10 of the Best Performance Management Practices for Your Business

Three women discussing management
Leveraging the best performance management practices can help you improve employee engagement, retention, and profitability.

Key points about the best performance management practices:

  • Performance management helps you measure employee performance and align individual and organizational goals. 
  • The performance management process you use will depend on your business and workforce.
  • Best practices include clear goals and KPIs, performance appraisals, and continuous feedback. Many companies also seek employee input and reward performance.

When individual goals align with organizational goals, you help ensure company success at every level. Because of this, performance management is critical to every business. But not every company has a strategic, well-designed performance management process. In fact, only 2% of companies feel that their performance management system delivers “exceptional value.” 

Luckily, taking advantage of some of the best performance management practices can help you deliver this value to your employees and manage performance more effectively. These practices can also lead to increased engagement, retention, and profitability. Here are ten of the best performance management practices that can help you manage today’s workforce. 

Best Performance Management Practices for Today’s Workforce

Performance management is a set of practices used to measure and evaluate employee performance and professional development. By clarifying expectations, identifying goals, and providing feedback, performance management helps employees develop their skills and work more efficiently. It also helps align individual goals and career progress with larger organizational goals.

Traditional performance management consists of formal, annual performance reviews. But for many workplaces, this performance review process is no longer effective. In today’s environment, new generations, remote work, and other changes call for new performance management models. 

The practices that work best for your business will depend on your employees and unique business needs. In general, though, performance management best practices:

1. Share the big picture

Clearly explain how employee performance aligns with your organizational strategies, mission, and goals. When you show employees how their personal achievements contribute to overall success, they’ll feel more motivated and connected to your company.

2. Reevaluate and update KPIs

The rise in remote work has changed business strategy and individual role responsibilities. To address this shift, reevaluate your organization’s Key Performance Indicators (KPIs). If necessary, define new KPIs. 

For example, you may want to measure the productivity of your newly remote workforce. To do this, set new KPIs for things like self-discipline and effective communication. Do employees meet their deadlines? How does their current performance compare to their performance in the office? Do they respond to emails and messages on time? A few simple tests, like asking employees to respond to an email by a certain deadline, can help you assess these metrics. You should update your KPIs anytime you experience a major business change.

3. Set SMART goals

Goals and expectations are the foundation of any performance plan. After all, they drive success and determine the future direction of your organization. Yet only 50% of employees know what’s expected of them at work. 

When you reevaluate your KPIs, take the time to set goals that reflect your current strategy and vision for the future, too. Make sure your goals are well defined so employees understand what’s expected. You can use the SMART method to set effective goals:

  • Specific – The goal should be clearly defined and use exact numbers and figures when possible
  • Measurable – The goal should be quantifiable, with metrics you can use to track progress
  • Actionable – The goal should be realistic and attainable
  • Relevant – The goal should align with your broader organizational goals
  • Time-bound – The goal should have clear start and end dates or deadlines

4. Involve employees in the process

Your KPIs and goals directly affect your employees. If they’re unrealistic, your employees may feel alienated and unmotivated. You can avoid this by making sure employees have a voice in the process. After all, employees who feel heard are 4.6 times more likely to feel empowered to do their best work. 

Ask your employees for their feedback and opinions through surveys or interviews. You’ll improve employee engagement while gaining valuable input about your performance management.

5. Provide frequent, actionable feedback

80% of millennials prefer on-the-spot recognition as opposed to formal reviews. In addition, 63% of Gen Z workers want constructive, timely feedback throughout the year. 

Continuous performance feedback meets shifting workforce needs. It also provides better insight into overall employee performance and strategy. You have more opportunities to check in with employees, measure their progress, and provide feedback. How are they doing? Are they encountering any problems? Do their goals still make sense? Based on their answers, you can then adjust their goals or find new ways to support them. 

Try using daily or weekly check-ins or individual or team meetings as touch points throughout the year. This will create an ongoing performance management cycle instead of the traditional annual review or quarterly check-ins. More frequent feedback benefits both employees and managers.

6. Recognize employees for their work

20% of employees said that feeling under-appreciated for their work hindered their engagement. Another 74% wished that they received more recognition at work. Recognizing employees for their work makes them feel valued. Sharing their achievements with the rest of your company can offer further motivation. If you can, send out company-wide emails and announcements celebrating employee achievements. This can be especially helpful for employees who need that extra push to reach their goals.

7. Reward performance

Similarly, you can reward performance when an employee or team meets a certain goal or performs exceptionally well. Rewards encourage strong performance and offer extra motivation. 

Before you decide to reward performance, be sure to establish specific criteria that will merit a reward. This will help you stay consistent and ensure your employees know what they need to do. For rewards, consider: 

  • Bonuses
  • Gift cards
  • Company swag
  • Extra vacation days or time off
  • Donations to a charity of the employee’s choice

8. Offer additional training

74% of surveyed employees say they aren’t reaching their full potential due to a lack of development opportunities. When it comes to performance management, consider future performance alongside current performance. Providing opportunities for growth shows your employees that you care about their future. You’re willing to invest in them and help them reach their goals.

9. Turn around poor performers

Even with a robust performance management system, you may have employees who consistently underperform. If this is the case, there are a few steps you can take to turn their performance around.

First, address the issue as soon as possible. Sit down with the employee one-on-one and explain why their performance isn’t meeting your expectations. Give them the opportunity to express (not defend) their concerns and any personal matters. Then, work with them to develop a performance improvement plan that includes:

  • Clear goals – Identify training programs, tools, and other resources that will help your employee improve their performance. Consider online lessons or guided mentorship from a senior employee. Then, set goals with specific deadlines for the employee to work towards.
  • Feedback – Check in with the employee regularly to assess their progress and offer support. What improvements have they made? Where are they still struggling? The more specific your feedback is, the more helpful it will be.    
  • Recognition – When the employee makes improvements, be sure to acknowledge their efforts. Offering praise like a simple “good job” can assure them that they’re on the right track. 

10. Trust employees

Last but not least, trust your employees. Performance management means holding employees accountable. But it also means understanding that no one performs perfectly every day. If an employee doesn’t meet a goal or deadline, that doesn’t mean they’re incompetent or disengaged. If an employee is struggling, communicate and ask how you can support them. 

Of course, if performance becomes a recurring issue, then it may be time to have a more serious conversation with the employee. If they aren’t trying to turn around their poor performance, it may be time to let them go.

Performance Management with an HRIS

These performance management best practices set clear expectations and engage your employees. You can easily manage performance with an all-in-one HRIS like SentricHR. SentricHR combines performance management with goals, training, payroll, and everything else you need. With our ready-to-use and customizable performance reviews, you can assess employee performance at any time. Your employees can also access and complete their reviews directly in SentricHR for full transparency throughout the year.

To learn more about how SentricHR can help, schedule a demo today!


The Sentric Team

The Sentric Team

At Sentric, we help businesses make people management easier with industry-leading technology and standout support.

Sentric HR & Payroll Insights

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