What Is an Employee Performance Management System?

It’s vital to an organization that both employees and managers are on the same page about goals and expectations. One great way to be involved in your employees’ performance beyond an annual review is to use an employee performance management system. An effective system gives clear guidelines of goals, responsibilities and expectations, and it provides employees with feedback and mentoring to help them become more effective.

Benefits of Employee Performance Management

The benefits to using a performance management system are extensive, and can include:

  • Clear goals and expectations cause employees to feel ownership over their work.
  • Managers spend less time daily on employee development and task management.
  • A better relationship between management and staff is built.
  • Provides affirmation for positive performance and an opportunity to eliminate poor performance.
  • Misunderstandings on directions or duties are reduced.
  • Consistent feedback increases employee engagement and leads to better retention.
  • The encouraged collaboration often results in an increase in employee performance.

Employee performance management is becoming a preferred system for most companies as they hire more and more millennials. As of 2017, 56 million millennials were in the workforce, according to Pew Research Center, and studies have shown that they tend to crave real-time, practical feedback from managers. A TriNet survey found that 85 percent of respondents said increased performance feedback from their managers would result in more confidence.

The survey also found that 62 percent had received a performance review but felt “blindsided” by it. This response demonstrates that there has to be structure to the feedback for it to be received properly. This could damage employee morale and, if left unchecked, could drive employees to seek a new job.

Employee Performance Management Systems

Creating an effective performance management system distills down to three key stages: planning, implementing and evaluation.

Advance Your Business Career

Our online MBA program will enhance your understanding of the business world while providing you with the necessary support to grow as a professional.

Explore Degree

Stage 1: Planning

When developing an employee performance management system, there are many decisions to make to ensure the needs of the organization are met, including the purpose of the system. Will it determine pay raises? Can it result in promotions or terminations? A system that tries to satisfy too many goals is likely to fail due to a lack of clear direction. Consider business needs, company culture and how the system will be integrated with other employee systems.

Stage 2: Implementing

Arguably the most important part of a performance management system is how effectively it’s used. When implementing a system, make sure it’s user-friendly and adds value, which will encourage both employees and managers to take it seriously. Encourage buy-in from staff by getting as many members as possible – from all levels of employment – to contribute. Without management support and employee participation, the system will fail.

Stage 3: Evaluating

Performance management systems continually need to be evaluated and improved using metrics to qualify their effectiveness. Metrics can include:

  • Proper training for all employees and managers on the performance management system prior to its implementation
  • Completion of performance review form or other activities, which are typically submitted to the Human Resources department
  • Management review to ensure ratings match with the current system and there is no bias – positive or negative
  • Alignment other HR decisions to ensure there is no contradiction across policies and there is follow-up in the instances of promotions, demotions and pay increases
  • Feedback from users for areas of improvement and what is working well

Improving the Bottom Line

Having an employee performance management system in place has substantial benefits for both employees and companies, many of which contribute directly to the bottom line. Reduced turnover, increased job satisfaction and a decrease in errors are just some of the ways you can improve your business.

The online business degree program from Ave Maria University covers these topics and more in a flexible and convenient schedule. With an accelerated, Catholic-based curriculum, our program will enhance your understanding of the business world while providing you with the necessary support to grow as a professional.