The Optimal Performance Management Best Practices for Happy People and Higher Profit

Learning the latest performance management best practices can be your secret weapon in hitting and exceeding your goals this year – and growing a motivated, tight-knit team.

But as in many other HR scenarios, there's no clear answer to what performance management practices will best suit you. 

How do you know which practices will be the most effective? How do you implement changes with employee buy-in? 

If you want to establish a performance management system that is efficient, fair, and effectively drives organizational and individual growth, this article on performance management best practices will bring you the clarity you're searching for. 

You'll leave with actionable tips and clarity on the way forward for your people and their needs.

A note before we dive in: Performance management is not to be confused with performance measurement. Look at our guide on performance management vs. performance measurement to understand the difference. 

In short, performance management is the more extensive process within which performance appraisals and feedback sharing happen. 

With that out of the way, let's look at the top 12 best practices for performance management! 

🧩 Find the right goal-setting framework that fits your organization

"I don't believe in luck or hard work without the so-called 'work smart'. It's not all about how you work hard but it's about how you manage your time, resources, mind to work together for a better output." Jayson Zabate, Senior Security Consultant.

Working smarter instead of harder definitely helps performance. The other part of the equation is to have goals to work towards.

Without solid goals, there's no performance management. The natural next question: how do I best set goals for my team?

We recommend starting with an established framework that has been proven to work before you get creative and tailor it to your team. 

When it comes to goal-setting frameworks, there's no one size fits all. Our tip is to review different frameworks and select one that aligns with your company culture. From there, train managers and staff on how to use that framework. 

Stick with the framework for a period to evaluate how well it works, but don't be afraid of changing frameworks down the road if the one you picked doesn't serve you or if there are significant organizational changes.

➡️ In doubt of where to start? SMART goal setting is a safe bet to begin with. This popular goal-setting framework has been used in various organizations and for personal development since the 1980s. 

Or if you want to shake things up a bit, go on the opposite end and get innovative with BHAG goals (big, hairy, audacious goals).

How do you link goals to performance? OKR performance management is a framework for setting, communicating, and tracking organizational goals and outcomes. It combines objectives (the more visionary aspect of goals) with results (the actual numbers) to ensure that every daily action is aligned with the overarching goals.

➡️ Get the rundown on how to set OKRs in our guide. 

👥 Engage in collaborative goal setting & adjustment to ensure goals align with organizational objectives 

Performance management shouldn't be done exclusively top-down. Employee engagement is the key to ensuring your teams are on board with the changes and motivated to implement them.

One way to increase employee engagement is to initiate goal-setting meetings where employees can contribute to defining their objectives. The likelihood of meeting the goals is higher when employees set them rather than the goals allocated by upper management. 

Employees who set their own goals also naturally care more and take accountability for achieving them. 

Another valuable tip: Consider running workshops where employees can share their views on what constitutes (high) performance. Performance is a broad concept; the first step to improving it is to have a consensus on what it means.

➡️ What gets documented gets done. Use a goal-setting meeting template to document agreed-upon goals and make them accessible. 

Just like going to the gym won't give you a six-pack overnight, goal setting is a competency that develops over time. It can be improved with regular practice. As a manager, it's clever to prioritize enhancing your goal-setting skills. Get started with our guide on setting goals for employees. 

An OKR software takes care of the administrative part of goal-setting. That way, you can focus on developing your understanding instead of sweating over documentation.

➡️ Look at our guide to help you choose the best OKR software for your organization.

🎯 Set clear expectations from the get-go to establish an understanding of each role's contribution

Maybe you used to have clearly defined roles, but the organization grew quickly, and with the new hires, no one really knew what to focus on. With many urgent tasks on your to-do list, defining role responsibilities keeps moving to the next week… and the next… 

This is not an optimal place to be in. Nothing slows an organization down like confusion. 

You can't expect your employees to prioritize if they aren't clear on their tasks and responsibilities. 

Here are our top tips to get back into clarity:

• Conduct job analysis to define roles clearly: A job analysis is the first step before communicating anything to your employees – you may be surprised at the untapped opportunities! 
• Develop and communicate job descriptions that outline expectations and responsibilities. Once these are communicated, you can expect your employees to have role clarity and perform in alignment with their role descriptions.

➡️ Unsure of how to accurately set expectations for employees? It requires intuition – too high expectations can discourage your team, while too low hurt performance. 

• Use competency models: A competency model covers the skills, behaviors, and knowledge required for each employee.

➡️ Check out our competency model examples to get inspired about what model to choose next.

