The Ultimate Guide to Performance Management

“One of the most tried-and-true forms of management is Feedback”

• Anon

Defining Continuous Performance Management

Continuous performance management is defined as an ongoing process that enables managers and employees to exchange feedback regularly to achieve near-term business objectives

It is an ongoing holistic process, as opposed to traditional annual appraisals. As feedback occurs more often, it feels more natural for both manager and employee, who can develop more of a healthy, authentic workplace relationship. Continuous communication fosters mutual trust and motivates both parties to be more vested in the process. Since both parties have more control on the direction in which Continuous Performance Management goes, it also extracts more keen interest from both instead of the scepticism often associated with annual appraisals.

In a culture of true continuous performance management, employees support each other with a wide range of real-time performance feedback – celebratory, instructive, and constructive.

Organisations that implement continuous performance management help develop a forward-looking growth mindset by emphasising feedback that is real-time, informal, and frequent. It also helps Strengthen relationships by improving communication and coaching between employees and managers.

Continuous performance management focuses on growth and development. It fosters a culture where people are comfortable giving and receiving feedback while working in an atmosphere of opportunity and promise.

Relevance of Continuous Performance Management in the present day world

It has long been argued that performance management should be part of managers’ everyday role and that once or twice a year appraisals are neither efficient nor effective. Research shows 95% of managers are not satisfied with their organisation’s annual performance management process and 75% of employees think yearly reviews as unfair. An unsurprisingly small number of companies believe that their traditional performance management process creates business value. Continuous performance management is a solution that complements and supports the pace, complexity and challenges of modern business.

Modern business is fast-paced. Companies face a rapid change in technology, market environments and continuously-evolving customer expectations. This needs a performance management system that accommodates this reality. Businesses need to be agile to survive and to thrive. Employees need to be empowered, connected and able to make intuitive decisions. Continuous performance management encourages this by providing instant communication, strengthening relationships through transparent dialogue and giving employees autonomy and independence – an environment preferred and greatly appreciated by millennials.

The 3 elements of  Continuous Performance Management process:

• Planning or Goal-setting

This is similar to the traditional performance planning process. It is a collaborative effort between employee and manager to determine an alignment between the objectives of the organisation and those of the employee. The manager must ensure employees know and understand how their job fits into the overall organisational objectives and how they will contribute to the achievement of those objectives. The larger objective they both work towards is mutual and individual growth and development.

Goal setting helps create a roadmap of goals for employee success over a period of time. Their performance will be evaluated against these goals along with other qualitative parameters. While goals are time-bound, they are created with a shorter-term view to keep the process agile and flexible. This way, in order to complement the external environment and business dynamics, shifting and adjusting focus is easier. Goals can be project-specific, behavioural or development-oriented.

There are many different types of goals set for employees depending on their individual role, managerial level and expertise. Let’s review some of the most common types of goals:

• Primary Goals (Job Description)

Each employee, when hired, is given a set of primary responsibilities often clearly articulated in their job description. They are intended to set expectations on both sides of the basic tasks and responsibilities entrusted to the employee. They also help define the basic hygiene on the employee’s day-to-day work such as deadlines, frequency of activities, nature of tasks, etc. the employee’s broad KPIs and KRAs are defined with specifics and assigned weightage individually. 

E.g. Sales Manager – Individual Contributor

These goals apply to employees working on particular projects which may have a detailed project plan, multiple stakeholders, and several stages of completion. These may be short, medium or long term projects. Project-based goal setting works to break down the tasks to be achieved by employees over short periods of time. It seeks to determine, observe and manage individual team member’s contribution to the overall project thus ensuring collective fulfilment of the project objectives while rewarding individual excellence. Since the overall project is influenced by several external factors and stakeholders, individual goals need to be re-evaluated and adjusted from time to time.

E.g. Design & Development Lead

• Innovation Goals

These goals are designed to foster creativity and drive a culture of innovation in the organisation. Employees are encouraged to take on extra-curricular projects that may not necessarily contribute to their individual business targets but help develop a newer, better way of performing regular business operations. 

E.g. Account Manager – Individual Contributor

• Recommend ways to improve the quality of customer communication
• Work on 1 cross-functional project to improve service turnaround for customers
• Identify areas of improvement in new vendor onboarding process

• Leadership goals

These are softer aspects of employee behaviour and performance where they are expected to demonstrate certain leadership skills beyond their job responsibilities. Such objectives are meant to improve the overall work culture in the organisation and help create a sense of wellbeing for everyone. Even as each individual employee has their own comfort zone of working, these objectives help create a cohesive environment with a common thread of work ethic running through the organisation. While everyone has a unique way of expressing themselves, these objectives seek to drive mutual acceptance and coordination within a diverse workforce. 

E.g. Team Leader:

• Development goals

These goals are meant to encourage employees to pursue self-development through training, learning modules, apprenticeships, shadow meetings, etc. The aim is to help employees boost their professional expertise by acquiring new skills, enhance their domain knowledge or improve on an existing skillset. These goals provide a window to the employee’s aspirations and identify training needs while giving the organisation an opportunity to demonstrate its commitment to employee wellbeing. The goals are left open ended and employees are asked to define their own development objectives.

