Performance Management: 2024 Comprehensive Guide

Unlock the strategies to drive your organization toward peak productivity and success through effective performance management practices.

Performance management can be a complex area to master because the industry is constantly changing and evolving. Every year, a new performance management trend pops up, and HR departments across the country jump on the bandwagon.

However, most businesses are evolving so quickly that the goals set at the beginning of the year might change by the end of it. Because of this fast pace, employees sometimes feel disengaged, leaving managers dissatisfied with the results.

Thankfully, an increasing number of companies realize the importance (and benefits) of effective performance management systems. Implementing an effective performance management system is the first step toward revitalizing and improving the existing performance processes.

What is Performance Management?

Even though many employers think of the annual performance review as the core of performance management, that’s just one aspect of it. In fact, it is an ongoing method of improving performance by:

Setting individual and team goals consistent with the organization’s strategic goals
Performance plan to achieve goals
Reviewing and assessing progress
New ways to develop people’s knowledge, skills, and abilities

In practice, a robust performance management system aligns and pursues measurable goals. It also creates a constant feedback loop for coaching and promotes engagement through recognition. With the introduction of a performance management system, employers conduct meaningful performance discussions more regularly, which means employees can improve and climb up the ladder faster.

The most important thing for managers to know is that performance management is not a once-a-year activity. On the contrary, it is a perpetual cycle of micro-managing activities that, in the end, will benefit the employees. It’s a process created out of four stages that establish a baseline of communication between the employee and the employer.

The 4 Stages of Performance Management

Michael Armstrong best describes these stages in his Handbook of Performance Management:

Plan
Act
Track
Review

Let’s break down these stages.

Plan

The goal is to set smart and achievable objectives. Each objective should specifically contribute to the achievement of one or more of the organization’s goals. After the goals are set, both the employee and the employer agree on the personal development plan.

Act

In the act phase, the employee strives to achieve the previously discussed objectives. After this phase is in motion, the employer can implement a personal development plan. Note: Personal development planning should consider what behaviors, abilities, or knowledge a person needs to develop to achieve their goals and maintain the company’s values.

Track

During this process, the employer tracks the employee’s progress and maintains communication by providing regular feedback. If there are milestones that the worker will need to achieve, the manager can mitigate the obstacles by providing day-to-day coaching. Managers can employ coaching to assist team members in identifying learning opportunities and fostering performance improvement.

Review

The employer reviews the employee’s achievements, identifies learning possibilities, and gives feedback. After completing the review, the employer should discuss career goals and take on actions so that the work process can carry on.

Knowing the basics of how a performance is executed is a valuable resource for managers who need to prepare for implementation.

In reality, the stages do not flow one after the other. On the contrary, they should be continuous throughout the year. Managers must communicate the reasons for the adjustment and consistently share performance management objectives with their employees.

Performance management should be a perpetual process that allows discussions, improvements, and adjustments based on employee performance.

Elements of a Performance Management System

These five elements unveil the critical performance management points that managers need to stick by. By applying them in employee appraisals, there’s no room for mistakes and miscommunication.

Setting Goals

Managers need to set goals that are meaningful and well-understood. Employees should understand why these individual goals are essential and how they relate to the organizational objectives.

When employees know and understand how their jobs matter, they care more about their jobs. In fact, only 7% of employees are fully aware of their organization’s corporate plans and what is required of them to help them achieve these goals.

When employees are placed in the driver’s seat and given the freedom to develop their priorities, they feel a greater sense of autonomy and ownership over their role. This inevitably leads to better employee performance.

Transparent Communication & Collaboration

Employees expect and deserve their leaders to be transparent and honest at all times. Communication is crucial for building and maintaining healthy relationships with coworkers and managers. Even when it is difficult or unpleasant to communicate, regular feedback and open discussions are beneficial.

Employee Recognition

An effective performance management system should make employee recognition and compensation a high priority. Employees need to feel appreciated for the effort they put in. If employee recognition isn’t a top priority, it will almost certainly harm the company’s turnover.

Regular Feedback & Reviews

The more frequent and straightforward the feedback, the better will the employee performs. If employees are well-informed about their performance, they tend to improve and prosper.