• Communicate expectations from the onboarding process, and regularly check in if your new hires are clear on what they're expected to do during the 90-day onboarding process.

⚖️ Ensure appraisals are fair and accurate 

• Calibration: You're done with the last round of appraisals. But how do you ensure they reflect the truth and are an accurate tool in the performance management process? 

That's where calibration enters the picture. 

A performance review calibration is when reviewers gather to ensure they agree on the rating standards. 

Think about grades in school. 

Some teachers may think 75% of correct answers are enough for a grade A on a test, while others require 95%. 

Using the same standards for fair comparisons in employee feedback is essential.

Likewise, it's crucial to agree on the time frame. Perhaps someone on your team used to be an A-player but hasn't been delivering during the last 3 months. The rating would differ if you look at the previous 12 months vs. the last 3 months.

➡️ How do you put calibration into practice? Our guide will show you how to conduct a successful performance calibration meeting.

• Manager training: The best way to ensure everyone is on the same page regarding performance management is to host a manager training. 

➡️ Check out our performance review best practices to know what to include in the training.  

• Use data and analytics to support objective performance management decisions. It's a best practice to use numbers whenever possible to avoid bias.

Using data for evaluating soft skills, like communication or collaboration, can be challenging. But when it comes to sales performance, for example, it's better to look at KPIs like the number of conversions during a period to stay objective. 

Otherwise, it's easy to be swayed by someone's enthusiasm or the personal relationship between the manager and the employee. 

The process of using data for performance review purposes is called people analytics.

• Invest in performance management software that provides analytics on employee performance. This growing field is known as data-driven HR, and it's the direction you need to go in to stay competitive. 

➡️ Check out our list of 11 performance management tools; maybe you're unaware of something that would be precisely what your organization needs to reach the next level! 

🧑‍🎓 Provide ongoing training on performance management processes to keep everyone competent 

• The only thing consistent is change – that's also true for performance management. To stay on top of the game, we recommend developing an ongoing training schedule for performance management skills for the leaders within your organization.

Ideally, the training should include how to deal with challenging situations, such as managing underperforming employees.

➡️ Exchanging feedback is equal parts art and science. Prepare for your next performance appraisal with our article on giving and receiving feedback training. 

• It's helpful to explain the performance management process to your employees to involve your team more and boost each member's motivation. Zavvy lets you create interactive training journeys so your employees can better understand the performance management process.

➡️ Managers who are great coaches can optimize the performance of their team members. Dive into our guide on conducting effective coaching skills training, including the 11 key skills of an effective coaching manager. 

➡️ Another critical skill to master for managers is compensation conversations. Check out our guide on compensation training for managers to learn more.

🔁 Adopt a continuous approach to monitoring and discussing performance 

Gone are the days when you could postpone performance check-ins for later or stick to annual reviews. The companies that win in today's fast-paced market schedule regular check-ins between employees and managers. This contributes to faster feedback and course corrections.

With continuous monitoring and performance discussions, your team becomes skilled sailors quickly adapting to the changing winds. With the old-school annual appraisals, you're a giant ship taking time and effort to turn with the tides, thus losing the race to your sailor competitors.

➡️ Explore our guide on how to conduct successful performance check-ins.

➡️ Learn how Adobe nails this format in our case study on employee performance reviews at Adobe. 

💬 Share regular performance feedback in formal and informal settings 

The word "feedback" can give even a senior employee a tight knot in the stomach. Nervous people can get defensive and fail to take the necessary actions to improve. That's why companies turn to more informal forms of feedback. 

One famous example is Spotify, where team members have weekly coffee chats with their managers to discuss performance. For on-site employees, these chats happen over a cup of coffee in the restaurant. 

The setting makes them feel less like a court trial and more like catching up with a friend, making people more prone to take constructive criticism without feeling attacked.

Undoubtedly, ongoing feedback requires more logistics. That's why we recommend using a performance management tool that facilitates continuous feedback. 

When you automate employee feedback, you make a smart move that saves you hours – and thus dollars – every month. 

➡️ Wonder how to choose the perfect performance management system software for your needs? Our guide will help you find the answer. Read it through, and bring it to your next management meeting to amp up your performance management process! 

➡️ Need inspiration on how to give feedback? Read through our 45 performance feedback examples list to inspire you to give better feedback.

And when it comes to feedback for your leaders, check out our complete guide with 145 tips for leadership performance review phrases.

🌱 Emphasize employee growth and development 

• Another best practice is to focus on what's good and do more of that. Rather than ruminating about what went wrong, put the spotlight on employee growth and development during appraisals. A performance development review can be a goldmine for growth when framed correctly. 