Examples of Development Goals:

Identify an area of expertise you’d like to improve or build upon. What tools would you need to achieve that?

Define your long-term goal as a professional. How can the organisation support you in its achievement?

• Checking-in

Instead of waiting for an annual appraisal, continuous performance management fosters ongoing and open communications where managers frequently check in on employee progress without wasting time on formality or preparation. Similarly, it enables employees to seek direction or raise concerns on unforeseen challenges. Checking-in could be a short, simple conversation, a few words of encouragement, or quick coaching activity to help employees handle the given situation. Regular informal check-ins develop a transparent, stress-free work environment. It also creates accountability making it easier to call out performance deficiencies, errors, etc and take corrective steps in time.

On the other hand, formal check-ins should be systematically planned, scheduled and followed-up with commitment. Their frequency should be determined at the start of the business year and a detailed activity chart followed by both managers and employees. 

Check-ins can be organised in varying frequency and formats:

• Weekly 1-on-1s

Recent Gallup research suggests employees who had regular 1-on-1 conversations are 400% more likely to find their performance reviews useful than their counterparts receiving only one annual review. They’re also found to be 3.2X more motivated and 2.7X more likely to be engaged.

1-on-1 performance conversations between an employee and their manager are a great tool to build a line of honest and secure communication between both parties. Managers can use this opportunity to provide real-time feedback, get transient status on goals, and discuss short-term challenges or blockers. 

Here are the 5 key elements of 1-on-1 conversations:

Feedback

This is a comfortable setting for employees to hear honest feedback as they are not only prepared for a conversation of that nature but also understand the context of feedback given on such a stress-free platform. Managers can share their views on small, relatively less significant matters and even everyday business issues during a 1-on-1 conversation – not feasible during a detailed annual review with too many agenda points to cover.

Coaching

1-on-1 conversations are highly suitable platforms for providing coaching at an individual level. Managers can focus on one unique employee’s learning needs and discuss them in a comfortable, private setting without appearing judgemental or patronising. In the absence of their peers and potential competitors, employees may be more receptive to coaching from their managers in a private, 1-on-1 conversation. 

Goal review

Focusing on the key objective of any review, 1-on-1 conversations facilitate efficient and meaningful goal review. Typical business review meetings attended by large teams tend to stretch into long hours, and  employees often tend to be disengaged when someone else’s issues are being discussed. Employees and managers can quickly discuss the roadmap, assess external factors impacting its trajectory and mutually agree on any goal adjustments required to stay on course.

Problem-Solving

1-on-1 conversations provide a great opportunity for employees to draw from the superior knowledge, experience and authority of their managers in order to resolve open items or overcome challenges they are unable to deal with. Managers can recommend corrective steps, take on some of the responsibility of resolving the issue further or help remove a roadblock by stepping in with their position. During day-to-day business, managers might be stretched on multiple priorities and not be able to give focused attention to every concern of the employee which the latter can bring up during a 1-on-1 conversation.

Relationship Building

The most obvious strategic benefit of 1-on-1 conversations is the bond they help build between the employee and manager. A direct, face-to-face setting is conducive to both parties bringing their authentic selves, showing genuine respect for each other’s perspectives and valuing each other’s contributions.

Thus, it can be safely inferred that weekly 1-on-1 conversations are a potent ingredient in the success of continuous performance management process helping accelerate performance and engagement. Each successive conversation can keep building on the takeaways of the previous conversation and create a seamless dialogue between the employee and manager. Some organisations also prefer to convert these short weekly conversations into a more detailed monthly 1-on-1 depending on the nature of business and the business function involved.

• Performance Snapshot

A Performance Snapshot is a management tool that asks leaders to answer five questions about their experience of working with a team member with a monthly frequency. Its cadence allows for a series of data points to emerge over time, providing more reliable data than traditional annual ratings and reduces the effects of rater biases. Performance snapshots produce a pattern of the manager's experience reflective of the trend of the employee’s performance while also providing an insight into the manager’s intention to support the employee’s future development. It thus facilitates continued conversation between managers and employees about the latter’s performance, goals, and future development.

As human beings we are not very good at rating other people and are prone to several types of rate biases. We will discuss some of these biases at a later stage in this guide. However, the performance snapshot process requires managers to answer questions about how they are feeling about the employee’s performance and their willingness to support their future development. This effectively takes out any external pressure on the manager to give a particular type of answer and extracts an authentic, reliable judgement of their own state of mind. When a compilation of these questionnaires is generated by the performance management system, the manager can use the trend it shows to determine the content of their weekly 1-on-1 conversations and quarterly reviews. They also enable managers to understand the employee’s training needs which may not be very obvious otherwise. However, for this tool to be effective, managers need to generate Performance Snapshots data once every month for each of their team members. 

Trends and patterns emerging from Performance Snapshots can become a powerful foundation to build future plans for employees such as succession planning and talent investments. Performance Snapshots are, therefore, a unique tool to uncover valuable insight on employee performance and create inputs for strategic HR initiatives.

