How to Implement a Performance Management System

Performance ManagementWhat is a Performance Management System?

A performance management system is a defined set of tools, processes and actions that enable you to maximize the performance of your employees.

Why should you have a Performance Management System?

As a CEO you want to get the best return on your investment and employees are probably the most expensive and valuable asset you have. It only makes sense to do everything you can to get the best performance from them. In fact, if you don’t think that your employees are your most important asset then stop reading now as this article will be of no value to you.

All of us like to know what is expected of us, in detail. We also like to know how we are performing against those expectations and lastly we want to develop ourselves to meet any gaps in performance and to move toward greater responsibility and reward.

What are the Key Components of a Performance Management System?

There are several key components that need to work together to make a system work.

1) Job Plan and Performance Expectations – This is a document that outlines, in writing by category, what is expected of a particular employee and might include things like: Company product and service knowledge, following internal processes, meeting required work schedule, teamwork, customer service and so on.

The key is to break the work of a position or individual down to some natural categories, probably no more ten categories makes the most sense and then write the specific expectations in that category. Keep in mind that not every category will include items that are objectively measurable, there will be items that are subjective, like teamwork.

2) Performance Review – This is another document that is used to document the actual performance of an employee against the criteria you outlined in the Job Plan and Performance Expectation document. In addition to writing your evaluative comments in each category, or numerical specifics,  you need to have a rating system.

The rating system should enable the labeling of items that Exceed Job Requirements, Meet Job Requirements or Failing to Meet Job Requirements. You choose how granular you want these to be. The key is that you apply a rating to each category and to overall performance.

3) Development Plan – This is another document (or it could be on the Performance Review document) that outlines by each category what actions will be taken to improve performance in that category. Then, the next review part of the performance evaluation is how well the employee accomplished the development actions.

4) Communication – This is the critical item. None of the above matters if the communication with an employee is not done effectively. Keep in mind that this process is a two way street.  Most employees have more detail than most managers on what they do every day and how they perform. You should listen and make the process a dialogue for gaining agreement on expected and actual performance.

The frequency of doing a Performance Review may vary by type of business, the role of the position, your pay structure and other variables. The key is to do it frequently enough to maximize the performance of your employees.

Performance Management SystemTake Aways

Developing and implementing a Performance Management System is not easy but it is a critical task toward working on “Finishing Your Company”. (A journey that never ends) Actually doing this is common sense, how can a business survive if employees don’t know what is expected? Why would an employee remain if they never get feedback on their performance.

Better yet, why would your prospects and customers buy from you if you don’t have such a basic management tool?


2 Comments How to Implement a Performance Management System

  1. Steve Blue

    You are missing one crucial element in what is otherwise a very comprehensive review of the process. Money. Always tie the system into a variable reward, based upon how the company is doing against its profit budget for the year. No other measurement has any real value. In my company, every single employee gets, or doesn’t get a substantial year-end bonus based upon reachcing profit objectives. And we report where we are to all employees every month. That really gets people thinking about how to improve the profit number.


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