4 Influential Performance Management Best Practices
Performance management is something that affects all HR leaders and managers, whether they see it as a necessity, an obligation, or a frustrating puzzle they can’t quite crack.
For those who struggle with it, there’s a pretty common reason: most performance management methods are inadequate.
First of all, its primary purpose has evolved over the years.
For too long, the goal of performance management has been largely singular: to identify low performers (and typically get rid of the bottom 5%—ouch!). The model typically used by HR professionals is built on a grading system. After a manager assigns (sometimes biased or subjective) grades to their employees, HR teams plug those grades into a compensation calculator to determine increases. Since compensation is commonly adjusted once a year, performance is evaluated at the same frequency.
This model gives employees a broad, infrequent, inequitable, and recency-biased picture of how they’re doing. It also leaves very little room for employees to better understand their role and take concrete action to improve or excel.
In recent years, we’ve started to understand that performance management can influence more than just compensation. It can also clarify employee expectations of role responsibilities, create a clear picture of what it takes to get to the next level, and more.
To help guide your performance management practices, download your free copy of our Performance Management Template!
The best practices of modern performance management
Typical employee performance management practices provide a high-level summary of employees’ main achievements and challenges throughout the year. Modern performance management, however, can—and should—do so much more than that.
When HR teams empower managers with intentional performance management processes, they can:
- Engage, inspire, and empower employees.
- Be proactive rather than reactive in addressing unmet expectations.
- Provide an equitable and fair experience to all employees.
- Become a valuable tool in employee professional growth and development.
- Encourage frequent, multi-directional feedback.
- Leverage contemporary psychological and organizational research.
- Evolve over time to meet the needs of employees and organizations.
That’s a pretty long list, and without best practices in place, it can be hard to know what needs to change within your existing performance management practices. Here’s how we think about performance management to both benefit companies and provide the best employee experience.
1. Have an end goal in mind
As we mentioned, innovative performance management can do many things. As an HR leader, it’s important to ask yourself three things in terms of how to approach it:
- What are the goals of the organization?
- These may include increasing your company revenue, expanding to new markets, improving customer satisfaction and retention, innovating your product, or improving company culture and morale.
- What are the goals for managers?
- This could mean providing a clear, systematic performance management process for managers to carry out, defining role expectations for their direct reports, having continuous performance management discussions with employees, or reviewing the proficiency levels of employees for their job responsibilities.
- What are the goals for employees?
- These might include increasing employee retention and engagement by promoting from within more frequently or providing salary increases and promotions in a fair and transparent manner. Your goal for employees may be to foster a culture of regular positive and constructive feedback. Additionally, you may want employees to come away with specific expectations of their roles and a plan of action for any responsibilities that need improvement.
The answers to these questions are important to consider so that you can think of performance management practices in a holistic way. It may seem daunting but it is absolutely possible to design processes that achieve the goals of the business, managers, and employees.
How Bonusly does performance management
At Bonusly, once company-level goals have been set, managers determine the goals for their teams or departments. Then, they work with their direct reports to revise and finalize a list of specific competencies for their roles ahead of time, ensuring that they positively impact the team and company goals. This audit is essential because responsibilities don’t stay static—many of our jobs change and evolve over time.
This updated list of specific responsibilities ensures that employees and managers are aligned and performance reviews are relevant, fair, and detailed—leaving little room for guessing or ambiguity. Employees then have a clear picture of exactly what they need to accomplish and they have a say in it too. Employees can work with their managers to include responsibilities they're especially interested in or that they would like to grow in which helps build a trusting working relationship.
In addition to the existing levels of their direct reports, managers are also responsible for finalizing role expectations for every potential level of a role. Responsibilities for every level and role are available internally to all employees so that they know exactly what the expectations are if they'd like to promote to the next level or even move to a different position in the company.
Managers have formal performance conversations with their direct reports twice per year. Each of the formal performance reviews has the potential to lead to a raise or promotion.
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2. Performance assessments should be collaborative
Once you’re crystal clear on employee expectations, the next step is for both the direct report and manager to carry out an assessment of each of the employee's role expectations. Once the direct report has completed their self-assessment, the manager can add their own assessment of the employee's proficiency levels for each job responsibility.
If there is a misalignment in how employees and managers rate one aspect of the role, this is a great opportunity for discussion. The manager and employee can come up with a plan of action for anything rated as "needs improvement."
