Written by Francesca Snyder, Associate and Abraham Ash, Director
Australian Business Lawyers & Advisors
Performance management is too often seen as a reactive exercise which focuses on an employee’s negative performance. The term ‘performance management’ has become synonymous with performance improvement plans (PIP) and/or warnings issued to employees when they are underperforming. However, a good performance management process practice can, and should, encompass much more than just that. When performance management is approached in the right way, it can result in benefits such as high employee motivation, increased productivity and a high staff retention rate. Why then do businesses focus on such a small part of the performance management system and often get it so wrong?
Why do employees underperform?
In the first instance, it is important to understand that employees often underperform because of factors such as:
- low motivation
- lack of purpose
- unclear goals and expectations
- inadequate training and/or
- inadequate communication between managers and employees.
Often, the factors which cause employees to underperform can be addressed and be resolved when employers implement a good management system in their workplace.
What is performance management?
Performance management is the process of ensuring employees perform work to the best of their abilities and that their work aligns with the goals and values of the business. While performance management is sometimes used to correct poor performance, when approached the ‘right’ way, a performance management system starts at the beginning of an individual’s employment and continues throughout their employment. The focus is to ensure employees have the support and guidance necessary to successfully complete their work and to thrive and grow within the business.
Often businesses get this wrong because too much importance is placed on underperforming employees and not enough time and energy is invested in ensuring that employees have the right support and systems in place to avoid situations which lead to underperformance in the first place.
What are the purposes of a performance management system?
The main purposes of a performance management system include:
- making sure employees understand and are aligned with the business’ goals and values
- making sure employees have the support and guidance necessary to help them thrive within the business
- having regular meetings so that employees and managers are on the ‘same page’ and build the rapport to have open and constructive conversations and
- identifying and addressing any performance concerns in the early stages so that formal performance management is not required.
What should employers do to make sure they have a good performance management system in place?
Employers should set clear goals and expectations early on in the employment relationship and communicate these goals and expectations to its employees. Doing so will help ensure employees know their role within the business and will help employees stay aligned with the business’ core values and goals.
As a starting point, employers should ensure that its employees are clear about:
- what the employee’s role entails
- what is expected of the employee
- what success looks like in the employee’s role and
- the business’ core values.
If these key aspects of the role are understood and agreed by both parties from the beginning of the employment relationship, it creates clarity and helps build a strong foundation for the employment relationship going forward.
A successful performance management system should also include regular meetings between managers and employees to discuss ongoing improvement. This provides employees with the opportunity to discuss any concerns with their managers and ask for support and guidance when needed. It also provides employers and managers with an opportunity, early on, to discuss and address any concerns which arise, in an informal and productive manner. In short, it helps reduce the possibility of performance concern escalating to the point where a formal PIP is needed.
Rewarding good performance
One aspect of the performance management process which is often overlooked is the need to reward good performance. When employees are performing well, it is important to provide positive feedback and let them know that they are doing a good job. Providing positive feedback to employees has the effect of increasing motivation and confidence and will likely encourage more good performance in the future. When employers fail to provide employees with positive feedback over time, it can often backfire and result in employees’ loss of motivation, purpose and overall satisfaction in the role.
Benefits of getting it right
When performance management is approached in the right way, this usually leads to employees feeling motivated and supported.
When an employee is happy and feels supported, this will likely lead to:
- increased employee engagement and motivation
- increased productivity and output
- a happier and more satisfied workforce
- increased staff retention (which reduces costs)
- building high performing teams and
- cultivating a great work culture.
Further, if a performance management process results in underperformance and the eventual dismissal of an employee, having a thorough performance management system in place will also protect the business against unfair dismissal claims.
Key takeaways
When employers take steps to implement a performance management system early on, check in with its employees often and provide ongoing feedback (both positive and constructive on a regular basis), it will likely result in increased benefits to the business. Some of these benefits include: less occurrences of employee underperformance, a more motivated and satisfied workforce, increased productivity from its employees and increased retention rates which reduce recruitment and onboarding costs. Overall, approaching performance management from a more holistic and proactive approach will benefit both the employees and the business.
