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Companies using traditional performance management have a big problem.
Their employees don’t:
- trust traditional performance management is fair
- or believe it’s making them any better at their jobs
In fact, according to Gallup, only 20% of employees believe their performance is managed in a way that motivates them to do outstanding work.
Why so few?
Because performance management systems focus too much on measuring performance and not enough on enabling it.
Companies have long participated in time-consuming performance reviews that have not yielded any clear improvements in performance.—Gallup, 2024
To avoid performance management pitfalls, companies need to build a system that increases top performance through improved manager effectiveness, continuous feedback, and behavioural science-based technologies.
At Mesh, we’ve spent hundreds of hours designing performance enablement systems like this.
In this article, we’ll walk you through the must-have features of a performance management system that actually improves performance.
8 Characteristics of Effective Performance Management Systems
When choosing an effective performance management system, companies should look for eight characteristics in particular:
- Comprehensive and fair performance reviews
- Continuous and ongoing feedback
- Designed to drive behavioral change and habit formation
- Goals that can be set, measured, and aligned
- Development and capabilities focused
- Transparent and accountable
- Customizable to the business
- In tune with employee sentiment
1. Comprehensive and fair performance reviews
When managers write formal reviews for team members, they shouldn’t have to rely on memory or gut feel to assess employee performance.
It leaves too much room for effects like recency bias or the Idiosyncratic Rater Effect to skew what they put.
Effective performance management systems reduce these biases by giving managers access to multiple data points across an entire review period.
With both historical and the latest data points, managers can make sure the review is comprehensive and representative of the employee’s actual performance over a set period of time.
We recommend collecting these data points on a continuous bases:
- Feedback that’s been delivered (from managers as well as peers)
- Goals and objectives that have or haven’t been achieved
- Competencies that have or have’t been developed
- Self assessments from the employee
For example, Mesh’s Performance Review System was designed with this fairness and objectivity philosophy in mind.
While quarterly performance reviews are never the first time the employee hears the feedback—it’s continuous—when time comes for a more thorough, period review, managers have data at their fingertips on each employee’s progress towards goals, their self-reviews, peer feedback, and discussion topics from 1:1s.
To learn more about designing and implementing better performance reviews, I’d highly recommend watching our webinar (here) where we share our Performance Review Playbook.
2. Continuous and ongoing feedback
Annual or bi-annual reviews have been abandoned by many organizations over the past 10 years.
To maximize performance, managers provide continuous feedback through 1:1s and feedback technologies to support their team members to make daily improvements.
This approach helps focus them on the right development areas continuously and feel a sense of active progress toward their next career milestone.
A modern performance management system will bake these continuous feedback and praise processes into its fabric.
We recommend that feedback, when given, is tied to specific competencies that your organization employees to improve, such as project management or decision making.
This provides clarity to employees on where they should spend their time, whether that’s developing conflict resolution, project management, or managing ambiguity.
Most traditional performance management systems are stuck on a “monitor and measure” approach that neglects an employee’s desire to get regular support and recognition.
We strongly recommend you cut against this grain, making it your focus to shift to continuous performance enablement in 2024.
Learn more about this making shift here: the Pivot to Enablement.
3. Designed to drive behavioral change and habit formation
We’ve established that a must-have feature of a performance management system is to help employees improve 1% or more everyday.
Daily reminders encourage daily improvements toward desired behaviors.
To best achieve this outcome, your performance platform should integrate with other tools that employees use on a daily basis (like Slack or Microsoft Teams) and provide prompts and reminders in-situ.
That way the software can ‘nudge’ employees to complete tasks such as giving feedback, updating goals, completing reviews, and preparing for upcoming 1:1s without requiring them to remember to login to a “employee enablement platform”.
At Mesh, we deliver recommendations and prompts directly in Slack and Teams. Our platform also make it easy to setup 1:1s and even takes notes that are saved neatly, ready to open when the manager needs to give employee feedback.
This type of feature helps continuous feedback, among other behaviors, become a part of managers and employee’s day-to-day habits.
Related Read: The Nudge Theory To Revolutionize Workplace Practices
4. Goals that can be set, measured, and aligned
In an ideal, enablement-centric performance system, goal setting is a collaborative process that ensures employees' objectives are directly aligned with the company's strategic vision.
These goals are clear, measurable, and time-bound, allowing for easy tracking and agile adjustments as needed.
We recommend that your system give visibility to managers on the progress of those goals.
And give employees visibility over the priorities of the business so that they understand how their goals tie into wider business growth.
This approach clarifies expectations and empowers employees to take ownership of their contributions to the company's success.
5. Development and capabilities focused
Performance management systems that improve employee retention should take an active role in their professional development.
For example, Mesh’s platform has a place where core competencies are listed and measured. Employees know how they’re getting on and managers have context ahead of 1:1s.
