How to Build a Performance Management Strategy: 4 Steps to Get Started

Building a performance management strategy is essential for any organization looking to maximize its potential. Not only does it help identify areas for improvement, but it also enables you to motivate and reward your employees for their hard work.

But where do you start? With so many different approaches to performance management, it can be overwhelming to know where to begin.

Never fear: Below are four key performance management objectives that can help you manage employee performance and get you started on the path to success.

1. Define What Success Looks Like

We’ve all heard the wise advice about not putting the cart before the horse. You can apply this saying to just about anything…even managing employee performance. In this case, you must first define what success looks like in order to lead a high-performing team in the future.

But there’s unfortunate news for those who love a good checklist (guilty as charged). Defining what success looks like isn’t a one-and-done activity. Instead, it needs habitual reevaluation to make sure your objectives align to company goals and that your people are feeling successful – no matter the current economic state or organizational status.

To help ensure your teams are engaged and motivated, make sure you’re:

• Taking into account your people’s talents, skills gaps, and bandwidths when creating performance management objectives.
• Using data from previous performance management cycles. By looking at performance ratings and areas of improvement, you can then devise goals that will help their team reach its maximum potential.
• Creating actionable steps and building on current performance to ensure that everyone involved is getting the most out of their efforts.
• Communicating your definition of success to teammates and executives.
• Staying up-to-date with data and making sure goals are being achieved to get the most out of performance management objectives.
• Providing clear expectations for employees, allowing for transparency between supervisors and employees, and recognizing achievements or successes in a timely manner.

2. Understand Employee Capacity

To set realistic goals for your performance management, you need to consider employee capacity, or how much time a person has to devote to specific projects.

The truth is that 82% of employees say they’re overworked, but they often don’t know how to inform their manager of the problem. Team leaders can also suffer from burnout, especially when their span of control becomes unmanageable or they’re carrying the emotional weight of their direct reports.

On the other hand, employees can also be underworked, leading to lower employee engagement – a concept known as “boreout.” Therefore, staying aware of employee capacity is essential to keeping team members happy, engaged, and productive, as well as ensuring that the company operates smoothly.

One People Ops leader who’s passionate about employee capacity is Anthony Rossi, Proposal Manager at Talkdesk. He developed his leadership style from reading case studies and research, one of which found that the average person can put in four hours of focused work a day.

He explains his team’s process when it comes to this four-hour mindset: “We have projects, deliverables, and proposals. We will rate their complexity on a scale from one to ten. Ones on average take two and a half hours to complete, nines might take 50 hours to complete. Using the due date, we find the average hourly burden – and the idea is that you keep everyone’s average hourly burden below four hours.”

He’s also found that this process instills collaboration and trust among team members, as colleagues with more work capacity may jump in to help move the project closer to the finish line if someone is overworked or overwhelmed. He says, “Pouring more hours into work isn’t going to solve problems. I want to get the most out of my people, and doing capacity planning makes sure they’re doing less – but more focused – work overall.”

3. Improve Feedback Conversations

Effective managers don’t just give feedback – they welcome it. Specifically, they view feedback as a chance for two-way communication instead of just providing one-sided assessments.

The good news is that employees actually want these conversations; in fact, 89% of people believe that effective communication in the workplace is extremely important. The bad news? The same study found that 80% of people rate their organization’s communication as either average or poor. Yikes.

One glaring issue is that many organizations still hold annual performance reviews, which are usually unhelpful for both employees and employers alike. Studies show that 77% of People leaders believe performance reviews aren’t an accurate measure of employee performance due to the lack of routine feedback throughout the year.

Therefore, to truly provide effective feedback, your conversations need to be continuous and contextual – in other words, your conversations should happen regularly and include qualitative and quantitative data.

Particularly, regular 1:1 meetings provide a chance for employees to share how they're meeting their goals and discuss their work environment. There’s numerous benefits to implementing continuous conversations, including:

• Helping employees understand where they stand in relation to their performance objectives.
• Identifying areas for improvement in their current performance.
• Building a culture of trust and encouraging honesty between managers and employees.
• Gaining a sense of individual employee happiness, motivation, and engagement.
• Creating opportunities to celebrate success and discuss potential obstacles, both of which are essential in managing performance objectives.

Note: To further encourage a psychologically-safe culture, work on building relationships that welcome open dialogue so that everyone feels comfortable voicing any concerns they have about current performance objectives.

Using standardized templates helps create a consistent check-in experience across your organization and allows for employees to add agenda items.

4. Collect Data and Measure Progress

The previous three steps help you build a performance management strategy, but to know that it’s working, you must collect data and measure progress over time.

The preferred way to do so is with a people operations platform with analytics capabilities. With such a platform, you’ll have access to performance metrics that set benchmarks, track individual performance (which helps you provide targeted feedback or additional guidance when needed), and create scenarios for future headcount plans.

For example, when software company Truework set out to improve their performance management cycle, they prioritized bringing in data from various sources to make informed decisions. Ultimately, they chose to invest in a people operations platform to quickly visualize their people data. Former VP of People Devin Blase explains: “To be nimble with data, answer questions quickly, and implement changes easily, you need technology. Having platforms that can help uncover data that’s not naturally illuminated in spreadsheets allows for more data-driven decisions and faster insights.”

While there’s a lot of HR metrics to collect and track, the following three will give you a glimpse into how people feel about their role and responsibilities within the organization:

• Engagement scores: Understanding employee engagement levels can help you identify areas where employees need more support or resources. Engagement is a huge driver of success: Engaged employees are 22% more productive, 22% more profitable, and have 41% lower absenteeism. They’re also twice as likely to be top performers.
• Requested time off: It’s important that people take PTO, and leaders agree: 78% say taking vacation improves employee focus and reduces burnout. However, when people are calling in sick time and time again, you may have an engagement or morale issue on your hands that you’ll want to address.
• Attrition rates: This metric is a good measure of how successful your organization is at retaining employees. With a people operations platform, you can look at turnover rates by department and even by manager to determine any trends.

Using these metrics helps you get an in-depth understanding of your team's performance and objectives, allowing you to take action to improve your performance management strategies.

The right platform allows you to slice and dice your data to help visualize areas of strength and room for improvement.

The Transformation of Adobe’s Performance Management Cycle

While discussing performance management strategy is helpful, it’s even more beneficial to read a real-life example. We bring you the story of the software company Adobe.

In 2012, Adobe made international headlines for what it stopped doing: annual performance reviews.

Donna Morris, Adobe’s former Senior VP of HR and Employee Experience, and her team deemed annual reviews “time consuming” and “negative.” Now, Adobe engages in continuous performance management, and the move has paid off at the employee, manager, and organizational level.

The HR team encouraged managers to regularly check in with employees – specifically, at least quarterly, but teams could conduct them more often. Because discussion topics usually revolved around project progress, goal setting, and opportunities, managers gained a strong sense of their team’s current performance and effectively planned for the future. Employees felt supported as they hit their goals.

The result? Adobe saw a 30% reduction of employee turnover.

Improve Your Performance Objectives for a Stronger Team

Productivity and profitability are certainly important, but your organization's most valuable asset is its people. Therefore, keep a people-first approach when building your performance objectives so you can establish a system and goals that work for both you and your employees.

Managers have the added responsibility of getting new hires on the right path to success. Do you have a 30-60-90 day plan in place? Read outs for performance objectives for your new teammates and set a positive tone for future communication.