Successful managers are those who provide a high level of support to their team and put effective performance management processes in place. Managers that don’t stay in-touch with their employees and don’t closely track and manage both individual and team performance – and only give feedback sporadically – risk having a disengaged team.
So, how does a manager remain on top of performance management effectively and efficiently whilst simultaneously juggling other responsibilities – all the while not draining business resources?
The solution: a streamlined performance management system that simplifies staff management and offers ongoing coaching opportunities, and is both time and cost-effective. The result: a more unified and productive team that is built upon trust and a shared vision.
In the recipe for business success, employee satisfaction is a key ingredient. When a team is engaged, productive, collaborative and takes initiative, a business thrives. This means, of course, that when staff members aren’t motivated to succeed, are not rewarded for their contribution and performance, and are not given opportunities to develop their skills, an organisation will struggle to reach its full potential and success rates may decline.
In organisations where antiquated performance management processes are practiced, employees may receive one annual review, but this is neither inspiring nor encouraging. Today, performance management needs to be consistent and constructive, and feedback must be delivered in regular one-to-one meetings.
The good news is that with an automated performance management software, managers and HR personnel can streamline every aspect of the evaluation process on a single platform that is both user-friendly and cost-effective.
This guide on performance management systems explores:
- What is a performance management system?
- What are the basic components of performance management systems?
- Why is performance management important?
- What’s wrong with traditional approaches?
- Benefits of agile performance management
- Different types of software (standalone vs. integrated)
- On-premise vs. cloud-based solutions
- What should a good performance management system aim for?
What is a performance management system?
Performance management is when managers monitor their employees’ contribution to the business and make certain that they are fulfilling their duties in a timely and effective manner, and are honouring company values.
Online performance management software simplifies this process by using automation to frequently track and evaluate the progress of individuals, and analyse the systemic structures that support them (at least, in theory).
This is beneficial for managers because they can deliver feedback, acknowledge positive achievements and organise coaching sessions all on one platform.
Advanced technology handles it all by processing data and coordinating various elements:
- Setting goals for the company and staff
- Monitoring individual progress
- Delivering feedback from various stakeholders
- Organising coaching and professional development
- Rewarding employees for outstanding work
- Reviewing salaries and wages
- Taking disciplinary action when required
When these elements are combined they significantly reduce a HR department’s workload and enables managers to continually monitor and track employee progress.
What are the basic components of a performance management system?
A performance management system tracks and evaluates individual and team performance in real-time while supporting communication between employees and their supervisors. This encourages team members to work collaboratively and remain engaged, and gives them the support they need to perform to the best of their abilities.
Popular features include:
- Check-in meetings: Managers can schedule regular meetings with employees discuss their goals, ideas and concerns, as well as deliver constructive feedback. This shows employees their input is valued and allows managers to provide support.
- Comprehensive progress reports: Through customisable and transparent reports, managers can see, at a glance, how their individual team members are coping with their workload. With this insight, managers can determine which team members have the capacity to take on more responsibility, and who could benefit from some guidance. Reports also highlight when compliance procedures aren’t being followed.
- Self-service: When an individual can access their own profile from their personal device, they can set goals, follow development plans, access training modules, collaborate with other users and ask their managers for feedback. Round-the-clock performance management is highly productive and should be encouraged.
- 360-degree feedback: Team members can give constructive feedback to each other, which encourages colleagues to identify the strengths and weaknesses of their peers. Receiving feedback from multiple perspectives is often more powerful than when it comes from a single source.
- Manager reviews: It’s becoming more and more common for team members to review and give constructive feedback to their supervisors, as well as the other way around. After all, the better the leadership approach is, the better the team will perform.
- Performance plans: Managers can allocate tasks that need to be completed, as well as send reminders. Progress can be reviewed against stated objectives on a regular basis.
- Performance appraisals: Managers collaborate on reports, which are customised to meet business requirements and individual development plans.
Other features that complement a performance management system :
- Social recognition: Appreciated employees are more productive. Being acknowledged by peers through social recognition is a powerful way to inspire team performance. It’s also an effective way to reward those who demonstrate company values.
