Best Principles for Performance Management

People feel about performance management the way they feel about going to the dentist: they know they need it, but they don’t like it.

• 82% of HR leaders say performance management isn’t effective at meeting its objective.
• 95% of managers are dissatisfied with their review process.
• 67% of employees don’t feel heard during performance reviews.

Performance management is the lynchpin connecting employees to your entire engagement strategy—from compensation and succession planning to mentoring, recognition, and career development. Get performance management wrong, and the resulting misalignment undermines all the other good things you’re trying to do as an employer, which in turn affects your performance as a business. But get it right, and people will understand their role, their path to success, and their value—meaning the whole organization benefits.

Two key principles can help ensure you’re conducting more worthwhile employee performance assessments: First, do them more often. Second, turn your managers into coaches.

Why Is Having Regular Employee Performance Assessments Important?

The Problem with Annual Performance Reviews

Getting a performance review cycle set up takes substantial coordination. There’s the review format: Will you be using software, some kind of shareable document like Google Docs, pen and paper, or a verbal assessment? And then you have to decide when you’ll do them, who will perform the reviews for which employees, what the review will assess, etc.

After all that, it can seem daunting to go through this process more than once or twice a year. But this approach puts too much pressure on those few conversations, rendering them not only intimidating, but essentially useless. Gallup researchers put forward two compelling reasons why:

1. Lack of relevance: If employees only get feedback once or twice a year, whether the feedback is positive or negative, “the issues are history—they have either been resolved or are in the distant past.” Employees won’t be able to do much with outdated feedback.
2. Too much to cover: It’s impossible for managers to adequately advise employees on ways to improve, compensation changes, career development, or promotions in a single discussion. Plus, mixing compensation with performance is a no-no: managers rarely set pay rates, which tend to be determined by market forces and budget, and tying pay in with performance discussions undermines honest communication, collaboration, and improvement.

Employees Want and Thrive on Regular, Informal Feedback

If thinking of the logistics involved in adding more assessments gives you heartburn, let’s focus on why it’s important for employees to receive informal feedback in the first place. We’ve found that 61 percent of employees prefer to receive feedback as projects are completed or in informal meetings with their managers (as opposed to during annual performance reviews). So what makes these informal meetings different from formal performance reviews?

In-the-moment, informal meetings help:

• Lower the pressure on employees and managers by allowing them to focus on growing strengths or identifying areas for improvement over a shorter period of time
• Encourage everyone to be more open and honest since everything isn’t riding on one or two conversations (or tied directly to compensation)
• Motivate managers to give more relevant, actionable feedback employees can put into practice right away
• Encourage continual, collaborative problem solving
• Grow employees’ confidence in their own strengths, their trust in their managers, and their loyalty to the organization

Now that we’ve highlighted the benefits of including informal feedback as a part of your employee assessment strategy, let’s turn to the more intimidating idea of having that feedback happen regularly. Based on surveys we’ve done of other businesses and how we do things at BambooHR, we recommend doing formal employee assessments twice a year (at the very least) and having informal check-ins once a month or more often.

Additionally, managers should conduct impromptu assessments—performance assessments outside the performance review cycle—to avoid mixing in evaluations for compensation, promotions, and raises with formal performance reviews. (BambooHR customers who would like step-by-step instruction on how to use this feature can find how-to guides in our Help Center.)

Gallup likewise reports that weekly (rather than annual) feedback from managers gives employees a big boost. With weekly feedback, employees are:

• 5.2x more likely to feel they receive meaningful feedback
• 3.2x more likely to feel motivated to do outstanding work
• 2.7x more likely to be engaged at work

For example, think about new-hire onboarding. A rapid-fire half-day orientation run by someone new hires will never really see again isn’t going to be very effective. Even a week of onboarding activities will fall short for the majority of positions. But a gradual, planned integration led by the new employees’ manager, with 30-60-90 day impromptu assessments, helps new hires stay on track, feel engaged in their new position, and stay longer with an organization. The same principle holds true for current employees and their need for ongoing conversations with their managers.

In order to make the most of these informal meetings, you’ll need to shift your organization’s thinking about manager responsibilities, which we discuss in more detail in the next section

Why Is It Important for Managers to Act More Like Coaches?

Good Feedback Is Hard to Find (But Worth the Effort)

If managers at your organization already hold informal performance check-ins or one-on-ones with employees on a regular basis, that’s great! But is employee engagement and performance getting better as a result?

If your organization hasn’t seen improvements despite increased manager feedback, it can be tempting to put all the blame on employees or on the system. And we’re not saying poor performing employees and bad performance management systems don’t exist—of course they do. This entire article is aimed at rooting out the latter. But that’s not the whole picture.