How Bonusly does performance management
Our bi-annual performance review process is designed to:
- Allow our employees to get regular (and documented) performance feedback.
- Support career progression and personal development.
- Inform, where appropriate, merit increases and promotion decisions.
We use a performance management template to achieve this.
Below is an example of what our performance review template looks like.
Twice a year, both the employee and their manager fill out a column ranking proficiency levels for each job responsibility, which can fall into one of four categories:
🥳 HIGH PROFICIENCY = Sustained high proficiency means a high level of proficiency over four months or more.
🚧 DEV PROFICIENCY = Developing proficiency, meaning performance needs more time, more consistency, and/or more skill building.
❌ NYST = Not yet started. This is a skill that the person has not demonstrated yet, or has not had enough time to demonstrate.
☹️ NEEDS IMPROVEMENT = This is a skill, behavior, or Bonusly value that isn’t meeting expectations. In this instance, something is sliding backward and needs a clear plan for improvement.
The result of this structure is a very clear picture of both the direct report and manager assessments. Using this template helps us pivot faster, track progress, and prevent “the element of surprise” when formal review times roll around.
Beyond ranking proficiency levels for each role responsibility, we also have a column for employees and managers to list specific examples of the employee's work that demonstrate either a high or developing proficiency. This helps combat recency bias, helps inform promotion decisions, and gives managers an opportunity to provide employee recognition for all of the work they've accomplished.
Download your free copy of our Performance Management Template!
3. Build a repeatable process
One reason why managers often default to annual performance reviews is that it’s easier to remember—and carve out time for—something that only happens once a year.
But as we know, an annual employee review serves as more of a summary of the year and is often subject to recency bias, which does very little to empower employees or put proactive performance improvement measures in place.
Start to think about performance management as a process. If you want to focus on growth and feedback, how frequently do informal check-ins need to happen? Block off those times in your calendar and stick to them.
How Bonusly does performance management
Managers focus on employee performance year-round in more informal one-on-one meetings that prioritize positive and constructive feedback.
In informal discussions, managers may ask their direct reports to answer the following questions:
- Am I doing my job as it was advertised to me?
- How well do I feel I’m performing?
- Which areas of development do I want to focus on?
- When I think about my job expectations in my role and level, which data shows me positive signals about my performance?
- Where are the signals about my performance weaker?
These questions can spark discussion between the manager and employee before formal review time so they can take action and there are no surprises. Managers can use the information provided to help plan career progression.
Are you thinking about improving one-on-one meetings for your team? Check out our proven template for effective and productive one-on-ones.
4. Think of performance management as a conversation
It can be easy to think about performance management as a one-way street: the manager assesses their employee’s performance, gives the employee feedback, and the employee takes that feedback away and improves (or doesn’t).
As you can imagine, this method doesn’t do much to build trust or improve employee engagement. If you’re approaching performance management as a regular, process-driven endeavor, there should be a lot of room for conversation and bilateral feedback to take place.
Try asking your employees the same set of questions regularly to see what comes up; questions about job satisfaction, workload, and sense of fulfillment can tell you a lot about how your employees feel and whether they may be struggling.
How Bonusly does performance management
Feedback lies at the heart of our communication and teamwork philosophy. Peer feedback and manager one-on-ones are great opportunities to allow for radically candid conversations to take place. Outside of our twice-yearly reviews, each employee also solicits peer feedback every six months. Doing this helps improve peer relationships and helps us actively listen, self-reflect, and improve ourselves. It also gives everyone in the company a chance to practice and improve at giving and receiving constructive feedback.
The bottom line
Thoughtful and intentional performance management practices can help organizations reach their goals, create clarity around role expectations, improve employee performance, engage and inspire employees, improve manager-employee relationships, and more. Taking a holistic approach, using an employee performance management template, and prioritizing continuous performance conversations can help you and your organization achieve those results.
How Bonusly can help with performance management
So much of performance management is shaped by the processes HR teams use, but having the right tools at your disposal can help your company, managers, and employees reach new heights.
Bonusly's top-rated employee recognition program helps managers eliminate recency bias by providing a record of positive employee contributions. It also provides tangible proof of proficiency and real insights into the day-to-day work employees are doing, which is especially helpful in remote-first settings.
Bonusly’s platform also helps to increase psychological safety and builds trust and transparency. When you give your employees consistent employee recognition (which is positive feedback) it makes it easier to provide constructive feedback when the time comes.
While you're here, check out our other Best Practice resources! ⬇️