How To Develop a Performance Management Framework: Your All-In-One Guide
Organizations see 30% higher revenue growth on average from effective performance management. Yet most leaders don’t trust their companies’ systems. What’s holding them back and how can you build an effective performance management framework?
Most organizations have a performance management framework in place, yet 80% have redesigned it in the past four years. Research from Gartner has also found that 59% of employees find traditional performance review systems ineffective.
It’s evident that organizations (and HR) are looking for more modern ways to manage performance. This article discusses the elements of a successful performance management framework and how to develop an effective one for your organization.
Contents
What is performance management?
What is a performance management framework?
6 steps to develop an effective performance management framework
Performance management frameworks: 5 real-life examples
What is performance management?
Performance management is a strategic, continual process between managers, employees, and HR. It involves communicating expectations and responsibilities, performance reviews, goal-setting, and development strategy implementation.
The aim of performance management is to help align individual employee goals with organizational objectives, set them up for success, and create a work environment that encourages everyone to fulfill their potential.
The 5 elements of performance management
There are five main elements of effective performance management:
- Goal setting: Together with employees, managers set and track SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals aligned with the company’s broader vision. These goals typically relate to work performance and career development.
- Continuous feedback: Managers and employees meet regularly throughout the year to discuss performance and goals. This frequent, real-time feedback helps build trust, pinpoint problems before they snowball, and foster a culture of growth.
- Performance monitoring: HR and managers monitor employee performance based on their goals by tracking key metrics and KPIs and regularly providing constructive feedback.
- Development and training: Depending on managers’ suggestions, HR may offer refresher courses or performance coaching to underperforming employees. Top performers, on the other hand, may be assigned extra projects to maximize their potential.
- Recognition and rewards: The organization rates employee performance through regular reviews or appraisals. Continual underperformance can lead to dismissal, while outstanding performance can result in a bonus or promotion.
What is a performance management framework?
A performance management framework (also known as a performance management system) is a structured approach HR and team leaders use to monitor and improve employee performance.
It defines how a company operationalizes performance management by looking at its performance management strategy, processes like cadence and rating scale, and systems and technology. It also defines the roles and responsibilities of various role players within the process.
A solid framework for performance management clarifies how performance management drives and supports organizational performance and ensures clear alignment between different role players. This means performance management is less about ratings but a structured approach to continuously drive business performance.
5 types of performance management frameworks
There are a few types of performance management frameworks, some of which are more modern and different from the traditional methods you may be familiar with. These include:
- Conventional performance management method: This traditional approach relies on annual or semi-annual performance reviews. Managers assess each employee using a rating scale and deliver feedback in formal meetings.
- Mission-based OKR method: This method focuses on aligning individual and team objectives with the organization’s broader mission and enables regular reviews and adjustments to ensure continuous alignment.
- Client-colleague-manager feedback method: Based on the client’s perspective of work impact, this method is suitable for high-touch client environments, with a clear cadence of interactions.
- Continuous dialogue method: Based on continuous performance discussions of key questions and criteria linked to internal impact, this approach is useful for diverse work types and can apply to various teams or clients.
- Retro reflection method: This method involves continuous feedback and can be used for assignment and project-based work within set rhythms and parameters.
Why a good performance management framework is important
One main benefit of an effective performance management framework is strategic alignment support, as its linking of employee performance to company objectives leads to better alignment of individual and organizational goals.
It also has clearly defined components to give managers and employees a specific process to follow, aid HR with implementation, and provide employees with clear, specific outlines of their job expectations and how to meet them. Employees can then clearly see how they contribute to the business performance in tangible ways.
Additionally, every employee has a clear career path and access to the training they need to progress, with career development and organizational needs aligned closely.
Finally, an effective performance management system involves more regular feedback, periodic reviews, and better alignment with business outcomes. This creates a fairer, more objective performance evaluation process for all employees.
An ineffective performance management framework can lead to inconsistent performance evaluations, biased feedback, and a lack of transparency. This can lead to decreased employee engagement, motivation, productivity, and retention.
Without a solid framework in place, you’re likely to see a misalignment between employee and organizational goals as expectations haven’t been clearly communicated.
Learn how to implement a performance management framework
Knowing how to develop and implement a solid performance management system is crucial. But do you have the necessary skills and knowledge to do so?
In AIHR’s Digital HR 2.0 Certificate Program, you will learn how to leverage technology to streamline and effectively implement your company’s performance management framework.
This online, self-paced Certificate Program will also teach you how to use the right tools to minimize errors in your performance management system.
6 steps to develop an effective performance management framework
Developing a performance management framework that benefits everyone in your organization doesn’t have to be difficult. Here are some simple steps to follow to ensure success:
Step 1: Assess organizational needs and goals
The first step is to understand what your organization wants to achieve, as well as its unique challenges and priorities. Then assess its existing performance management practices, their effectiveness, and areas for improvement.
You should also consider organizational values and culture, as performance management has a direct impact on these factors. As such, it should closely align with company culture and values.
Set targeted, easily trackable SMART goals to measure the progress of your strategy and workforce. Next, use resource optimization to help identify the necessary resources, skills, and competencies to achieve organizational goals.
Also, identify the workforce’s current skills, knowledge, and abilities to understand the type of employee development needed to support their growth and meet the company’s needs. At the same time, remember to pinpoint potential gaps or risks that could significantly impact the company.