• Quarterly Performance Reviews

This is the final element in the trinity of regular check-ins. While weekly 1-on-1 conversations are meant to focus on transactional matters in a brief, relatively informal format and performance snapshots provide a deep-set insight on their value to the organisation, quarterly performance reviews become a bridge between the 2 elements. During a quarterly performance review, managers and employees can deep-dive into the employee’s performance against objectives, assess the value generated by their contribution, and also discuss the employee’s future goals and aspirations. This makes for a wholesome conversation where both sides can show their empathy towards the other and strengthen their relationship with mutual trust and authenticity.

It is important to ensure every manager conducts quarterly reviews with each of their team members, uses the tools available to enrich those conversations, ensure they are not losing sight of the larger business objectives, and draws equally enthusiastic participation from the employee in the entire process.

• 360-degree Review

A 360-Degree Review is a method or procedure that allows employees to get confidential, anonymous feedback from others who work with them. This is a popular framework favoured by various levels within the organisation for its simplicity, flexibility and the equal opportunity it affords everyone to share and receive feedback while benefiting the organisation as a whole. 

The main purpose of 360 degree feedback is to ensure each individual understands their own strengths and weaknesses. This form of feedback that allows multiple raters, including peers, supervisors, and external stakeholder, contributes insights into aspects of the individual's work that need professional development.

Benefits of 360 degree review system:

• Helps increase self-awareness

360 degree review makes employees aware of how others perceive their actions, helping them achieve a more balanced view of their surroundings

• Distributes feedback responsibility

360 degree review approach enables teams to take greater responsibility for themselves and utilise their own leadership skills to assist their team in being more effective and productive. It is a great tool for leaders to engage with their team members by obtaining input on a regular basis, as well as receiving feedback on their own leadership.

• Provides deep-dive analysis of behaviours

A 360 degree survey might contain evaluations on 50-75 actions, providing a person with highly precise information into how they interact with others. Participants are frequently exposed to behaviours and interactions that they were not even aware of. When deciding on development areas, this degree of detail broadens the spectrum of choices and even allows leaders to discover various patterns in feedback.

• Fosters Accountability 

360 degree review, by definition holds everyone in a conversation accountable towards each other. It fosters acceptance of one’s areas of improvements along with that of the expectations of others. A culture of accountability, when combined with growth mentality, fosters development and efficiency within the team and company.

• Enhances Workplace Relationships

Reciprocity or a mutually beneficial transaction, is a unique element of the 360 degree. Performance feedback often tends to be one-sided and often remains debatable. 360 degree review demonstrates how you connect with people, why you excite the responses you do, and the influence it has on your relationships.

• Helps develop a richer culture of collaboration

Leaders are expected to determine, grow and shape the entire organisation’s culture. Strategies and policies are then modelled on their ideas and implemented for employees to align with. 360 degree review mechanism fosters a more organic growth in the organisation’s culture built on open communication, collaboration and a shared vision for growth and self-development‍

• Review

Continuous performance management promotes frequent review of employee progress throughout the year instead of leaving everything for the end of the year while avoiding its drawbacks.

An effective performance review is a collaborative process between manager and employee. It consists of:

• timely feedback or “check-in” throughout the review period
• transparent assessments of employee performance measured objectively 
• an open dialogue of assessment feedback
• acknowledgement and documentation of the employee’s performance review 

While the overall intent and results of the Performance Management process remains the same, the continuous nature of feedback makes the exercise more real, more useful, more authentic and more engaging for everyone concerned.

Benefits of Continuous Performance Management:

Continuous Performance Management has so far proven to be a valuable system making a strong impact on employee performance, development and engagement.

1. Business performance:

The most obvious benefit of Continuous Performance Management is the visible difference in overall business performance achieved by organisations that have implemented it. Recent research by Deloitte shows more than half the companies that share feedback on a monthly basis instead of annual have improved their year-on-year financial performance as against a quarter of those following the annual feedback cycle.

2. Employee performance

Frequent feedback is also being credited for boosting employee performance by up to 39%. When employees get tips on their work and how to make small things better from time to time, it helps them sharpen their learning curve and deliver better results, faster. 

3. Employee Engagement

Employees who feel they are a part of a larger conversation at all times feel more connected to the larger organisational goals and remain more engaged in their respective tasks and responsibilities

4. Retention and turnover

Engaged employees producing superior performance as a part of a developing organisation naturally tend to be more satisfied with their work, more committed to their responsibilities, and loyal to their employers.

5. Time and cost efficiency

Continuous feedback mechanisms are a lesser strain on the organisation’s resources as traditional appraisal systems require huge investments of time and effort. Since most managers and employees dread annual feedback sessions, a lot of time before and after those meetings is often wasted, thus making the appraisal period largely unproductive for everyone. 

If you think you’re ready to take your organisation’s Performance Management to the next level, let’s move to the next chapter where we will explore a detailed step-by-step process of implementing Continuous Performance Management.