- Engagement surveys: Staff members love having their voices heard, and surveys are an efficient way to gain insight into what really matters to them,
- Remuneration and compensation management: Managers can easily review reports and streamline processes to make sure that employees are paid and compensated in a fair manner.
- Succession planning: It’s important to identify and develop skilled employees who can fill leadership positions that become available. This ensures that vital roles are never vacant for long and that employees are motivated to perform well in order to climb the chain of responsibility.
- Goal setting and alignment: This tool motivates employees to challenge themselves to meet the goals that have been set. Managers can measure their performance against this benchmark to see how individuals and teams are progressing, and if further assistance is required.
- Competency and development models: This framework explains the skills, values and knowledge needed to do the job well and take on greater responsibilities over time.
Why is performance management important?
Supervisors need to measure and manage employee progress to make sure:
- Business objectives are being met effectively
- Staff members are aligned with company values
- High performers are recognised and underperformers are given appropriate support
- Employees are being remunerated fairly based on performance
- Individual strengths are utilised to help the organisation to succeed
- Weaknesses are addressed to avoid losing revenue
- Policies are adapted to respect the rights of employees (for example, abandoning a culture of overwork that causes health problems).
At the heart of it all, performance management ensures that employees are driven to contribute positively to an organisation, while being supported by internal structures.
Global research by CEB, now Gartner, shows that employee performance is 10% lower for companies that don’t have a review system in place. It’s also generally accepted that motivated employees will look for work elsewhere if they’re not supported by their supervisors.
What’s wrong with traditional performance management?
Traditional performance management consists of periodically evaluating an employee’s contribution to the business. This usually occurs once a year, but research suggests this approach is unpopular among staff.
“Surveys show that 95% of managers think their performance management systems suck and 75% of employees say they don’t get good performance feedback.”
Carol Kulik, Professor of Human Resource Management, University of South Australia.
Stressful processes and inaccurate results:
Sporadic reviews give managers fewer opportunities to identify strengths and areas that need improving are not addressed. Without timely feedback, managers can forget to reward people for good work, which may inadvertently allow poor performance to fester.
Irregular reviews can be anxiety-inducing for employees, who feel pressured to perform perfectly around the time of the evaluation. This is problematic because if employees only feel recognised once yearly, they could be less inclined to perform consistently well year-round.
Case in point: Over 1000 millennials were surveyed by a research firm and nearly one in four said they’ve called in sick when faced with a traditional review.
The traditional approach to reviews tends to focus heavily on negative results, behaviours and traits, which does little to motivate employees to give their best.
This isn’t to say that feedback shouldn’t address weaknesses, but it should be delivered in a constructive framework.
The previously mentioned CEB / Gartner survey found that recognition and feedback are powerful tools for encouraging high performance in employees around the world, including in Australia.
A drain on resources:
Traditional methods can be expensive and labour intensive. HR teams often juggle multiple programs or rely on messy paper systems to coordinate it all. This makes it difficult to conduct regular reviews, which means that employees miss out on hearing valuable feedback.
Employee isolation from wider structures:
Classic methods focus solely on the employee, without considering the influence of systemic processes and values. For example, is your outdated IT system hindering productivity? Are employees feeling burnt out by a culture of bullying?
Managers miss out on the opportunity to improve the framework of their business when they ignore powerful influences like these.
“Instead of limiting ourselves to formal performance appraisals conducted once or twice a year, we need to think about performance management as a system that is linked with the strategy of the entire organization.” Satoris Culbertson, Assistant Professor of Management, Kansas State University
Managers are looking for more effective ways to assess and guide employees…
For example, major companies like National Australia Bank, Deloitte, Accenture and SEEK have stopped doing annual performance reviews. They’re opting for smaller feedback sessions instead, as reported by the Australian Financial Review.
Benefits of agile performance management systems:
A single platform tracks employee progress in real-time and enables staff to collaborate constructively. Feedback is ongoing, so no stone is left unturned.
