Performance management: the pros and cons

Performance management is a continuous and holistic approach to ensure that whereever possible your employees’ goals are aligned with your organisational strategy, helping you to achieve corporate objectives collaboratively and efficiently.

We’ve previously touched on how performance management helps to engage your workforce, but let’s look more closely at the wider pros and cons of performance management.

The Pros of Performance Management

• Performance management encourages a holistic approach

By aligning everyone’s individual goals with the wider company strategy, employees are focused on what is important to the organisation. Performance management can align operational performance with strategic objectives and ensures employee reviews are relevant to the overall strategy and direction of the organisation. This can remove subjectivity and bias from appraisals as managers are judging everyone against organisational parameters and not against personal goals, or what the manager may deem a success.

• Performance management encourages performance based conversations

By undertaking a continuous approach to performance management, the performance of the organisation and employees are assessed collectively. This consistent approach in coaching staff provides encouragement, changes behaviours, and promotes development, shifting the focus from management to development and ultimately driving the organisation forward.

• Performance management assists in succession planning

Through the regular review of performance, top achievers are identified and celebrated. Similarly, under performers are also identified. Organisations can understand the performance development history of each employee, this knowledge can be used to gain insights into the skills and abilities required for a particular role. By applying this knowledge in to training and development planning, employers can better understand their growth curve and plan for the future. Performance management also helps the individual employee to plan their careers, they gain clarity on what is expected of them, goals are established and employees understand how to achieve their career aspirations.

• Performance management engages employees

Effective performance management means those employees contributing in outstanding ways are recognised regularly and not just on an adhoc basis. A simple ‘thank you’ and ‘well done’ can be underestimated when it comes to motivating your employees. When aligning your performance management process with formal reward and recognition strategies, clarity and greater control is provided to all employees regarding career progression. Such well planned policies will attract and retain top talent, reflecting that the organisation cares about individual development, thus improving your employer brand.  

The Cons of Performance management

• Performance management can be time consuming

An effective performance management process can be costly in both time and resource. Depending on the size of your organisation, the process of regularly reviewing each employee can take hours for each manager and each employee. Similarly, the management and review of the overall process itself can be timely. The good news is there are plenty of software options available to help in minimising this resource requirement. Just make sure that any system you choose to utilise is aligned to your goals and best suits your unique requirements.

• The mismanagement of performance management can impede growth

If managed poorly, your performance management approach can hinder, rather than promote growth – both in terms of the organisation and individuals. Common mistakes include inconsistent messaging, measuring faulty criteria and prioritising measurement over development. The managers undertaking reviews of employees are key to the success of your performance management system. Ensuring continuity of approach is vital, as is testing and monitoring your system to ensure your approach is working and that your criteria are SMART (specific, measurable, achievable, realistic and time-bound). Try not to focus on one dimensional metrics such as numerical data, instead focus on how your people achieve goals and how they are aiding the organisation goals in being accomplished.

• Performance management can result in bias

We mentioned that your managers undertaking the performance management process are key to its success. Depending on their leadership style and preconceived notions, each manager can take a different approach to performance review. Previous studies indicate that 62% of variance in performance ratings can be attributed to rate bias. To avoid such bias, training and monitoring is vital – focus on training your managers to be coaches instead of bosses and hold them accountable for their evaluations. Try to be clear on the purpose of reviews, the CIPD recommends that appraisals should be used for development purposes OR administrative purposed (such as informing pay decisions) and not for both. Such clarity means the process should be smoother and more productive.

Grace Hannah put it beautifully when she said that ‘performance management should be about bottom-up empowerment and each employee taking control of their own development and career goals. It has to be a process that appeals to people, not kills them off with 1-5 scales’. Only through the constant evaluation of your performance management process and encouraging feedback from across the business will you know that it is effective and focused on your people and organisational goals.

Navigating the world of performance management can be tricky, there is a lot of information out there yet HR Inspire can work with you to establish the best approach for you. Contact us today to start the journey.