The very same critique will be received differently depending on your wording! 

• Conduct recurring development conversations. Employees discuss their dreams and aspirations with their manager in a development conversation. 

➡️ Steal our best development conversation questions to ace your next employee convos. 

➡️ Help your employees set development goals – it may not always be obvious how to pick the right goals! 

• Allocate training budgets and resources for employee training and upskilling. To motivate your people a little extra, ask them what they would want training in and accommodate it to the extent possible.

➡️ Learn how Amazon offers a world-class collection of upskilling possibilities to their people in our case study on employee development at Amazon.

🏅 Acknowledge and celebrate achievements to boost morale and motivation 

Everyone appreciates acknowledgment – yet it's so easy to forget about. But it's not just about making your people feel validated – it's also a budget question. 

Employees who feel valued stay at their workplace longer, leading to higher employee retention and lower hiring costs. 

To make acknowledgment a habit, even during busy periods, create an automated recognition program for peer-to-peer and managerial recognition. Regularly celebrate achievements in team meetings. It doesn't have to take long, and it really pays off! 

➡️ Learn how Zappos implemented peer recognition in our case study on employee performance reviews at Zappos. 

➡️ Do you feel a bit brain-foggy about how to celebrate your employees? Check out our guide with 42 meaningful employee recognition ideas.

🚩 Promptly address any issues of underperformance to prevent them from escalating

• Underperformance is a serious issue that needs to be dealt with promptly. To avoid being caught off-guard and ensure it's handled promptly, develop a clear policy for managing underperformance. 
• Taking a tough conversation with your employee is just the first step. The next step is to create an action plan to get them back on track. A best practice is to train managers to develop performance improvement plans so everyone is prepared if and when it happens.

🗣️ Cultivate an environment encouraging open communication about performance year-round 

• Implement regular town hall meetings for company-wide updates. The more transparency you offer, the more your people will feel involved in the process and dedicated to contributing to performance improvement. 
• Hold workshops to foster communication skills among employees and managers. Companies that invest in communication win. The lower the barriers to being honest and transparent with each other, the better your team will perform.
• Invest in meeting software with the right features to facilitate remote employees' participation in performance conversations. We recommend looking for software with note-taking and other interactive features, such as being able to assign action items directly on the call. 

💡 Embrace the future of performance management: AI and personalization

If you want to embrace the future of performance management now, our top suggestions are to look at AI and personalization. 

AI performance management removes the headache of trying to connect the dots yourself. The AI delivers all the data so you can make more sophisticated decisions about employee performance.

➡️ Stay ahead with the latest performance management trends in our guide. We share the 9 hottest trends to look out for!

➡️ Elevate performance management to new heights with Zavvy

There you go – we've shared our top picks for performance management best practices, selected by our expert team that stays up to date with the latest trends. So, where do you go from here?

Zavvy is an all-in-one employee enablement platform. Many of our features are designed to facilitate performance management:

• 🎯 Check out our goal management software to ensure everyone in your team is on the same page and that performance is at the forefront of your daily activities. 
• 📊 Use our performance review software to save hours and heavy admin work coordinating your appraisals. 
• 🔁 Create a seamless 360 feedback process with our 360 feedback software. 
• 💬 Host your most organized individual meetings yet with our one-on-one meeting software. 
• 📈 Employ our performance development software to move from performance reviews as obligations to goldmines of information.

Performance management and learning go hand in hand. Many times, underperforming can be solved by educating your employees. 

The easiest way to implement learning into performance management is to integrate your learning software with your performance management system. That way, the system selects the appropriate resources for each employee and their performance improvement needs.

📚 With our learning experience platform, you get hundreds of cherry-picked resources so your team members can learn from the top online educators. 

📅 Schedule your demo today to see how Zavvy can facilitate your performance management! 

❓ FAQs

→ What are the 5 criteria for effective performance management? 

Effective performance management needs to include strategic consistency, validity, reliability, acceptability, and specificity. 

→ What are the 3 P's of performance management? 

Purpose, people, and process.

→ What are the 4 major processes of performance management? 

Plan, do, check, and act.

→ What are the 5 C's of performance management?

Clarity, context, consistency, courage, and commitment. 

→ What role does employee feedback play in performance management? 

Employee feedback is the backbone of performance management. To gain clarity on what actions to take in the present moment, your people need support from the past and the future: the past in terms of feedback and the future in the form of what goals to aim for.

Recently, a controversial stance that has won support is that employee feedback works best when requested. When people are delivered unsolicited constructive feedback, they can get stressed and thus focus on defending themselves over listening and taking the feedback to heart.