Optimizing success: 5 tips to creating an effective performance management system

by | Mar 13, 2024 | Marketing, Public Relations

Performance is the most important individual metric for any employee, and its significance scales with the rest of the enterprise. Generally speaking, you want to reward the top performers and use them as an example, figure out which of your employees could use a bit of help, and (unfortunately) figure out which of them are not cut out for your enterprise.

Still, how do you figure out all of this? What metrics do you use in order to see who falls under which of these categories?

Most importantly, you need to learn how to do this consistently with each of your employees. With that in mind, here’s a guide to help you set up an effective performance management system. 

performance management


1. Set clear objectives

The first thing you need to do is set some objectives. This will give you the framework and a point of reference for all subsequent evaluation and performance estimation. 

Just think about it: if you were to step into a random device factory and we told you that an average employee makes 12 per day, would you say that this is a lot or not enough? Chances are that you have no idea since you don’t even know what the product is or how long it takes to make one.  

In order to get started, you need to make a roadmap. First, in order to understand what’s expected of you, you need to take a look at some objectives for appraisal examples. This way, you’ll understand how to set employee goals, outline promotion opportunities, and even track employee progress over a longer period of time.  

The most important thing that you’re trying to figure out in these early stages is – what you are trying to accomplish (as well as what you are even looking at). Do you just want to improve the performance of your employees? If that’s the case, you need to take a look at all the factors that affect performance (which is a tad too ambitious). However, if you do take this systematic approach, you’ll be able to break it down into components and get a clear course of action that will give the desired result.

One thing with performance management is that you can’t just assign objectives retroactively. This way, you’ll always be off.  

2. Enable two-way communication

A lot of famous dictators in history were the last to know about a major problem in their domain because no one had the courage to tell them. The last person who spoke up was either shot or beheaded, so when the time came for the bad news to be heard, no one dared utter a word.

This is a huge problem when it comes to performance management since you really can’t improve performance without first understanding it, and you can’t understand it without feedback.

For this to work, the communication needs to be internal. In other words, you want to hear what your own team has to say, not what the others are saying about your enterprise. Still, social listening can be a handy trick in helping you reveal what former employees really think about you (even things they didn’t want to disclose in their exit interview). 

The biggest challenge that a lot of superiors face is finding a way to encourage open dialog without fraternizing with their employees too much. You need them to be willing to step up to you and tell you what’s bothering them without fear of repercussion. At the same time, they need you to be their boss, their safety net, and not their buddy. 

Since this always starts from the top, you need to be the first one to disclose information. Walk up to them (or send a message) and tell them exactly what they do right or wrong. A mistake that some superiors make is telling their employees only when they’re doing wrong or exclusively praising them in order to be seen as more likable. An equal measure is the only thing that works (sends a message). 

3. Create an approach that’s both industry- and employee-specific

Before you start, you need to take a look at your own industry, as well as evaluate some industry averages. Every industry has different tasks, materials, and responsibilities; therefore, there’s no talk about measuring performance without establishing what you’re measuring. 

You can’t allow your best employee to set the norm, and you can’t go by the lowest common denominator, either. In either of these scenarios, you’re setting expectations that aren’t realistic or indicative of the real situation in the field.

Instead, you need to make some minimum expectations (just so that you can tell which of your employees are just not cut out for this line of work) and then keep everyone’s personal track record. This way, you can see if someone is consistent, what their personal best is, and in which fields they need improvement.

This type of employee-specific approach will deliver the best results.

4. Understand what happens next

Understanding the performance of your employees is just the first step in this process. These are the resources you need in order to understand what comes next. What do we mean by that? Well, what happens when they improve their performance? What happens if they don’t? What happens if you do determine that their performance is lower than it should be?

Do you fire them, penalize them, invest more in their training, and move them laterally? This is something you need to have figured out in advance. How bad do they have to be for you to take action and move them to a different spot or let them go? How much under the line should they be for you to understand that they’re still salvageable and that you need to do something to make it better?

However, what happens if they’re so clearly overperforming? First of all, an over-performing employee is a rare gem, and they need to be treated accordingly. If their work goes unnoticed, they may feel undervalued and leave. So, you need a plan. 

Some effective ideas are:

  • Move them to a better position
  • Increase their rate
  • Provide them with more training

At the very least, you should sit down with them and talk about their future. Let them know that you want to keep them and ask them where they want to be in the future. Sometimes, setting them on this career course will require additional education and a lateral move.

Just remember that the most ambitious/productive employees also have to be challenged. If they find their work too easy, they might get bored even if you provide them with all the other incentives. In this scenario, more tasks would solve the problem. 

5. Foster a positive work environment

The simplest way to handle this entire issue is to foster a positive work environment. While this may be a bit too simplistic a way to look at things, the truth is that this is a solution to all your problems.

First of all, people who work in a positive environment rarely want to leave. This means that you get a higher retention rate by default. The longer they stay in your employ, the more experience they acquire, and you’re the one who gets to benefit from all this experience.

A positive work environment is also amazing for enabling a higher flow of information. Think about it: if people are not afraid to speak their minds, they’re more likely to give you feedback, even on minor things. In a really positive environment, they won’t feel offended even when their feedback is dismissed (if this is done the right way).

A positive atmosphere can make people more competitive, as well. You see, if your coworkers see everyone else trying and they’ve already developed loyalty to their team leaders and strong affection for their team, they won’t want to let anyone down. This is a far better, more natural, and more sustainable way to boost performance and productivity.  

A positive work environment also feels more supportive (and is more supportive in practice). This empowers employees to show more autonomy in experimentation and decision-making. They’re also more likely to ask directly for help, guidance, or assistance. This way, the support system, the feedback loop, and even the chain of accountability work intertwined. The best of it is that they’re developed organically and don’t have to be enforced top-down. 

Good or bad, you need to understand the performance of your team

You can’t handle evaluation subjectively. Sometimes, you’ll feel that you’re not doing as good when your team is actually overperforming. At other times, you won’t understand how badly your team is actually underperforming. The bottom line is that you need to see the numbers and a way to interpret reports. This way, you’ll see the true situation and won’t be misled by your subjective prejudices. 

Srdjan Gombar
Srdjan Gombar is a veteran content writer, published author, and amateur boxer. Srdjan is a Bachelor of Arts in English Language & Literature and is passionate about technology, pop culture, and self-improvement. His free time he spends reading, watching movies, and playing Super Mario Bros. with his son.


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