How does performance management work again?
Achani Samon and I spoke to dozens of African startup executives over the past few months, as we scouted for talent problems to help them solve. We decided to write about the themes we heard during these calls. We hope these articles would serve as refreshers or mini-guides that any manager or leader can share with a team member to help them get a high level understanding relatively quickly.
The goal of performance management is to enable individuals and teams to deliver work output and results at a level of quality and consistency that enables the organization to achieve its broader goals.
An effective performance management system, therefore, is focused on:
- Establishing what success looks like for the organization
- Creating clarity around expectations for employees and teams
- Providing career development feedback and coaching to employees
- Conducting work reviews with employees and teams
- Evaluating employee performance
- Establishing compelling rewards and penalties tied to performance
Establishing what success looks like for the organization
Every organization has a strategic focus, and each department or team has a set of objectives which drive the specific results that are expected, and the set of initiatives taken to achieve those results.
Effective performance management begins with ensuring the employee is able to understand and articulate the goals of the organization, the specific metrics that communicate success in achieving these goals, and initiatives which are the plan to achieve those goals and metrics.
One of the most widely used techniques for defining success is the Objectives & Key Results methodology (or OKRs), coupled with Initiatives.
Creating clarity around expectations for each employee
Once it’s clear what success looks like for the organization as a whole, this can then be translated into goals, metrics and initiatives for each functional or department lead, and then each employee. Ultimately, the desired outcome is for each employee to have clear expectations around their performance, connected to the company’s objectives.
At the employee level, this typically consists of defining:
- Individual objectives, key results and initiatives (or tasks)
- Expected competencies required for the level and role
- Behaviors and values that drive the company culture
Conducting periodic work reviews
Periodic work reviews are opportunities to review an employee’s (or team’s) work output and progress towards achieving objectives, key results and initiatives. Depending on the seniority of the employee and the nature of the work, these reviews can be every week, every other week or once a month.
Typically, work reviews can be:
- Informal reviews — which are usually scheduled ad-hoc to review or check-in on a particular initiative or project. For example, a Marketing Manager may schedule an ad-hoc meeting with the VP of Marketing to discuss some of the early results of a new marketing initiative. Or a Finance Manager may schedule an informal review of the initial budget with a Head of Finance
- Formal reviews — which are usually pre-planned structured meetings to review progress against the set of objectives, results and initiatives assigned to an employee or team. For example, the Marketing Manager could have a meeting in place every two weeks to review of all the marketing activities for the quarter
Providing ongoing feedback and coaching
Feedback and coaching sessions are an opportunity for a manager to help an employee get a better understanding of what they are doing well, areas they need to improve and how they can continue to level up in their competencies, behaviors and achievement of their objectives and key results.
Typically, feedback and coaching conversations can be:
- Informal sessions — which are more frequent and could be weekly for junior employees or monthly or quarterly for more senior employees. Informal feedback and coaching sessions can last anywhere from 15 minutes to give feedback on areas that can be improved quickly (e.g. someone who needs to improve the way they present information) to up to 60 minutes for issues that require more detailed feedback and coaching (e.g. someone who needs to be coached on how their communication demoralizes colleagues)
- Formal sessions — which are often known as performance reviews. They are less frequent and could be scheduled twice a year (e.g. mid-year and end of year) or once a year (e.g. end of the year or start of the following year). These sessions are usually a summarized view of the ongoing feedback given throughout the year, with broader themes extracted to help an employee get a view of where they are doing well, where they have improved, and where they need to continue improving
Feedback on strengths and areas of improvement, whether they are tied to work output, behaviors or skills and competencies should always be documented and made accessible to both employee and manager (e.g. using a performance management software like Lattice, Small Improvements, or BambooHR). This helps minimize any miscommunication or misunderstanding, and allows both the employee and manager to revisit the feedback in the future.
Evaluating employee performance (the review)
There are many different ways to arrive at a comprehensive view of employee performance by combining their achievement of individual objectives, demonstration of competencies and behavioral alignment to values.
Since there is no magic formula, the key is to be clear and transparent about the principles that guide how employee performance is evaluated and measured.
One approach is to assign relative weights to the various components of employee performance. While they can’t be precise, they give an idea of the importance of each component in the manager’s overall view of performance.
Four of the components that may feed into employee performance are:
- Achievement of Objectives & Key Results
- Achievement of Initiatives (or projects, tasks, etc)
- Demonstration of required competencies for their role and level
- Behaviors in alignment with company values and culture
The goal of evaluating employee performance is to provide each employee with a comprehensive view of their performance and as clear of an indication as possible that they are performing in line with expectations, performing below expectations, or exceeding expectations.
With great performance management, performance reviews should never be a surprise because the employee should have received all the feedback on an ongoing basis. The review is simply a formal write-up of the feedback, along with commentary of what has improved and what still needs to be improved, and what is going well, and the overarching summary of where they stand.
Establishing compelling rewards and penalties
A strong performance management system includes a clear framework for rewarding employees who are performing in line with (or above) expectations, and effective penalties for employees who are underperforming or behaving in ways that are not aligned to the values of the company.
Effective rewards include:
- Recognition
- Access to perks
- Performance bonuses
- Compensation increases
- Role changes (e.g. promotions, reassignment)
Effective penalties include:
- Reduced scope of work
- Role changes (e.g. demotions, reassignment)
- Missed bonuses
- Termination
Each organization can design the mix of rewards and penalties that are in line with its values and culture. The ultimate goals are to continue motivating employees to remain engaged and deliver value, to support struggling employees to level up and reach their full potential, and to guide employees who are consistently performing below expectations to find new roles or new companies where they can be more successful.