What Is Peformance Management?

Your company’s success ultimately rests on your team. Making sure you measure the performance of every team member, address issues, and help everyone improve can be one of the most powerful ways to drive your organization forward.

Performance management is a formal process of communicating goals, expectations, job responsibilities, development plans, and priorities. It helps create dedicated, ongoing communication with an employee so they can grow and improve.  

Performance management can be a steady part of workplace or fiscal-year evaluations, with teams and managers working together to improve themselves and their ways of working year after year.  

It can also be used to address pain points. If a worker is not meeting standards, performance management can raise the bar on employee performance. By working together, you and your team member can find ways to resolve issues, address skill gaps, clarify expectations, and more.  Performance management can make a positive improvement for you and the employee to move forward together. 

Key Goals of Performance Management Plans

Every organization can consider what their individual performance management plans should include. Here are common elements to aim for:

Define job duties.

One of the first places to start is with the job description, which should define what an employee is expected to do and achieve. Review this together so you can decide whether the job duties are still reasonable and understood clearly.

Align employee activities with the company mission.

Communicate how your employee’s job contributes to the overall company mission statement and organizational goals. Team members may feel more motivated to improve their performance when they embrace their efforts as part of something bigger. 

Develop specific outcomes.

Discuss how an employee’s work impacts the team as a whole. An individual may be delivering services or products other teams rely on for their own tasks, but there may be room to better understand the full impact of their work on others.

Create clear and measurable expectations.

Ideally, you develop goals and expectations together so employees agree to what they feel they can accomplish. Make sure expectations can be objectively measured so there's no disagreement about whether someone has met a target or not. For example, you might set a specific sales number as a monthly goal, or a set number of tasks with a defined deadline.

Share resources.

Individuals may need upskilling or additional training to reach their performance targets. Employees interested in professional development may benefit from mentorship programs or other opportunities. What resources can you offer or direct them to?

Maintain regular communication and meetings.

Regular communication lets employees share their own progress and get feedback about whether they’re on track. That way, there’s no surprises during the next performance review. In-person, one-on-one meetings are the best option here. They can help establish a warm rapport and ensure both employees and managers get a chance to ask questions.

Define next steps.

What happens if the performance management process works well, and an employee moves forward? Decide how you will acknowledge the hard work they put into the process. What happens if a team member fails to adequately improve after a PIP? Decide whether there will be another chance to meet expectations or whether termination or demotion will follow.

Performance Development Process vs. Performance Improvement Plans

A performance development plan is different from a performance improvement plan, though both are ways of supporting employees and helping them grow.

What is a performance development plan (PDP)? 

A PDP is a process for professional development and career advancement. It's used to define career goals and the steps needed to help reach them. 

A manager and individual meet to discuss career goals, opportunities for professional development, and then continue to communicate about steps they're taking to improve their performance.

For example, a worker and manager may decide a worker will shadow a more experienced employee or take online training to improve their skills. Ideally, the employee’s efforts will be reflected in the next performance review. The professional development may even pave the way for promotion or new responsibilities.

What is a performance improvement plan (PIP)?

A PIP is a way to communicate performance deficiencies with an employee. While this can look different at every organization, this is how it typically looks:

• A manager or leader meets with an employee to communicate performance issues.  
• The employee gets a chance to reply, hopefully helping uncover why they may be struggling. 
• The manager or leader and the employee agree to a performance improvement plan to bring work up to expectations and set a timeline.
• There is follow-up communication to review whether the employee has made the needed changes. 
• The organization may take additional action, such as termination, if performance hasn't improved sufficiently. 

A PIP isn't always disciplinary. While being asked into a meeting for a PIP might not feel wonderful for an employee, the goal is a positive one. PIPs can help team members avoid discipline by giving them time and support to fix any problems.

Differences between PIPs and PDPs 

The biggest difference between the two is how they start. With a PIP, often has an HR performance manager or another manager who starts the process. A PIP usually comes into play when an employee isn't meeting expectations or is overwhelmed. 

It's often the employee who decides to create a PDP, although at some organizations these plans are part of regular performance and fiscal year reviews to keep everyone improving their skills. 

While both PIPs and PDPs are designed to improve accountability and transparency, the PIP is meant to bring a worker’s performance up to a better level. The PDP is meant to help an employee move forward and level up toward promotions or other goals.

The Takeaway

Performance management can be key to a successful work environment and business. Being clear about standards, communicating well, and tracking progress can help you reap the benefits of better productivity and overall performance, while employees feel motivated to learn and grow within a company.

A version of this article was originally published on April 14, 2011.

Images: Getty