It's not unusual to hear employees complain about the performance management system their human resources team forces them to use.



Employees associate these programmes with the dreaded performance review, and the programs often aren't effective at setting job performance expectations or measuring employee performance.



However, performance management systems that revolve around Promise-Based Management and social discipline can provide the results necessary for meaningful, measurable and effective outcomes.

What Is Performance Management and Why Is It Important?

The definition of performance management is the process through which a manager or supervisor meets or discusses with an employee to support organisational and personal development goals. Often performance management involves an appraisal process with yearly employee reviews and regular communication to check in on progress toward strategic goals and performance improvement.



Performance management should be a critical focus for your organisation as it can affect financial performance, productivity, employee retention and company culture. Some of the other benefits of performance management include greater efficiency, accountability and employee satisfaction. It can also be a useful way to identify skill gaps, reflect on good management techniques and provide data for development planning.



An effective performance management process links strategic objectives with individual goals, motivating employees to feel connected to business goals and their continuous improvement. For example, if one of your main business goals is to cut down on time-consuming busy work, this is something you could discuss with your admin team through the appraisal process.



By proposing a problem that needs solving and following up on progress against set goals, your employee will feel as though their individual efforts contribute to a positive change for the entire organisation.



What Are Performance Management Systems?

As organisations grow, managers and teams need a standardised performance management process in place for goal-setting and gauging individual performance. At their best, performance management systems should align with your company culture and strategy, help with talent management and serve as a performance appraisal tool for managers, employees and teams. Effective systems can also aid in identifying skills and succession planning.



At their worst, performance management systems can lack meaning, demotivate teams, slow the decision-making process, stifle career development and take time away from important work that would have otherwise helped you meet your key initiatives and success factors.



Appraisal systems should do more than turn a job description into a set of rote tasks where the employee's performance is only evaluated with an annual performance review. While annual reviews are useful, a robust approach to employee evaluation with regular 360-degree feedback can have a positive impact on performance, success and the bottom line.



Consider how ongoing feedback through regular meetings could help you track progress against bigger performance goals. For example, for a sales team member with a target of increasing their sales by a set percentage every quarter, a monthly catch up to review progress helps you to identify issues and address them faster than waiting for an annual employee appraisal.



The best performance management systems foster employee development, provide constructive feedback, effectively measure key results and are transparent across every layer of the company.



The performance evaluation process should be easy to use while keeping teams and individual employees accountable for reaching their goals. The review process should also feature clear goal-setting tools and tracking methods, like those featured in performance management software, to measure results.

The Major Pitfalls of Performance Management Systems

Often, leaders in organisations adopt a performance management system with enthusiasm, convinced the program will help managers connect with direct reports, establish an avenue for constructive feedback, provide professional development opportunities and track performance issues.



In reality, it's common that the employee review system is cumbersome to use and not widely embraced by the organisation as a whole. The training that’s needed to utilise the system correctly is left unaddressed.



A major flaw of many traditional performance management systems is that they measure performance results long after the goals have been set, such as during a performance review, even if performance expectations have changed. This can be frustrating and demotivating for employees, especially if their goals relate to a project which has since ended, leaving them with no future targets to work towards.



Organisational goals need to be malleable to shift with industry trends and organisational change. Without a useful way to accurately measure group and individual performance in real-time, it becomes nearly impossible to hold team members responsible for meeting critical strategic goals.

The Free-Rider Effect

When individual employees work in groups without developing clear performance measures and organisational goals, team members can't be held accountable for achieving results. Naturally, a free-rider (or riders) will emerge.



The ‘Free-Rider Effect’ happens once team members realise that other members of the group will pull their weight for them, and they can easily get away with it because individual performance isn't being closely monitored. For example, if you have a team working to deliver an annual conference, you could find that one team member misses project meetings, avoids set tasks or doesn't contribute to planning effectively.

The Sucker Effect

Free-riders don't go unnoticed. Once the hard-working members of the group realise not everyone is pulling their weight, the ‘Sucker Effect’ enters the equation. To avoid being a ‘sucker’, these typically high-performing employees hold back to bring equilibrium to the team.



Consequently, work output is drastically reduced. The group may still achieve their goal, but motivation diminishes and organisational performance suffers. Following our annual conference example — your event may go ahead, but it may not be up to the standard that you'd set for the team.



Development plans aren't put into writing, constructive feedback is neglected, and the group spends countless hours in meetings brainstorming and making plans that are never executed. Action items aren't assigned, productivity is hampered and employee engagement hits an all-time low.

How Can You Avoid a Poor Performance Management System?

Effective performance management begins with the psychology of promise-based management to deliver excellent organisational performance and sustainable employee engagement.

What Is Promise-Based Management?

Promises are made daily in the business world, whether they are made to co-workers, managers or customers. Promises, combined with social discipline, create a transparent work environment and a performance management process lined with individual accountability.



What happens when promises are made in a public space for everyone to see? Performance expectations become crystal clear and employees at every level of the organisation become socially motivated to honor their promises.



Companies that rely on keeping their promises also generate an increase in employee engagement with a feeling of community around shared ownership of goals. Morale and motivation improve, and overall organisational performance soars.



The social discipline behind promise-based management creates a heightened sense of awareness because an employee knows their goals are visible to their team members. That transparency makes it easier to gauge individual contributions and employee performance while creating the opportunity to weave a reward system into the public space with positive feedback.



What Makes a Good Promise?



The most significant aspect of implementing Promise-Based Management into any human resource management system is ensuring everyone on the team knows how to craft good promises they are capable of keeping. All promises should be:



Public: When an employee makes a promise that is tracked in a public place, they are likely to honor it to guard their reputation and avoid letting the group down. This could be within a project meeting, by raising their hand at a staff event or agreeing to deliver something in front of a client.



Active: Promises should not be accepted or requested passively. The timing of delivery and possible conflicts should be handled prior to making a commitment. For example, you would check your calendar for any conflicts before agreeing to meet with a client on a specific date.



Voluntary: Team members should not be pressured into making a promise. Promises should be carefully negotiated to allow the promise-maker to retain ownership of the commitment, increasing accountability. It can be easy for employees to feel under pressure in a group environment, but one way to combat this is to keep any requests for help open and not directed at any one individual.



Explicit: Promises should be clear and concise, explaining who will do what, by when. This can be made easier by noting a promise in writing, for example in the minutes of a meeting.



Mission-based: Each promise should directly relate to the mission of the organisation and clearly explain which organisational goals completing the promise will fulfill. To help with this, make sure employees have a good understanding of your business goals, for instance through a welcome pack or company intranet page.

FAST, Rather Than SMART

A traditional performance management process recommends that goals should be SMART: specific, measurable, achievable, realistic and time-bound. However, research indicates the most effective goal-setting methods follow the FAST acronym. In promise-based management, goals are rooted in:



F — Frequent discussions

A — Ambitious objectives

S — Specific measurements

T — Transparent work environments



Once a promise has been fulfilled, it should be publicly documented in the performance management system. Team members should provide frequent feedback to one another to continually improve the process.



The Role of Technology in Creating a Powerful Performance Management System



Meaningful and effective performance management doesn’t have to be complicated. With the right software and training, your team can have the ability to track individual and team efforts in a transparent environment.



The best software takes the red tape out of performance management by reducing time spent in meetings, measuring what matters in real time and putting it out there for everyone to see. Software like this allows companies to create, track, measure and discuss their promises while increasing productivity levels and employee engagement.



While every business is different, integrating the right software can have a positive effect on team productivity, accountability and performance. To help you find the right tools for your business, we’ve created guides on what to look for in teamwork software and the best project management tools.

