IDS HR Study 839, February 2007

Performance management

• Examines the performance planning process, including agreeing individual targets linked with overall business goals, establishing SMART measures and taking account of how, as well as what, objectives are to be met
• Looks at how employers track and support progress during the year by means of formal interim reviews and regular feedback
• Discusses the final review process, including preparation and collection of evidence (possibly in the form of 360-degree feedback), conducting the appraisal, applying ratings and ensuring consistency
• Considers potential outcomes, such as the link to pay and career development opportunities, and how employers seek to manage poor performers
• Includes five detailed company case studies

Performance management is a continuous process based on flexible objectives closely aligned with business goals ad supported by regular feedback. Employees are increasingly being given greater ownership of the process and responsibility for their own career development. But line managers still have a vital role to play in monitoring progress, providing constructive feedback and coaching employees to improve. 

Supporting business strategy
The ultimate aim of any performance management framework is to improve the effectiveness of the business as a whole. Each individual’s targets should therefore be aligned with the organisation’s strategic goals if there is to be a real impact on the bottom line. In their push for a higher performance culture that will drive longer-term business success, organisations are also placing greater emphasis on behavioural goals. These are typically set in relation to a competency framework to define the manner in which objectives ought to be met. There is also a growing focus on personal development planning as a means of helping employees achieve their targets and of encouraging continuous improvement. 

Line managers have key role
While organisations are increasingly advocating a higher degree of employee ownership of the performance management process, line managers continue to play a key role as facilitators, advocates and coaches. The success of a new performance management system rests largely on the ability of line managers to manage and engage their staff. Consulting with them during the initial design phase, then, is likely to build enthusiasm and can help to secure buy-in and long-term commitment to the process.