Performance Management Process 101

In the business setting, performance management refers to performance-related measures and their evaluation. The process typically includes performance planning, performance review, and performance feedback.

It’s necessary for managers to conduct performance reviews, as doing so increases the productivity of their company through better communication between managers and employees.

Performance management also creates trust, enhances career development and succession planning, and provides an organization with different ways to increase their revenue besides hiring more staff.

According to research, 98% of businesses believe performance management is important, but only 64% say they have an effective approach to it. This is why it’s so important that every manager gains a thorough understanding of the performance management process.

Today’s article will guide you throughout the process. Keep reading to find out how you can reach the best outcomes for your business and employers.

What Does Performance Management Entail?

Every year or half-year, managers should ideally conduct one-on-one meetings with each employee to review their performance. The reviews go through three main steps: problem identification, goal establishment, and solution implementation.

Problem Identification

As the manager, this step is where you identify any problems that you want to solve through performance management. Aim to identify something meaningful for the employee to work on rather than just focusing on the problem.

For instance, if your department is losing more clients than you’re gaining, your performance management might focus on client retention. If your clients are complaining about customer service, direct your employee toward professional development in that area.

Goal Establishment

After you identify performance problems, set performance goals for employees to reach. Goals should be specific, measurable, and agreed upon by both the manager and employee. You can also include subordinate performance goals in a performance review or performance plan if their job performance is relevant to the project at hand.


Immediately after the goal establishment phase, discuss what steps will be taken in order to achieve these goals with your employee(s). Allow your employees some creative control in helping come up with solutions, but emphasize the importance of completing all necessary steps.

Who Benefits From Performance Management?

Performance management is highly valuable for any performance-based business. Managers are able to get more work done with performance management because they can plan, track and follow up on their employees.

Employees benefit from performance management by having a clear understanding of how they’re performing in relation to their goals. With a half-yearly or yearly review, your employees can keep track of the job aspects they are doing well and the things they could improve on.

How To Get Started With Performance Management

The best way to begin your performance management is to talk about it during your next performance planning meeting or performance review. It’s essential that everyone understands the process and sees it as an ongoing practice rather than a one-time event.

Here are some concrete ways you can implement performance management in your company:

Create and Confirm the Plan

1. Review employee performance using a set template each time. This will ensure consistent reviews among performance management professionals and ensure performance measures are always fair and thorough.

2. Identify performance-based problems. Performance review meetings should be a time for problem-solving as well as appraisal–don’t be afraid to bring up the difficult subjects, as it will ultimately benefit your employees and the company as a whole.

3. Set goals. Your performance goals need to be specific, measurable, and agreed upon by both the manager and employee. Each goal should have an actionable plan so you can track performance progress.

For the best outcomes, each employee should set goals after agreeing upon them with their manager during performance review meetings.

Reviewing performance goals at each performance evaluation meeting will help keep things on track. Review what your employee is currently doing to work towards their goals every few months, as this will reveal whether adjustments need to be made.

Determine Performance Ratings

Rating systems can be useful in holding all employees to a certain standard. Your ratings should be in line with company standards and communicated in clear enough language that all employees can understand what they’re being rated on.

For example:

1= Does Not Meet Expectations: The employee has failed to meet all of the goals and expectations set for this period.

2= Meets Expectations: The employee’s work performance is satisfactory but not up-to-par with other employees in similar positions.

3= Exceeds Expectations: The employee has performed their duties beyond company standards or what was expected for this period.

4= Significantly Exceeds Expectations: This rating should be used to give credit where credit is due; it must reflect an exceptional effort by an employee that results in significant benefits or savings for the organization.

5= Exceptional Performance: Use this rating sparingly because it should represent outstanding contribution, creativity, and efforts well above what would normally be expected of employees in similar roles.

“Focus on Performance, Not Just the Rating”

It’s important to remember that performance management is about improving performance and not just rating employees. It should be focused on helping your employees to improve their skills rather than taking them under your wing.

Using performance reviews to discuss personal development plans for your employees will help build strong working relationships and help all team members to get a better understanding of one another’s expectations.

Be Clear About Performance Goals

You should create a performance appraisal form with all job responsibilities clearly stated so you can accurately rate employee performance. Remember that a rating of “meets expectations” is not a bad thing at all, because although it is average, it means there’s an improvement from your employee’s previous rating.

Often, people get frustrated when their boss gives them a “meets expectations” rating. If you explain it to them rationally, however, they’ll see it as an opportunity for personal growth and improvement rather than negative feedback.

In your next review meeting, tell the employee what they did well during this period and what could be improved on in the next period rather than focusing solely on the performance overall.

Keep in mind that ratings are subjective, meaning they are based on the opinion of the reviewer rather than facts alone. If you notice any bias when rating your employee’s performance, make sure to correct it.

Make Performance Reviews a Formality

Performance reviews should maintain formality to help keep things professional between both parties. A formal approach will also contribute to better company culture by keeping things consistent among employees.

Using templates for performance review forms can help speed up this process; however, if you have your system of doing things, then continue using it or a hybrid of both instead of switching completely over to an unfamiliar method.

This is only recommended if what you’re currently doing isn’t working well for you, as switching systems can confuse the workplace and take up valuable time.

Be Consistent with Performance Reviews

Do not turn performance reviews into something that happens sporadically or whenever you feel like giving an employee feedback. Inconsistency will only confuse employees and make things feel unpredictable.

Conducting quarterly meetings instead can help keep things organized without making it too rigorous for the employees involved.

Create Opportunities For Further Development

Once you’ve finished your performance review meeting, don’t just leave things at that and move on. Try to figure out ways to help your employee develop further as a professional.

To do this, you can go back through the goals discussion you had during the first performance review and find new development opportunities.

Performance management isn’t a one-time thing, nor is it a simple list of things you need to accomplish before moving on to something else.

It should be a long-term, ongoing process to give employees a chance to reflect on how they’re doing from period to period instead of being complacent with what they’ve learned and accomplished in the past.

Key Components Of A Successful Performance Management Process

It’s important to remember that different people respond better to some performance management approaches over others. Even so, there are some critical components of a successful performance management process that remain fairly consistent throughout all strategies:

  • Performance reviews should be a collaborative effort that requires communication between both parties.
  • It should be formal and take place regularly throughout the year.
  • You should always consider employee feedback when making changes to improve performance management.
  • It’s essential to use the same performance management process throughout your company for any given position or job role.
  • The goal of performance management is to motivate employees. Still, it should also be used as a measuring stick to determine whether or not key goals are being met within the organization.
  • Use time-tracking software to keep track of how long tasks take without relying on memory alone since humans are prone to making errors when recalling events from memory.
  • You can create different goals for specific projects or periods instead of only focusing on one single goal per employee, so they have an opportunity to achieve multiple goals at once if possible.
  • When setting goals with employees, make sure that the goals are measurable, so you’ll know how well they did when performance review time comes around.

Final Words

Performance management can become a highly complex process, but it doesn’t have to be. The key components are clear communication and consistency; with these in place, you are likely to succeed in your performance improvement goals and endeavors!

By following these steps, we hope that your organization will experience positive results during performance reviews and be able to measure progress and success more efficiently.

However, even if you’d like to use different performance management methods than what we’ve discussed here today, don’t feel limited by our suggestions–there is no one-size-fits-all solution when it comes down to improving performance management.

The performance management process is only one part of the equation to success when it comes down to improving performance in your organization. Still, it’s also necessary to communicate performance goals, have regular performance reviews, and use time-tracking software to keep employees accountable for performance throughout the year.