The ultimate guide to world-class performance management

One of the biggest takeaways from the recent SHRM conference had audience members raising their eyebrows. The headline was clear: annual performance reviews are rife with inconsistency, bias, fear, and even tears.

It’s no industry secret that performance reviews haven’t evolved much over the last few decades, but it seems today’s HR leaders are seeking a shift in the way performance reviews are handled. 

At Rippling, through our work with leaders at over 16,000 businesses, we’re seeing this firsthand. In this post, we’ll share some of those learnings, including: 

• What performance management is and why it matters
• How performance management is transforming into an always-on process (with the help of technology) 
• The benefits of transitioning to a contemporary performance management strategy 
• The best software to help improve your performance management

What is performance management?

Performance management is the process of communicating feedback between managers and employees. It’s usually facilitated by HR leaders with the goal of reaching organizational objectives. In the past, performance management focused mainly on looking backward, using only past experiences to shape future systems.

Thankfully, this is changing. The modern approach to performance management is all about gathering and implementing feedback continuously. With cutting-edge performance management technology, organizations can now better anticipate issues based on current performance, making timely adjustments to keep employees on the right path.

Two core types of performance management

First, let’s compare traditional performance management to the always-on approach that is beginning to gain popularity.  

Traditional performance management

The traditional process for reviewing and managing performance is linear and mostly static—everything revolves around the annual review. 

Typically, this kicks off at the beginning of the year, with managers setting objectives for employees. Throughout the year, management may monitor performance against these objectives, but the final moment of evaluation and feedback isn’t delivered until a meeting at the end of the year.

The biggest pitfall of waiting a whole year to review performance and provide feedback is that it does not provide a clear way for employees to get ongoing feedback on their work and make adjustments as needed.

The end-of-year review cycle may also fail to capture the whole scope of an employee’s contributions throughout the year, which is understandably demotivating for employees.

Modern, always-on performance management

Always-on performance management leaves Jurrasic-era software behind for modern, nimble solutions that can be customized quickly based on individual employee needs. 

In this approach, larger annual reviews such as 360 assessments are still relevant. But they’re also accompanied by frequent milestone reviews.

This cyclical process is all about iteration. This means managers listen to employees frequently and goals are revamped regularly to ensure everyone is always working toward company-wide key performance indicators (KPIs). 

Most companies don’t use always-on performance management because it requires connected data in order to work. Traditionally this has posed a challenge, but today that’s changing with new tech like Rippling.

Why performance management matters

Performance management is a significant contributor to organizational success in four main areas. 

Improving employee productivity

The most obvious result of effective performance management is, of course, increased employee productivity.

Employees who are classified as highly productive say that, at work, they:

• Understand their managers' expectations of them 
• Receive communication about progress on their success metrics (more than once a year)
• Are encouraged to develop
• Get recognized for great performance

By setting clear expectations, providing regular feedback and encouragement, and recognizing successes, managers using an always-on performance management program can help employees reach peak productivity. 

Boosting worker retention

A good performance management system fosters a positive work environment because employees feel invested in and supported.

A positive work environment is a boon to loyalty. In fact, the number one predictor of employee retention is a positive work environment. 

We don’t have to tell you that replacing employees is an expensive and time-consuming process. Replacing a worker can cost up to two times that employee's salary. As you can see, performance management has far-reaching benefits not just for employees but for HR leaders and businesses as a whole. 

Creating upward mobility for employees

Effective performance management also builds a structured framework outlining each employee’s professional development path.

Regular performance reviews where workers are invited to collaborate with managers on goal setting and skill development enable employees to actually see their road to advancement. 

This visibility into upward mobility also uplifts productivity and retention.  

Driving business results

Lastly, effective performance management doesn’t only improve individual performance, it also boosts business performance. 

By aligning employees’ individual goals with company goals, smart performance management ensures that everyone is working toward improving company-wide goals set by leadership.

Four key principles of performance management

Now, how do you actually put this into practice?

Let’s explore the four essential elements for putting together a successful, always-on performance management cycle.

Establishing goals wisely

Of course, you may already know that setting S.M.A.R.T. goals around employee performance is pivotal to making your whole strategy work. 

But, what’s your approach to goal setting itself? 

Setting strategic goals on a rolling basis, checking on employees’ progress, and refining objectives to make sure they’re aligned and actionable following every performance is key.

This modern approach is crucial because it shifts performance evaluations from backward-facing to forward-looking and ensures goals are iterative and always relevant to business objectives as well as the individual’s professional journey. 

Setting progress milestones

Milestones make what can feel like insurmountable objectives much more manageable by breaking them down into smaller steps. 

They also position milestones as a lead up to an ultimate payoff, whether that’s a raise or just a celebratory performance meeting, which creates motivation and momentum.

On the employer side, HR leaders and managers should use milestones (learn how to automate them here) as progress markers for tracking achievements and adjusting strategies as needed.

Gathering feedback

Aside from self-reported performance evaluations and observation of goals and milestones hit, feedback from colleagues provides some of the most powerful insight into employee performance. 

So, striving to get this high-value feedback should be a key part of your performance management strategy. 

360 reviews are pretty well-known to most folks who conduct performance reviews. The gist of this approach is that it develops a comprehensive look at performance by collecting feedback from everyone a worker interfaces with: team members, direct reports, peers, and even clients or customers. 

Conducting 360 assessments seems time-intensive, but with the right tools, it doesn’t have to be. And, the ROI is there if you know how to conduct them effectively: 

• Async surveys are probably the best way to solicit this type of feedback. 
• When sending surveys, include basic instructions recipients can follow to leave productive feedback.
• Review responses to form a holistic view of employee productivity that can be acted upon.

Implementing feedback

Feedback is really only valuable in the performance management setting when it leads to action. 

To do this, you’ll want to transform employee feedback into a structured, practical plan to improve upon low points and capitalize on competencies they’re already excelling at. 

This is when managers and HR can partner to come up with meaningful adjustments to their employee engagement strategy, ensuring each worker gets the specialized training, resources, expectation setting, and recognition they deserve. 

And this isn’t only about improving performance. Recent research found that employees who see their employer act on feedback are 37% less likely to job hunt.

Leading performance management software

At Rippling, we’ve had the pleasure to work with over 16,000 companies. 

We know the following to be crucial:

• Effective performance management is about continuous processes, not isolated events.
• Most companies want to align performance management with their culture, not revolve it around their tools. 

That’s why our performance management tools, including Goals and Review Cycles focus on enabling you to integrate performance reviews seamlessly throughout every stage of your unique employee lifecycle. 

Conclusion

If you aren’t already in the thick of it, you can probably tell from this article that building a culture and system of continuous performance improvement can require a lot from HR leaders, managers, as well as team members.  

But, with the right tools, it doesn’t have to be difficult. And it really is invaluable to cultivating a high-performance team. This is where Rippling comes in, streamlining and modernizing your performance management approach. 

Ready to implement a world-class performance management process? 
Request a live demo or view a video tour of the platform.