Step 2: Clarify roles and responsibilities
Key stakeholders include employees and managers across different departments and on different levels. Instead of dictating the goals employees should achieve, invite them to set their own goals and plan how to achieve them.
Also, instead of creating a performance review document and sending it to managers, give them the freedom to create a document in a format that works for them. This will help them include relevant, useful questions to measure their team’s performance.
While not all stakeholders will be involved in creating the performance management framework, they all play a part in its operationalization. Your role is to co-create a framework fit for the business’ purposes. The process should enable line managers to take accountability for managing employee performance and employees to take ownership of their own development.
Maintain constant communications among HR, managers, and employees so you can collaborate to create a performance management framework. This will give everyone more ownership over the process, which can help boost engagement and motivation.
Step 3: Design the framework components
Begin with the framework’s overall strategy and objectives, then decide on KPIs to help you measure each objective. Additionally, define the process, which includes how objectives are defined and cascaded, the cadence for measurement (when and how to measure performance), and a rating scale.
Next, develop the training and development programs you’ve planned and start to implement them according to a specific schedule. Plan frequent touchpoints in addition to an annual review of the process so HR, managers, and employees can build a stronger relationship.
This also gives employees the chance to share their opinions, what’s going well, and where they need more support. These check-ins don’t need to involve paperwork — they can simply be a “chat” that is scheduled every fortnight or month.
Plan your recognition and rewards process — how will the company reward top performers for their contributions? Knowing what your employees value will help you decide this. Fix a date to roll out your new performance management framework, and notify everyone well ahead of time.
Step 4: Implement technology solutions
Use a centralized platform to send automated reminders ahead of meetings and store all important documents in a secure location backed up by a cloud. This will also help you keep track of every employee so you’re aware of their progress and needs.
Choose a platform that integrates well with your existing HR systems and allows for customization to give you more flexibility. Once you’ve selected the platform, focus on proper implementation and training to ensure all users understand how to use the new system.
Additionally, create a support system to offer ongoing assistance, and continuously evaluate and refine it after implementation. Regularly gather feedback from users to identify areas for improvement and ensure the system is serving its purpose well.
Step 5: Train and support managers
The final step in developing an effective performance management framework is to train managers to facilitate it, build trust with employees, and help them meet their goals. Provide assistance or added support to all parties to ensure employees have the resources they need to maximize their potential and that managers are well-equipped to handle underperformance.
Step 6: Pilot and refine the framework
The next step is to pilot your framework. Be open to feedback so you can understand the impact of your performance management framework, what’s working, and what to improve.
This feedback can also shed light on why some employees may be underperforming or why certain team members consistently meet their goals while others don’t. Don’t just collect feedback — use it to improve your framework over time.
Performance management frameworks: 5 real-life examples
Check out these real-life performance management framework examples that companies have successfully implemented.
1. Adobe
In 2012, Adobe replaced its annual performance reviews with check-ins — less structured, ongoing conversations between managers and employees to discuss performance and career growth. As the company has adopted a hybrid work model, these check-ins are now digital.
A web-based dashboard allows all employees to manage the details of their performance and development, such as setting goals and tracking progress. They also have access to real-time feedback from colleagues and managers and can explore new roles at Adobe depending on the career path they wish to pursue.
2. Deloitte
Deloitte’s new approach includes quarterly or per-project performance snapshots, in addition to weekly check-ins with managers to ensure employees meet their goals.
Compared to traditional performance reviews, this approach is quicker and more efficient, provides more data points on employee performance, and fosters more accurate, real-time feedback.
3. General Electric
In 2016, GE shifted from an annual performance review to an app called PD@GE that enabled employees and managers to exchange performance-related notes and documents.
This has created continuous dialogue and shared accountability. Managers and employees still have yearly summary conversations. However, these are part of the ongoing dialogue rather than the sole basis of compensation, promotion, and development decisions.
4. Google
Google adopted OKRs back in 1999 as a way to set quarterly and annual goals. Google has noted that these goals should stretch employees and bring them out of their comfort zone, which is why it never expects 100% achievement rates.
Under this system, employees can divide goals into measurable key results they can consistently track. OKRs are publicly visible to all employees, and Google tracks all individual contributions to its success.
5. Netflix
Netflix removed annual performance reviews and opted for a 360-degree review process where employees regularly and informally review one another. While reviewers were initially anonymous, the company recently implemented signed feedback for full transparency.
It also encourages managers to use the “keeper test” — essentially, they must consider if they would fight to keep an employee. If they would, that employee is a “keeper”. Otherwise, Netflix encourages managers to let them go so it can continue building a team that is aligned with its values.
HR tip
Combine 360-degree feedback with more traditional performance management methods, such as annual appraisals. This helps employees to receive the feedback they need to succeed at work.
To sum up
A robust performance management framework can drive both employee growth and organizational success by aligning employee goals closely with company objectives. It also ensures clear expectations, continuous feedback, and career development.
By integrating technology, involving key stakeholders, and focusing on continuous refinement, you can create a framework that not only boosts employee engagement and productivity but also enhances transparency and fairness in performance evaluations.
Ultimately, your framework’s success depends on its adaptability and the support it provides to managers and employees. A move away from traditional, rigid performance reviews towards more dynamic, ongoing feedback processes can enhance employee satisfaction and performance.
Finally, continually gather and act on feedback to keep your performance management system effective, relevant, and aligned with evolving individual and organizational goals.
Learn more
Related articles
Are you ready for the future of HR?
Learn modern and relevant HR skills, online