Employee Development

No ambitious top performer wants to stay with a company for the long haul without perfecting and developing their skills. Employees value development, not to mention that companies benefit when their employees are more skilled and competent.

When these elements are put into work, team building will not be an out of work experience. The shire process will form close connections and trust among employees and managers. And with that, move the work process to a more productive level and drive the business in the right direction.

Performance Management Technology

Many performance management software solutions on the market offer a simplified approach and manageable routine that can boost performance. According to current projections, the talent management industry will be worth $16 billion by 2024, with a 16 percent annual growth rate.

Performance management tools help companies track employee performance consistently and measurably. They offer the best opportunity to manage teams, set smart goals, regularly analyze performance, and reward excellence.

They include a complete system of goals, reflection, and rewards that enable teams to do their best work. The multifunctionality contained in the performance management tools also provides context for individual performance.

Here are the top 10 best performance management systems on the market:

Oracle HCM

Goals: yes
Mobile App: no
Analytics: yes
Career Planning: yes

Workday

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: yes

Cornerstone OnDemand

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: yes

Namely

Goals: yes
Mobile App: no
Analytics: yes
Career Planning: yes

Engagedly

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: yes

EmpXtracks

Goals: yes
Mobile App: no
Analytics: yes
Career Planning: no

ClearCompany

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: yes

BambooHR

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: no

Saba

Goals: yes
Mobile App: yes
Analytics: no
Career Planning: yes

Bizmerlin

Goals: yes
Mobile App: yes
Analytics: yes
Career Planning: yes

Suppose the company decides to create a long-term performance plan for the employees and the team. In that case, a performance management solution can keep the data centralized and ensure managers don’t miss out on crucial points.

Performance Management Features

Coaching Management – Managers use coaching management software to coordinate their reports’ priorities, create career plans, monitor training and evaluations, store contact, and input each of their reports.
Performance Assessment – Companies use a performance assessment module to store, assess, and monitor how employee performance improves over time.
Goal-setting, Alignment & Management – Managers and individuals write goals and monitor their progress toward their target in a centralized and consistent manner.
Feedback Management – Tools for managing feedback gather and coordinate reviews based on objectives or success measurements.
Competency Management & Skill Assessment – They keep track of certifications, skills assessments, and permits to ensure that the organization complies with local and state regulations.
Development Planning – A robust performance management software includes tools that support HR teams and managers in planning long-term career moves for employees.
Performance & Productivity Analytics – Analytics tools assist businesses in aggregating performance indicators and efficiency KPIs to plan the next steps and measure the progress of current initiatives.
Performance-based Compensation – Companies base bonus and commission rates on individual performance toward goals accomplishments.
Talent Profiles – Without sifting through reams of performance records, talent profiles provide a comprehensive view of an individual’s strengths and abilities.
Multi-rating Feature – This feature helps set the stage for various viewpoints on an individual’s success. They provide feedback from peers and members of other teams on performance and give reviews about capabilities.
Mobile-friendly Version – It allows managers and workers to complete performance tasks outside of the workplace.
Reporting & Analytics – This feature generates reports and analytics that provide information about the tool’s effectiveness, employee success, and company development.

On a Final Note 

Today’s top workplaces are more open, engaging, and employee-focused than ever before. Companies evolved past old-school approaches to employee performance reviews, and for a good reason. When the coronavirus threat became apparent last year, feedback became much more difficult for companies across the country.

In 2022, there’s no doubt that companies have to adjust their typical methods when it comes to hiring talented employees so they can stay viable in this increasingly competitive and volatile market.

Therefore, a performance management system’s ultimate goal is to retain talented employees by enabling their growth.

Performance management means supporting employees continuously, not only through annual performance reviews. It must be a day-to-day activity. Continuous mutual collaboration and understanding can give workers a sense of appreciation and belonging.

Written by Shortlister Editorial Team

Performance Management Software

Browse our curated list of vendors to find the best solution for your needs.

Stay Informed

Subscribe to our newsletter for the latest trends, expert tips, and workplace insights!

Performance Management: 2024 Comprehensive Guide

In This Post:

What is Performance Management?

The 4 Stages of Performance Management

Plan