This strengthens every level of business…
- Feel valued and supported
- Develop skills and confidence through regular coaching sessions
- Motivated to put their strengths to good use
- Swiftly assisted to improve their shortcomings
- More opportunities for job growth
- Paid fairly
- Don’t fly under the radar when working remotely
- Spend less money on performance reviews
- Earn the trust of employees, who appreciate the ongoing support
- Improve their leadership approach, based on employee feedback
- Understand employee strengths and weaknesses, thanks to real-time data.
- Oversee a highly productive and successful team
- Less staff turn-over
- Fewer hours are wasted coordinating reviews and feedback sessions
- No need to work with messy spreadsheets or paper files
- Extra time to focus on other HR tasks
- Less stress
- Higher profits
- Teams are strengthened when colleagues give each other feedback
- Detrimental policies are weeded out
- Everyone is accountable for their actions
- A happier, healthier and thriving workplace
Staff are motivated to work hard for a company when they see that their growth matters to supervisors who take their concerns seriously.
Organisations that actively engage and prioritise their employees are 17% more productive and 21% more profitable than others, according to research by Gallup.
What’s more, their turnover rates are 25% lower than usual as a result of focusing on development.
Do you want to find out what your ROI will be if you invest in agile performance management?
Calculate the ROI of your current approach and see the savings your company can make.
Different types of performance management software
There are two types of performance management platforms:
- Standalone ‘best of breed’
We strongly recommend an integrated approach.
Standalone systems focus on providing a specific service (performance management), which means that you’re unable to integrate the software with other programs, like training or payroll. This means there is more work for your HR team, who double-handle information when they manually connect multiple systems.
Therefore, although standalone systems are cheaper upfront, you will end up using more resources in the long-term.
On the other hand:
Integrated performance management software is designed to seamlessly integrate with other HR platforms by sharing the same data in real-time.
Not only does this paint a comprehensive picture of your workforce, it saves a significant amount of time and money, too.
This approach costs more in the short-term, but you conserve resources over time, since there’s no need to handle installation or maintenance.
On-premise vs. cloud-based performance management
There are two ways that your business can host the platform:
Cloud-based technology is a popular option for organisations looking for a convenient and cost-effective solution.
Here’s a closer look at both options.
Your organisation is responsible for hosting and managing the equipment from its premises.
This gives the organisation total control over storage and data security. On top of this, there are zero subscription fees.
However, it isn’t cheap to invest in the resources that are required: e.g. on-site servers, plenty of space and dedicated IT staff.
Cloud-based performance management:
An independent vendor hosts the software on their cloud server, separate from your workplace.
Your team isn’t responsible for the equipment or system upgrades, so there’s no need for servers or IT staff. This falls into the hands of the provider for a monthly subscription fee, which also covers security.
The best vendors update their shields regularly, to deliver the ultimate protection.
Other benefits of HR software on the cloud:
- Quick installation, with low set-up costs
- Software upgrades occur regularly
- Employees have access from any device that’s connected to the internet.
- Ongoing customer support
- Highly adaptable to accommodate changing office environments
What should a good performance management system aim for?
The best systems make it easy for supervisors to review progress and collaborate with employees consistently. Convenient features include quick installation, personalisation, security, privacy, local support, adaptability and more.
Performance management checklist:
- Quick installation:
It’s vital that your system is up and running in no time, with zero disruption to your workflow. This enables managers to monitor staff performance without any delays.
Managers can customise reports, feedback models and engagement surveys to suit their business needs. The software is set up to accommodate the unique criteria that your business uses to measure employee progress. No two organisations do this the same way.
- Remote access at flexible times:
Give your staff the option to use the platform remotely from their devices with internet connection. This way they can see how they’re progressing and can ask managers for feedback at their own convenience – wherever they are and whenever the time.
Look for software that simplifies the monitoring and feedback process to avoid frustrating staff. Ask your vendor for a free demonstration to make sure the product is user-friendly.
- Security and privacy:
A cyber-attack could compromise the personal data of staff, as well as your intellectual property. The best systems provide robust layers of protection that are constantly monitored and upgraded. If you’re using a cloud-based solution, make sure the vendor doesn’t share your information externally.
- Local support:
Cloud-based platforms are best served by a local team. Many vendors outsource their support services, which blocks your access to swift assistance when you need it. Find a vendor that provides local support for their cloud services, so your staff can enjoy the guidance of a performance management system without being frustrated by technical problems.
