions are outdated; today it's about continuously measuring performance with processes.

What is a good performance management process based on?

What actually favors high performance? Money? Not at all. Expressed in a formula: Performance = Skills x Commitment x Context. What a good performance management process should be based on, Marcus Reif, who is himself a HR manager and has many years of management experience in large and small companies, talks about it in the video.

There are four components to consider when designing a performance management process.

They are interrelated and, in the best case, reinforce each other. This guide outlines how you can set up an optimal performance management process in 5 steps.

What role does the corporate culture play?

In most companies in Germany, performance management is understood as a system for setting goals, often combined with variable remuneration.

The goals are very quantitative, i.e. driven by sales or number of items (in production). There are few soft targets; Performance management therefore has too little to do with the personal development of people. But that is what it has to be about: a culture that puts the employee at the center; a human resources department that understands this and makes it clear to executives: only when employees can develop personally and professionally can they achieve top performance - and good results.

Show your co-workers that you have confidence in them. Give them more operational and strategic responsibility. This is the only way to ensure that employees find and implement suitable solutions for area-specific challenges.

Set (together) ambitious but achievable goals for your employees that contribute to the company's goals. So he knows what he is working towards and what he is being judged on.

Performance management easily implemented

Plan performance meetings, send calendar invitations and use standardized feedback forms for better comparability.

What performance management methods are there?

In order to assess performance and potential, you need processes for target agreements that are based on constant interaction. Use apps or tools with which employees can give ad hoc feedback, not only managers to employees, but also employees to one another. Questionnaires can help you find out what went well (and why) and what didn't (and why).

Do not plan development meetings once or twice a year, but more frequently. Nobody can measure the performance of 12 months in one conversation; cognitive performance ends at 2-4 months. Your feedback should be

  • done in portions
  • be event-related
  • take place frequently

Performance management example

Advocate packing feedback on goal achievement into smaller pieces. In the year 30-40 these can be different, which contain both qualitative and quantitative goals. Example: An employee has just completed a project as a project manager. Then the manager could have a feedback discussion and evaluate together: What went well, what did not go well? Where can / should the project management employee improve?

This is documented and measured (for example in a later conversation in which the employee talks about the newly acquired skills). In a digital world that is constantly changing and constantly demanding new skills, the performance management process must also be based on this. Every project, every interaction can be assessed.

It is best for the manager to have a tool in which they take notes, which HR and the employee can view and edit. This creates transparency and comparability, a must for constructive communication.

As a HR manager, promote a continuous dialogue between managers and employees. What executives should ask their colleagues: What are your needs today? Where do you want to go What do you need to do your job well in the future?

Performance Management: HR trains managers

“People join companies and leave managers.” HR should a) recognize this connection and b) also make it clear to managers. Because they often think it's the money, not bad leadership, when employees quit. Studies show the opposite. You can find out through professional exit interviews or employee surveys. As a rule, this results in: Appreciation and individual development motivate and bind.

Ask: How do you promote your employees? How do you assess competencies and how do you build them up?

How can HR pave the way for good leadership? By recognizing first and foremost: If you are not inclined to people, you cannot become a manager. The best professional is not always interested in people, is not a good communicator, etc. Perhaps he is more of an operational man. That can be a problem. As a HR manager, you should therefore offer training for those who have what it takes to be leaders, who can and want to develop there.

Performance management can bring change with it. And change management almost always fails. Besides change, it is professionally guided by HR.

Download the Performance Management Guide

With good performance management, you set the optimal conditions for good performance. Find out in this practical guide how you can promote, motivate and ultimately retain your employees in your company.

The role of remuneration

Moving away from one-off viewing towards continuous exchange, that is a maxim for contemporary performance management. The other is: Decouple the variable remuneration from the performance appraisal in the performance management process. Because one has nothing to do with the other.

You can find a template for the performance appraisal here.

Often it is like this: Managers assign employees to different categories in a steering and final meeting - from high to low performers. Accordingly, remuneration budgets are set behind it. Since there is only a certain budget, the money has to be divided. In the end, 50% of the employees go home with the message: You have not achieved more than Everything is ok ’. This is a difficult message in performance orientation - and leads to annoyance among employees.

The focus is on people

For managers, feedback discussions are a (further) burden. At least that's the perception. What these conversations are often: occasions for a critical review. It should be about targeted further development. What will the employee's future tasks be and how can you expand their skills? What equipment does he need for this? In the end, this motivates both: the employee because they feel they are being taken seriously and valued, the manager because they can influence the positive development of their colleagues.

It's not about past performance, but about future development.

Performance management is more about personal and personality development, which must be well connected with professional development.

A manager should not set goals for the (half) year end with the employee, but rather milestones that also target the person: What skills does the employee want to acquire in order to position themselves broader or deeper? Are there ambitions like learning a new foreign language or the desire to learn something completely new? All of this should be taken into account and incorporated into the goals.

Conclusion

What can I do as a HR manager? Think big! Be disruptive when setting up or revising your performance management process. Your superiors will negotiate you down anyway and so in the end you get what you actually wanted.

Do not just build HR instruments around existing structures, but also dare to make major changes on topics that are fully in line with the business goals. Are employees who call up 100% of their capabilities important to your company? Then it's performance management too. Your managing director will see it that way too. Every employee who leaves or does not fully develop his potential is a cost factor that he does not want to afford.

If you agree on this point, then you also have the support you need to successfully turn your performance management inside out and create a culture in which employees can develop and deliver results that move the company forward.