Performance management system

What is a performance management system?

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Performance management system

Any company that wants to grow sets ambitious goals to achieve. The Performance Management System allows you to supervise the achievement of these goals effectively.

What is a Performance Management System?

The Employee Performance Management System is a set of various organizational activities (in other words – methods and tools) to help a company achieve high performance. These activities include setting goals, monitoring their implementation, motivating employees, and evaluating individual and corporate results. We can also define a Performance Management System as the process by which a company prioritizes its activities – setting goals and matching tasks to available resources (including human resources).

The key elements of a Performance Management System

The Performance Management System supports implementing the company's business strategy via several key elements.

  • Objectives. For the system to work efficiently, all team members should co-create a high-performance organizational culture, that is, know and understand the company's goals and strive to achieve them. Employees' individual goals should be closely linked to their competencies and skills, as this will increase the efficiency of operations.
  • Flexibility. An effective Performance Management System must be flexible – have a dynamic nature to match the company's business model and the development stage.
  • Evaluation. We can speak of effective performance if we achieve the goals and the results obtained exceed the value of the investments made. Evaluating the results achieved against the needs and planning changes in performance help improve the implementation processes, e.g. increase efficiency.
  • Regularity. For the efficiency of performance to increase, certain phases of the management process have to repeat themselves in regular cycles, e.g.:
    • The planning and goal-setting phase – setting goals, selecting KPIs, setting a timeframe for achieving goals;
    • The phase of goal implementation – presenting the goals and measurement methodology to the team;
    • The phase of monitoring the current status of implementation – periodic measurement of KPIs;
    • The evaluation and reporting phase – reporting according to the established scheme and periodic meetings to evaluate the status of implementation;
    • The feedback phase – motivating employees to achieve better and better results, rewarding achievements;
    • The phase of implementing corrective actions – correcting actions that were not effective.

Once you implement the corrections, the planning and goal-setting phases come again. New plans should take into account lessons learned from the previous cycle.

Benefits of implementing a Performance Management System

The implementation of a Performance Management System in a company includes:

  • Better understanding of processes, and therefore faster implementation of repair actions, more effective search for new development opportunities, e.g. greater efficiency and effectiveness of operations, which leads to a better financial result;

  • Improvement in the quality of operations due to the use of KPIs and the regular progress tracking;

  • Increased employees' motivation as they reassure themselves of their work's importance and impact on the company's development;

  • Better internal communication through periodic evaluation meetings and allowing employees to express their ideas and opinions;

  • Better data systematization supported by reporting, making it easier to understand the company's strengths and weaknesses and enabling strategic decision-making,

  • More effective risk management by setting the right metrics and tracking them on an ongoing basis.

What are the common features of Performance Management software?

Performance management software can be a separate tool or part of an HRM system. Both solutions have some common features.

  • Workflow automation. Using the software, we can efficiently plan employee assessment cycles and communication schemes using templates and scheduling of correspondence (notifications, feedback requests, surveys, etc.).

  • Regular feedback. The software allows you to create templates for 1:1 meetings, various surveys, and schedule assessment cycles. It's all about managing feedback on an ongoing basis – giving it and receiving it.

  • 360-degree feedback. Many tools have this functionality to provide a complete overview of an employee's performance.

  • Goals and OKRs. Management by objectives, using goal cascading, goal maps/trees, and measuring individual KPIs, allows each employee's activities to be effectively monitored regarding the strategic company goals.

  • Ranking tools. Performance management is more effective if you use various assessment tools, including n-box matrices, skill-tracking frameworks, competency grids, or role-based rating patterns.

  • Career planning. An important feature of performance management software is the ability to plan career paths. Awareness of the company's development paths increases engagement and motivates employees to work more effectively.

Performance Management System questions to ask when evaluating a solution

When choosing your Performance Management System, make sure that:

  • It is tailored to your company's needs regarding its type of business, number of employees, and employment structure.

  • It is user-friendly and will not cause problems for either management or entry-level employees.

  • It provides efficient communication and feedback.

  • It allows remote access from various terminal devices.

  • It provides the right level of data security, such as user permission grading, two-factor authentication, etc.

  • It offers functions that will enable you to manage by objectives, employee evaluations, reporting, etc.

  • It collects and presents data in an easy-to-read way, visualizing and summarizing with charts or graphs.

  • It can be flexibly integrated with other applications, such as one for project management, and can be adapted to the changing company's needs.

  • Its purchase will quickly be returned or even bring significant savings.

  • The system provider provides technical support and periodic updates.

Wrapping Up: Performance Management System

If a company wishes to improve its performance, it must increase productivity in cycles and keep its team motivated at a high level. Industries are evolving quickly, and the business environment is still changing. Evaluation of performance once a year is a recipe for disaster. That's why many companies choose to implement continuous Performance Management Systems. These systems ensure that the feedback on occurring problems will quickly reach the right people, and they will be able to find the solutions. The proper system makes it possible to set goals and monitor their implementation on an ongoing basis, as well as to ensure that every employee is involved.

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