Setting Up a Performance Management System

Setting up a good performance management system doesn't happen overnight or by accident. You need to consider its design and carefully plan how it will work before managers begin using it to evaluate employees.

A performance management system should provide employees with these four basic benefits:

A clear understanding of job expectations Regular feedback about performance Advice and steps for improving performance Rewards for good performance

The goal of a performance management system is to help boost employee performance and, ultimately, the productivity of the business. For it to be effective, a performance management system should incorporate the following critical elements:

Updated Job Descriptions
Job descriptions should clearly describe the employee's current duties and performance expectations. Position descriptions should be specific, clearly defining the job function, required skills, deadlines and goals, and should delineate expectations for the employee's relations with peers and customers.

Keep job descriptions current, especially during times of organizational change. Rapid growth and downsizing inevitably add new responsibilities and shift employees' workloads.

Performance Measures and Standards
Once you have job descriptions in place, you need to establish performance standards that describe what constitutes below-average, average, and above-average performance. Start by thinking about the best- and worst-case scenarios until you reach realistic standards for measuring performance.

Next, determine how you're going to measure the expectations outlined in the job description. This requires both objective and subjective methods of assessment. In some situations it's easy to gauge performance by looking at the numbers: for example, how many new accounts an employee brought in or how many products an employee assembled.

Quantifying an employee's coping skills, customer service skills or attitude is much more difficult. Some managers also have biases or poor evaluation skills. Establish clear guidelines and measures that eliminate potential bias and prevent evaluators from subjectively determining what constitutes excellent and unacceptable behavior.

Evaluator Training
Research shows that managers with poor communication or interpersonal skills are often the downfall of a company's otherwise sound performance management program. All managers need training on how to communicate and how to conduct fair, nonjudgmental and consistent appraisals. An effective performance management system will administer training to managers before they conduct their first reviews.

Guidelines for Improvement
Institute basic policies to cope with employee weaknesses and poor performance. Decide if you'll provide training or mentoring for employees exhibiting subpar performance. Set guidelines that outline how long it should it take an employee to improve and what steps will be taken if the employee fails to show improvement.

Employee Input
Solicit and evaluate staff suggestions for your performance management program. Incorporate employee input into your program or system as needed.

Compensation and Rewards
When your employees perform well they should be compensated. Rewards keep morale high, generate loyalty and foster additional improvement. But closely linking pay hikes and promotions to performance appraisals is a contested issue. Critics say that too close a tie between performance evaluation and compensation may be punishing or unfair to employees who don't overachieve.

Regardless of how and when you choose to compensate your employees, an above-average appraisal deserves acknowledgment. Make sure you consistently reward employees for their hard work.

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