How to Construct the Perfect Performance Management System

When managing people, you can’t always expect top performance. To improve, read these crucial steps in crafting the perfect performance management system.

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how to create a performance management system

You’ve started your own company after decades of dreaming about it. You’ve assembled a dream team and have begun raking in sales numbers like you’ve never dreamed of. Everything seems to be going along just fine until one of your employees starts to slack. His numbers drop and you must decide to either correct the behavior or cut him loose. Financially, it’s going to be better to keep your employee instead of recruiting and onboarding a new one. However, you have no idea how to go about correcting the slacking behavior.

Don’t worry. Plenty of new small business owners find themselves in this position and often because there was little or no system in place to define what ideal performance looks like to employees. What you need is a performance management system to clarify and crystallize the whole process. It sounds simple (and it is!) but there are a few crucial steps you need to know before implementing your own.

What are the elements of a performance management system?

As Canada’s HR Council explains, “performance management is a process by which managers and employees work together to plan, monitor, and review an employee’s work objectives and overall contribution to the organization.” However, be careful not to confuse this with an annual performance review because they are two separate things.

A performance management system refers to a continual process of “setting objectives, assessing progress, and providing ongoing coaching and feedback to ensure that employees are meeting their objectives and career goals,” the HR Council concludes. Think of it as a system of continual micro-feedback and course corrections as opposed to an annual macro-level review.

What is the process of a performance management system?

First, you can’t have a properly functioning performance management system without the right inputs. That means that you have to have well-written job descriptions that accurately capture the work and responsibilities of each role, supervisors who are able to carry out managerial tasks effectively, a strong new hire orientation and training program to set employees up for success, and an overall supportive work environment that lets employees know you’re dedicated to their success.

Once you have the foundation in place, the next step is crafting a collaborative plan outlining exactly what type of work and outputs are expected from each team member and make sure to communicate them with each team member. Next, you’ll need to devise a way to track each employee’s performance so that performance can be measured against the expectations set out in the plan. Finally, you’ll want to reinforce the behaviors of team members who are performing well and consider putting underperformers on a performance improvement plan, or PIP, if necessary. Much of this is carried out during one on one performance management meetings that take place between each employee and their supervisor.

When meeting with an employee during a performance management meeting, here are a few do’s and don’ts:

  • Do begin the meeting by discussing positive achievements and reiterating goals and progress made.
  • Do ensure a comfortable, professional environment in which to hold the meeting.
  • Do ask employees to speak about areas in which they think they could improve.
  • Don’t think of it as an unnecessary exercise that managers have to carry out—it should be useful for your employees.
  • Don’t think of these meetings as punishment. They should be treated as coaching sessions.

What are the benefits of a performance management system?

When you have a well-oiled performance management machine running at your company, there are a variety of benefits that you can expect. First, employee satisfaction should increase when employees feel like their managers are invested in their improvement and professional development. If you keep performance management in mind from the very beginning of the hiring process, you should end up with employees better suited to perform the tasks they were hired to do. Lastly, because of the multiple opportunities for reflection and improvement that performance management systems offer, you should have to go through that awful process of firing underperformers significantly less frequently.

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