The 6 Vital Elements Of Effective Performance Management Systems


Occasionally when I’m with a large group I ask two questions. The first, “Who had a performance review last year?” will result in most hands going up. I follow up by asking, “Who had a really positive experience in that performance review?” Unexpectedly, only a few hands will go up.

What’s wrong with performance management?

Performance reviews tend to focus on the past. They are a look in the rear view mirror instead of through the windshield and planning for a brighter future. Research has shown this results in negative outcomes over 30% of the time and can also damage people’s self-esteem. Employees lament that these reviews focus primarily on recent events rather than performance over time. They note that managers will often carry a bias, as well. Indeed, other research shows that often immediate colleagues have a more accurate view of a person’s performance than does the manager. Finally, results have shown these reviews will rarely improve performance, although the process is a huge investment of managers’ time, besides being an emotional drain for many.

Due to these problems, organizations have experimented with a number of fixes. Some have eliminated rules altogether and let people manage themselves. They recommend only positive feedback, and eliminate traditional appraisals all together. Others have taken the opposite extreme, with detailed quarterly plans and frequent reports by employees on their activities and results. Still others have tried different techniques for appraisal, asking about whether you would want this person to be a permanent member of your team, or should this person receive a maximum bonus.

When a performance management system is done well, there are positive outcomes. With no system in place, feedback between leaders and employees is less frequent or often non-existent. Organizations need systems that set objectives and define work plans. Compensation requires an underlying rationale for its administration. Additionally, the periodic appraisal provides legal protection for the firm in cases of demotion or termination. Even more importantly, employees want feedback on their performance and need to know how they can improve performance and further their career.


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