Improving the effectiveness of employee assessments and performance management isn’t as easy as increasing the contact between managers and their employees. That contact has to be meaningful and aimed at supporting employees—not just another task to be checked off—and managers are at the center of it.

Deloitte asked HR leaders to rank the top three roadblocks to improving performance management, and the most listed answers were:

1. Skill level of managers to have meaningful, ongoing coaching discussions
2. Ability of managers to distinguish levels of performance and provide appropriate feedback (both poor and good performers)
3. Tends to be based on two discussions a year rather than ongoing coaching discussions

Deloitte researchers get pretty fired up in their conclusion about the need to train managers to give the right kind of feedback: “Coaching is a set of behaviors that must be learned and reinforced through proactive training. There are no shortcuts” (emphasis theirs).

What Does Successful Employee Coaching Look Like?

Again, meeting with employees more often isn’t going to do much good if all managers do is talk at rather than with employees. Trust and open communication need to form the basis of every interaction, especially when providing constructive employee feedback.

Here are a few research-based coaching skills that encourage high employee performance and that organizations can focus on in their manager training:

• Engage in two-way dialogue. Successful coaching relies on an open, collaborative approach, where employees “feel encouraged to share their perspective, ask questions, and bring issues to their manager.”
• Clarify expectations. While this sounds basic, confusion over work responsibilities can hamper engaged employees. In a recent study of nursing staff during the COVID-19 pandemic, a lack of clarity caused previously high-performing nurses to regress in their skills. On the flip side, more clarity reduced anxiety and created a sense of purpose, helping nurses perform better.
• Smooth out bureaucratic hurdles. Managers build trust by being involved in their employees’ day-to-day and removing excessive rules, meetings, or procedures that make it harder for employees to feel actively engaged and purposeful in their jobs.
• Acknowledge and help employees manage emotions. In the same study on nurses, researchers conclude that to encourage high performance and build trust, managers need to show employees they care about their well-being. Managers should ask for input, acknowledge ideas, respond to concerns, and carefully consider how top-down decisions affect employees.
• Focus on the future and on employee strengths. A coaching mindset, Gallup points out, should be positive and constructive; it’s easy to criticize rather than build up and look forward. “Great managers take their coaching to the next level by observing, listening, and proactively anticipating topics that will be useful to employees in the future.”
• Put employees in the driver’s seat. While managers should avoid rescheduling and cancelling one-on-ones, giving employees control over these meetings, for both scheduling and content, helps them feel a sense of ownership.
• Stay flexible. In cases where employees transfer teams or new hires come in during a scheduled formal performance review, giving them the time to get adjusted and their managers time to get to know them takes priority. Skipping a performance review when it’s not relevant will make the assessment that much more meaningful later.

How HR Software Can Help You Implement Performance Management Best Practices

As we mentioned before, improving your performance management process can feel overwhelming, especially if you have a small HR team and if you’ve been relying on paper or other labor-intensive systems, like spreadsheets. HR software can do a lot to ease logistical burdens by sending out reminders, offering a consistent format for gathering and analyzing employee performance assessments, and tracking goals and performance over time.

Here are a few features to look for when choosing performance management software (or when identifying features you may be underutilizing) at each stage of the employee performance review cycle:

• Formal Performance Reviews: Automated review scheduling and reminder emails, customizable template for self/manager assessment questionnaire, peer feedback, and reports on review completion, employee performance (individual, department, and company), and employee goal completion.
• Impromptu Assessments: Scheduling employee performance assessments outside the review cycle (e.g., for 30-60-90 day new hire check-ins, promotions, after a major project, and raises), and skipping assessments when necessary.
• Informal One-on-One Meetings: Note keeping for managers, and collaborative goal setting and tracking for both managers and employees.

BambooHR® Performance Management includes all of these features in an easy-to-use platform, making it more likely that employees and managers will see the performance review process as useful and worthwhile, which is key to motivating real improvement. Research by global consulting firm Gartner confirms this: “Focusing on increasing the utility of performance management increases workforce performance by 24 percent, increases employee perceptions of fairness and accuracy by 50 percent, and increases engagement by 14 percent.”

Change and Improvements Happen Together

Improving performance management will be a company-wide effort. It’s going to be up to leadership and managers, in partnership with HR, to win over employees on the usefulness of these changes. And it’s going to be up to your people to make a difference in their day-to-day performance.

Leaving a bad performance management process in place is like ignoring a toothache—it’s going to eat away at employee engagement and stunt business growth. Focus your efforts on making performance assessments more effective with frequent, supportive conversations between managers and employees, and you won’t just stop the pain; you’ll give your organization a thousand-watt smile.