- Adaptability and flexibility:
The software should adapt to change, allowing you to add or remove users, devices and apps as your business goals evolve.
- Seamless collaboration:
The software supports 360-degree feedback, enabling multiple stakeholders to give constructive feedback to colleagues. Users can also express their concerns, ask questions and nominate fellow employees for awards.
- Real-time data:
Managers can analyse data as soon as it enters the system, since there’s no time delay. Key performance indicators can be accessed at the click of a button.
Top facts about performance management:
- 63% of employees say they don’t receive enough praise at work. (Officevibe)
- 32% of workers have to wait longer than 3 months to get feedback from their supervisor. (Officevibe)
- Companies that manage their goals quarterly (rather than annually) generate 30% higher returns. (Forbes)
- Employees surveyed from 156 organisations in New Zealand would prefer for review meetings to occur more frequently. They say the process isn’t simple enough and there’s a lack of clarity around performance standards. (The University of Auckland)
- 70% of surveyed managers in Australia say that abandoning performance management would negatively impact their business. (PricewaterhouseCoopers)
- 80% of Australian managers say they would struggle to engage and manage both low and high performers without a system in place. (PricewaterhouseCoopers)
- People are motivated by three factors: recognition (feedback), power (a sense of control over their actions, or the actions of others) and affiliation (feeling part of a team), according to the Three Needs Theory by David McClelland. (Management Study HQ)
- Employees who are driven by intrinsic factors (such as developing their skills) are three times more engaged than employees who are motivated by extrinsic factors like money. (Harvard Business Review)
- Four out of 10 employees become disengaged when they get little or no feedback. (Forbes)
- Net income surged by 756% for companies that used performance management over 11 years. Organisations that avoided this only grew by 1% over the same period, according to a study in 1992. (Forbes)
- Departments with managers who receive feedback on their strengths are 8.9% more profitable than those that don’t. (Gallup)
- Employees who received feedback about their strengths had 14.9% lower turnover rates than employees who received no feedback. (Gallup)
- CFOs say they spend 40% of their time on business performance management. Even so, they estimate that 30% of potential is wasted because they’re relying on ineffective processes. (Talent Management 360)
Become a business that motivates people to excel…
Employees respect managers who care enough to monitor their progress and give quality feedback.
Unfortunately, too many businesses only do this once or twice a year, framing their comments in a negative light instead of offering constructive advice. This deflates staff members, who as a result become complacent or seek work elsewhere.
Stressed managers then question their leadership skills and question where they went wrong, as their revenue deflates.
On the other hand:
Companies that prioritise employee development have:
- Lower turnover rates
- Higher profits
- Empowered staff
- Confident managers
An online performance management system makes sure that employees and managers are being supported to contribute to the success of the organisation. It also streamlines administration tasks to save precious resources!
Make sure your automated software meets this checklist:
- Easy integration with other HR departments and external apps
- Cloud-based hosting for the ultimate convenience
- Local support
- Quick installation with no downtime to your workflow
- Easy to use from multiple devices
- Robust privacy and security protection
- A free demonstration that explains the features and services
And remember: The best platforms turn disengaged workers into team players who care about their jobs and respect the leaders who motivate them to thrive.
How ELMO can help
ELMO Software is a fully integrated cloud HR, payroll and rostering / time & attendance solution. We provide comprehensive solutions for each stage of the employee’s journey, from hire to retire. This includes recruitment, learning & development, performance management, payroll, rostering / time & attendance, and more.
ELMO Performance Management improves employee productivity, boosts profitability and engagement through continuous feedback. It enables organisations to align individual and team goals with organisational strategies. It also streamlines the employee appraisal process by offering a range of pre-built goals and development objectives, provides 360 reviews that assist in the development of a performance culture that reduces employee turnover. ELMO’s performance management software fully integrates with the entire ELMO cloud HR & payroll suite.
Try our Solution Configurator to see which ELMO solutions are recommended for you, based on your specific business needs. Alternatively, use our ROI Calculator to determine how much time, money and resources your organisation could save by using ELMO’s cloud-based Performance Management solution.