What is a performance management plan?

Performance management is about creating a balance between a happy but productive team. Your HR team is an essential part of maintaining organisational performance. Providing your HR with the skills, data and targets to follow performance strategies should be part of your overall business strategy.

Examples of performance management include, but are not limited to:

• outlining performance objectives;
• looking at employee data and working with feedback to find room for improvement;
• working with individuals and teams to ensure that they are rewarded and promoted;
• working with individuals and teams to ensure that poor performance is monitored, improved or dealt with appropriately, such as through warnings.

The best HR teams and people managers manage performance by creating strong lines of communication with employees, providing clear feedback and training for improvement. The process of creating a performance management plan is a holistic one, encompassing creating learning plans, analysing employee data, one-to-one feedback meetings, group feedback discussions and creating objectives.

You will also need excellent people managers on board to work with your employees on their performance goals. They should be great diplomats, listeners, clear communicators who understand how to manage conflict and can arrive at concrete solutions for improvement. Therefore, a good performance management strategy goes beyond that of an annual review. It involves the hard work of your whole business, not just your managers. Your performance strategy should be integrated with your HR strategy; your employees should also be familiar with their daily, monthly and yearly objectives.

Opportunities for learning and development will not only help improve performance in the long run. It will also keep your staff interested and engaged with your business. Although performance management is predominantly led by your HR management, employees can also be involved with creating your overall performance strategy. By allowing your employees to feel comfortable with being able to speak out and discuss opportunities for improvement, they can be responsible for their own development and that of their team.

How should you approach managing performance?

The best way to approach performance management depends on the nature of your business’s organisation and the individuals within it. There is no one quick fix for improving performance.

However, there are some crucial components to effectively managing performance, which include:

• working out departmental goals starting from your overall business goals;
• working with people managers to build close relationships with employees and help them to develop individual performance plans;
• generating feedback and progress reports for entire teams in your business, making sure that HR retains and analyses the people data from them in order to set new goals.

Your performance management plan should work as a feedback loop. By collecting employee feedback and data following performance improvement strategies already in place, you can decide what works most effectively for your employees. You should learn what motivates your employees to work hard, whether it be flexibility or other perks. You can also find out more about which employees are improving, where employee performance is declining, and why. It will also help you to work out which employees have not been responding adequately to feedback given during a performance discussion or appraisal.

With this information, you can start to revise your performance strategy to fit the needs of your team, but also decide whether some employees need to be warned about their performance so far or given additional support.

Learning and development strategies

A good performance strategy allows for learning and development, as well as reviewing past performance. Make sure that your learning and development strategy is integrated with your overall performance strategy.
Consider giving your employees their own individual personal development plans (PDPs). Your HR and people management can help create these by analysing current and previous employee performance.

Your employee PDPs should ideally also include the following:

• sections describing short-term, medium-term and long-term goals;
• work goals and personal goals for each section;
• skills required to meet these goals;
• an action plan for building these skills;
• a brief overview of the employee’s previous experience, education, interests and background.

You can also review an employee’s performance as part of an appraisal. This is known as a performance development review (PDR). A PDR gives an employee the opportunity to discuss their progress with their manager confidentially. This includes any areas that they may be struggling with or skills that they are looking to improve.

Performance development reviews can involve:

• a discussion of how an employee’s goals align with your company’s overall goals;
• opportunities for career progression such as promotions or training courses;
• redundancy discussion;
• a one-to-one talk about an employee’s own experience of their role so far;
• discussion of employee performance, improvement and career trajectory.

In the past, performance reviews took the form of an annual appraisal. However, it is becoming increasingly common for modern businesses to conduct more frequent performance reviews. This could be at the end of the week or on a monthly basis.

How often you review your employee’s performance will depend on the kind of work that they do and whether you deem it necessary. You might decide to monitor an underperforming employee more closely during a particular month. Consider a strengths-based approach to performance development reviews. This focuses on identifying and supporting your employee’s strengths and positive attributes.