This makes every development conversation more meaningful and focused.
But it also enables employees to take charge of their career growth journey, they know what is expected of them and their progress toward those goals.
6. Transparent and accountable
Transparency in the performance management and enablement process builds trust and ensures all employees understand how their performance is evaluated.
Here are X ways to improve transparency:
- Have clear, measurable goals for each level of your organization
- Have clear documentation, available to all, on how performance is rewarded
- Have clear accountability, e.g., how many 1:1s are needed and how frequently?
- Have tech-enabled visibility, e.g. continuous updates on goals at a team and company level, that everyone can see
7. Customizable to the business
Every organization is unique. Your performance management system should suit the way you do things and offer flexibility should that change.
Whether it's modifying the feedback process, setting unique performance metrics, or integrating with other HR systems, customization ensures performance management systems remain relevant and effective.
Mesh allows you to create templates, restructure systems to fit your needs, and change review frequency to match your culture.
8. In tune with employee sentiment
Your performance enablement system needs to know the engagement levels and sentiment of your people.
It’s an important part of long-term performance.
Think of it this way, if a team is performing well but they’re unhappy about their development opportunities, that performance is likely to go down over time.
Having engagement surveys and the opportunity for employees to give feedback to the organization can help you identify blockers to performance and retention before they become major problems.
How Mesh Helps With Effective Performance Management
As we’ve highlighted through this article, at Mesh we’re familiar with the challenges HR teams face with performance management.
We didn’t want to build another performance management tool that fails to address those challenges.
So instead we designed a continuous performance enablement platform to:
- empower employees to achieve their best
- support managers in becoming more effective leaders
- foster a culture of continuous improvement and feedback
- equip HR with the data and insights they need to retain talent
To achieve that, we adapted traditional performance management features to:
- facilitate habit formation through timely nudges
- improve the quality of feedback, performance reviews, and notetaking with the help of integrated AI (check out our AI co-pilot here)
- link individual goals to the goals of the business
- support the development of employee capabilities
- embed regular touchpoints and feedback into employee’s day-to-days
- make manager-employee conversations more informed, regular, and meaningful
- pull data points from the entire year to inform unbiased reviews
- consolidate performance data and insights for managers and HR to use
Book a product demo here to see how our features enable performance and introduce a management process your employees can believe in.
FAQs on Effective Performance Management Features & System Characteristics
What are the three Ps of performance management?
The three Ps of performance management are Purpose, Process, and People.
Purpose: Purpose is the underlying objectives and intentions that drive an organization's approach to evaluating and enhancing the performance of its employees.
It’s the foundation for setting individual and team goals, ensuring that everyone's work contributes to the broader objectives of the organization.
Process: This refers to the methods and procedures used to manage and assess performance.
A well-defined process ensures that performance management is consistent, fair, and aligned with organizational objectives.
This includes setting goals, providing feedback, conducting evaluations, and facilitating development.
People: In performance management you need to consider the human at the receiving end.
It involves understanding employee needs, motivations, and development goals.
Effective performance management systems are designed to support and enhance the capabilities of the people within an organization.
What key features do you think an ideal performance management system should have?
An ideal performance management system will have these features driving organizational success and employee development:
- Goal/OKR Setting and Tracking: Enables setting, monitoring, and updating goals aligned with organizational objectives, ensuring everyone is working towards the same targets.
- Feedback and Praise: Offers a framework for continuous, real-time feedback and recognition, creating a positive culture of growth and appreciation.
- 360 Reviews: Facilitates a comprehensive evaluation process involving feedback from peers, subordinates, and managers for a well-rounded view of performance.
- Engagement Tracking: Keeps tabs on employee engagement and satisfaction, pinpointing areas to enhance morale and productivity.
- Capability Monitoring: Observes skill development and proficiency within the organization, identifying both strengths and opportunities for improvement.
- 1:1 Support: Provides a structured approach for one-on-one discussions focused on feedback, career development, and coaching.
- Data Analysis and Reporting: Employs analytics to offer insights into performance trends, helping inform decision-making and strategy adjustments.
How does a continuous feedback loop enhance an organization’s performance management system?
A continuous feedback loop enhances performance management by providing timely insights into performance, fostering open communication between managers and employees, and encouraging rapid personal and professional development.
The immediacy of this feedback ensures that employees can adjust their behaviors and strategies in real-time, aligning more closely with organizational goals and expectations.
It also helps the organization know how it can do better to engage and retain high performers.
What role do performance metrics and KPIs play in an effective performance management system?
In an effective performance management system, performance metrics and KPIs guide everyone in the right direction, showing where improvements are needed and celebrating achievements along the way.
They're essential for keeping track of progress and ensuring that everyone is working towards the same goals.
This data also helps your organization make informed decisions regarding promotions, compensation, and identifying areas in need of development.
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