How-To Guide for Managing Employee Performance

It is vital to the long-term success of your business that your employees carry out their jobs well. This is particularly important if you are in a competitive field where the only differentiator may be the respective performances of individuals and teams within the competing companies.

The effective management of your employees’ performance should:

• contribute to business success by ensuring that individual efforts are linked to business objectives;
• improve the motivation and performance of staff by giving them positive feedback and by providing them with opportunities for training and development;
• provide a basis for linking rewards to performance;
• give the company more information about individuals and their needs.

The performance management process

The main steps in the performance management process are:

• setting objectives;
• managing performance;
• appraising (or reviewing) performance;
• rewarding performance. 

How to set objectives

The starting point for objective setting should be your mission and goals. This might sound over-elaborate or too much like management jargon, but it is important for a company of any size to have some view about its reason for existence, as this will help to focus on business priorities. It is also very helpful to your customers for them to know your business philosophy, which in turn will assist you in your marketing. For example, do you ‘pile ’em high and sell ’em cheap’ or do you provide quality at a price?

Your mission and goals will help you define your corporate or strategic objectives. Once you have established these you should incorporate them into a business plan and cascade them down the company so that there are objectives for each function and then for individual jobs. Overall objectives may then be broken down into more detailed targets.

There can sometimes be confusion over the differences between goals, objectives and targets. Generally goals tend to be broader in scope than objectives, which in turn are broader than targets. However, the particular terminology used is not important as long as everyone is clear about what is meant within the company. When setting objectives for a particular job you should first consider the main purpose of that job, which should ideally be set out in the job description. From this, and the job’s main accountabilities, you should be able to identify the outputs required, or key result areas (KRAs).

From these KRAs you should then be able to identify a number of objectives to be achieved for each KRA. These should be as specific as possible and linked to direct quantifiable outputs. Many objectives will be difficult to quantify, for example improving staff motivation, or giving high-quality advice, and in these cases a competency approach may be required (see below).

How to manage performance

Managing performance means giving employees effective day-to-day support to enable them to carry out their roles effectively. You should:

• ensure that all necessary equipment and resources are provided;
• ensure that everyone is clear about the results required;
• provide any advice and guidance that may be required;
• give staff the training and development necessary for them to be able to do
• their jobs effectively and to equip them for larger roles;
• adjust targets, priorities and performance targets according to changes in
• markets, business aims, economic developments and so forth;
• provide regular and positive feedback on performance.

As an overall aim you should encourage staff to take responsibility for their own performance.

How to appraise performance

Performance appraisal is something that happens throughout the year. Inevitably you will make judgements about how your staff are performing even if this process is not formalized. However, whatever process is used there will be a point or points in the year when you should sit down with each employee concerned and discuss that person’s performance. Although there is no hard-and-fast rule, it probably makes sense to do this twice a year. To do it more often is likely to be too administratively time-consuming, and less often may result in issues not being addressed quickly enough.

If you conduct an interim or progress review during the year there is probably no need to complete an appraisal form, although if the employee concerned is failing to achieve her objectives there may be a need to agree an improvement plan. You should keep a file note of any such agreement.

You should remember that the appraisal meeting is really only formalizing what should have been happening anyway, so there should be no real surprises, either for you or the employee. Remember also that the meeting is a two-way discussion.

The main objectives of any performance review or appraisal process are to:

• review past performance;
• help improve current and future performance;
• identify training and development needs;
• assess potential and produce development plans;
• improve communication;
• improve motivation;
• give the employee the opportunity to raise issues or concerns.