A recent study showed that a strengths-based approach may be most useful when an employee’s performance ratings are low. It suggested that a strengths-based approach can give an employee the tools to deal with a low-performance rating in a constructive manner and avoid conflict with their superiors.

Creating objectives

In order to achieve your business targets, you will need to set daily, monthly and yearly objectives for your teams and individual employees. These can include targets such as sales levels, completion of tasks, monthly projects or campaigns. They might include learning objectives for individual employees.

Businesses commonly use the SMART model for communicating objectives. SMART stands for:

• specific
• measurable
• achievable
• relevant
• time-bound.

However, for more complex tasks you may have to look beyond the SMART model for inspiration. Some disadvantages of the SMART model include:

• it focuses on short term gains rather than long-term aims;
• the approach is not holistic and is rigid, focusing on individual SMART goals rather than how they feed into the bigger picture, or how goals can be influenced by other goals and outcomes;
• it encourages employees to relax once they have achieved a SMART goal;
• some employees may become bogged down in the details of achieving individual SMART goals without focusing on the bigger picture;
• SMART outcomes are framed as success and failure based, when the outcome may be less clearly defined.

Therefore, you might find that SMART works for some tasks and not others. Do not feel as if you have to use this model for every single task that you give an employee. You might find it more useful as an assessment tool when your employees are dealing with smaller, more short-term projects.

Learning about what motivates your employees

According to Skinner’s behaviourist model, learners only learn through a combination of positive and negative reinforcement. As a manager, you will see that many appraisals and reviews of employee performance incorporate both positive and negative reinforcement.

Applied by Taylor and the Scientific Management business school, they believed that this corresponded to pay as being the sole motivator of employees. That pay was positive reinforcement, with the fear of losing their job being the negative reinforcement. However, another study suggests that this is not the full picture. The model focuses on what the employer sees, rather than what the employee sees. To work out what really motivates your employees, consider how your employees view you as their employer as well.

Tapping into what motivates your employees to work hard will make you a great leader. Your employees will respect you as it shows them that you are listening to them, taking on board their feedback and rewarding them when appropriate.

Linking pay to performance

Employees are now much more motivated by flexibility. However, bonuses and promotions are still strong motivators for many employees.

Compensating their efforts with bonuses is a great way to retain employees and minimise turnover. Employees who become increasingly competent at their job may look for other opportunities elsewhere if they do not feel like they are being compensated effectively for their efforts. If you are using a pay band model, during an appraisal you should consider whether an employee has moved up a band. You may have a system or checklist for deciding when someone has moved up. You might decide to have training modules in place that enable staff to gain the skills required to move up through the pay bands. Consider whether your employees have the skills necessary to justify a promotion and corresponding pay rise. That way, you can reward hard work while also getting the most out of your most competent employees.

Other kinds of performance-related benefits

As mentioned above, many employees today are motivated more by perks like flexibility and work-life balance than pay. According to an Aviva survey,

the most popular employee benefits include:

• opportunities to work from home;
• after-work social activities;
• gym membership and wellness activities;
• pension schemes;
• paid sick leave.

You should consider including these types of perks as part of your performance strategy, as rewards for good performance. There are some pros and cons to flexible working and unlimited holiday pay. You may wish to consider these benefits by whether or not you think they are suitable for the kind of business that you run, and whether they are right for your employees. Related article: Team-Building Tips and Activities to Boost Employee Morale and Engagement

Managing performance effectively requires a holistic approach. Essentially, you should communicate clearly to your employees what your targets are on a day-to-day basis, as well as your overall business strategy.

To get the most out of your employees, find out what motivates them the most. Try not to assume that they are solely motivated by pay. Think outside the box, and get to know their personal and professional development needs through regular appraisals and team discussions.

Give your most competent employees the training to move up pay bands, but also listen to employees who are struggling. They might need more learning and feedback opportunities to help them get up to speed. Performance management, therefore, works quite a lot like a feedback loop. One of the great leadership skills is listening. To get your employees excited and driven to come into work every day, you need to match their skills to the appropriate tasks. A solid performance management approach will strengthen relationships with employees. Furthermore, most crucially, it will help you to retain the best talent.