According to Gallup, “Simply learning their strengths makes employees 7.8 percent more productive, and teams that focus on strengths every day have 12.5 percent greater productivity.” The returns on the investment in employees’ talents are far-ranging: “higher levels of performance, profitability, productivity, and greater earnings per share for businesses.”
Setting and tracking goals will also help remedy a significant gap in the performance management process: the follow-up. In a study conducted by BambooHR, we found that many employees are dissatisfied with how managers and organizations respond during and after performance reviews.
feel they are not heard during their reviews.
say their companies don’t look for opportunities to provide career development afterward.
say their companies don’t help them make and meet goals.
Here are some best practices for setting performance goals and using them to help employees feel more engaged and motivated to improve their performance:
- Employees should set focused, relevant goals backed with a plan of action. Big, aspirational goals are impressive, but they can quickly get abandoned because they’re often vague or just too broad and overwhelming to realistically achieve. Instead, employees should drill down to the core of what they want to improve and break down that larger objective into actionable steps that will get them there.
- Managers should help employees set goals. Whether this is done during one-on-one meetings or as part of a formal employee development plan, manager involvement can help employees feel heard and supported. Managers can check in on progress, provide guidance, and point employees to relevant resources, other mentors in the organization, etc.
- Managers should help employees connect their personal goals with organizational objectives. Employees will be more effective and feel more engaged if they see how their efforts contribute to the greater success of the organization.
- Goals should be flexible, not set in stone. Realities and circumstances change, and so should goals. As managers check in with employees, they should work together to figure out if the goals are still manageable, realistic, and relevant.
- HR should provide career and professional development opportunities. Managers can do a lot to mentor and coach employees, but HR can implement broader training programs that benefit larger groups of employees.
Progress Tracking: Keep a Record of Performance, Goals, and Feedback
Better performance management means that everyone has to get more involved in the process:
- Employees need to think more about how they want to grow in the organization.
- Managers need to check in more often with employees and mentor their team.
- HR needs to report to leadership about how the organization as a whole is performing while monitoring how individual efforts are adding up.
But without some kind of system for tracking all this information, you’ll quickly run into the same problem as with only doing annual reviews: no will remember what they did or said, and performance won’t improve.
You have to track performance externally, preferably through performance management software, which makes it easier to aggregate overall performance while giving managers and employees the option to track individual goals and feedback.
Additional key reasons for keeping track of your performance management process include:
- To ensure a consistent, fair approach to performance management across the organization
- To keep managers accountable for the evaluations they give employees
- To keep employees accountable for their performance and track their progress on their goals
- To track the effectiveness of and improve the performance management process
- To measure employee performance companywide
- To identify high performers and top talent for promotion
For more details on the importance of recordkeeping for performance management and more, read our chapter on reporting and analytics.
As we’ve discussed, performance management is about helping employees to grow their skills in the workplace and beyond, so it might seem like rewards and recognition are ideally suited to make that happen, and they absolutely can when used in the right context. Recognition helps employees feel valued and acknowledges their progress or high performance, and rewards incentivize employees to reach certain goals.
The Difference Between Rewards and Recognition
While often lumped together, there’s a notable difference between rewards and recognition, and that difference is especially important when talking about performance management:
- Recognition is about giving praise or expressing gratitude for a job well done.
- Rewards are tied to compensation: employees receive a prize or gift based on something they’ve accomplished, like getting a bonus for meeting a sales quota.
Why You Shouldn’t Tie Rewards to Performance Reviews
Make sure managers know to keep conversations about compensation separate from conversations about performance. And by compensation, we mean both basic compensation (e.g., salary raises) and rewards, which are a form of performance-based compensation.
Why? As Tom DiDonato, CHRO for Lear, puts it in an HBR article, “Performance reviews that are tied to compensation create a blame-oriented culture...They reinforce hierarchy, undermine collegiality, work against cooperative problem solving, discourage straight talk, and too easily become politicized.” In other words, you won’t get honest answers from your employees, and they won’t trust their managers to help them solve their problems.
When Lear made the change from a traditional, compensation-based review model to a quarterly review system that wasn’t tied to pay decisions anymore, they saw vast improvements in communication and transparency during performance management reviews. DiDonato notes that their “new system greatly improves the feedback process. Supervisors and employees say the sessions are less stressful and more productive than the old performance reviews. Managers are more comfortable giving feedback,…and discussions tend to focus less on specific accomplishments and more on people skills, which are so critical to overall company performance.”
By all means, reward your employees for achieving their performance goals. A fair, well-thought-out rewards program can be an effective way to motivate employees. But when you’re trying to build an honest, productive performance management process that actually helps employees improve, you need to stop talking about pay decisions during reviews.
For more details on how to handle pay decisions, read our chapter on compensation and benefits.