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What is performance management?

When performance management is effective, everyone is happy. But what exactly is it, and how can you integrate effective performance management at your company?

1. What is performance management?

2. The consequences of poor performance management

3. The elements of performance management

4. A strong employee-manager relationship

5. A culture of feedback

What is performance management?

Performance management refers to the system in which employee performance is maximized through office processes, environment, and culture. Managing employee performance by setting clear expectations for an employee’s work quality to improve their work productivity.

For SHRM, Dominique Jones says some benefits of effective performance management include improved relationships as well as higher rates of employee engagement, productivity, and satisfaction.

The consequences of poor performance management

Poor performance management has consequences for the company as a whole. Forbes contributor Sebastian Bailey says poor performance management systems cause employees to feel uninspired about their growth and progress, particularly when they don’t have a preset rubric to be measured against. Such a rubric is vital for them to understand which areas they’re excelling and failing, if they’re going to be able to improve their performance.

Huffington Post contributor AJ Agrawal explains that unhappy employees can lead to:

As a result, low employee satisfaction can permanently damage an entire organization, including the bottom line.

Organizations without positive employee-manager relationships also suffer. In fact, bad management is expensive. When a company is plagued by high stress from a lack of communication and expectations, the following consequences can happen:

What elements do you need for effective performance management?

In the Business News Daily, contributor Nicole Fallon says effective performance management should prioritize:

All the above factors come down to relationship-building. If you want to manage employee performance well, you need to foster close employee-manager relationships.

Why do you need to build a great employee-manager relationship?

To build great employee-manager relationships, the first step is to focus on the employee as well as the organization at large.

When assessing performance objectives in terms of employee goals, the goals should focus on what benefits the employee as well as the organization. Creating goals within a framework — like SMART goals and OKRs— can help employees know how their goals can line up with the company’s needs. There’s also the possibility of created team- and company-aligned goals as well as employee development goals. Both these types of goals should be openly discussed between an employee and manager, rather than assigned by a manager. 1:1 conversations are a great way to have an ongoing discussion between manager and employee on goal progress and processes.

A culture of feedback

Along with developmental goals, effective organizational development also involves providing clear feedback often. While annual performance reviews should still be implemented, and 1:1 meetings should be practiced routinely, regular real-time feedback provides more immediate insight on a problem. This feedback has the potential to address problems and present solutions quickly, rather than waiting for the next employee-manager meeting days—or even weeks—away. It also builds trust between a manager and an employee.

How you enact your performance management system—whether it’s through boosting real-time feedbackupdating your company’s performance review process, or identifying more specific job descriptions—is up to you. However, what is most important is establishing a detailed system—such as through a performance management software like Lattice—in the first place.