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Talent Management

What Is Performance Management and Why is it Important for Businesses?

One Minute Takeaway

  • Performance Management is all about helping employees reach their potential
  • Best practices to achieve this include regular feedback and goal setting
  • For best results, businesses need a Talent Development strategy

Performance management has a bad reputation. For 74% of employees, performance reviews come once a year or less, and only 14% strongly agree these reviews inspire them to improve (Gallup). It’s no surprise 87% of HR leaders are considering changing how they review performance (Gartner).

Rather than something employees fear, performance management should be about inspiring your whole team to achieve their potential and produce results. Continuous development requires an ongoing conversation about performance, rather than infrequent and ineffective evaluations.

What is Performance Management?

Traditionally, performance management has been about looking back at an employee’s work over the previous year. Employees who haven’t met expectations might be placed on a performance improvement plan. If your only goal is to evaluate output, this way works. But if you actually plan to develop your talent, a year is a very long time.

Not all goals work on a 365-day cycle. When goal-setting isn’t linked to short-term results, you end up with unstructured aims which prove impossible to evaluate. Annual reviews also fall foul of recency bias, so an employee’s work in the first 9 months of the year may end up forgotten.

The Importance of Talent Development

Whether you’re dealing with superstar talent or a low-performer, finding ways for them to unlock their full potential should be a day-by-day process. What’s more, communication can’t be one-way. Managers need to work with their teams to set goals, and understand each individual’s challenges. The modern manager is as much of a coach as a disciplinarian.

This is especially true considering younger generations are more likely to be on the lookout for new job opportunities. If employees don’t feel they are developing, there’s a higher chance they’ll jump ship. If you want to keep your team engaged and producing results, you need to care about talent development.

When you give performance management the attention it deserves, you’ll be able to make the most of your investments into recruiting, onboarding and training. You’ll also be better placed to make the right decisions when it comes to succession planning and compensation strategy.

Performance Management Best Practices

To give your team the best chance of reaching their potential, incorporate these performance management best practices:

  • Regular Feedback
    If an employee can’t remember when they last received feedback, are you sure you’re giving them all the tools they need to improve? The majority of employees want more face-to-face feedback than they currently get. Whether you choose to implement weekly, monthly or quarterly reviews will depend on your industry. Don’t worry about finding time: when reviews are more regular, they can also be quicker, more targeted and require less preparation.
  • Setting Clear Goals
    It might not always feel like it, but people like having targets to aim for. Having goals to work toward isn’t just the basis of employee engagement, it’s a part of living a happy life. But these goals can’t be vague; instead, they should be SMART: Specific, Measurable, Attainable, Relevant and Time-bound.
  • Track Metrics
    Employee goals work best when paired with the accountability of actual business results. The Objectives and Key Results (OKR) methodology is designed to incorporate performance management with measurable job outcomes. This way, performance can be data-driven and assessed in real-time.
  • 360 Feedback
    Traditional performance management tends to be hierarchical, where employees only ever receive detailed feedback from their supervisor. This is an opportunity wasted—peers, teammates and those they supervise will also have insights. Taking a broader view of feedback allows for a better rounded picture of an employee’s strengths and weakness.

Using Performance Management Software

So, to recap, you want to create a culture of continuous feedback, with measurable goals incorporating real-time data. Doesn’t sound easy, does it? The good news is, performance management software can help. Paycor’s Talent Development makes this possible with:

  • Automated workflows so your people can focus on coaching, not unnecessary admin
  • Customized templates to help managers make the most out of 1:1s with direct reports
  • Feedback tools facilitating conversation between peers, teams and supervisors
  • Integrated goal-setting features designed to supercharge productivity
  • Easy access to historical feedback, boosting accountability and reducing bias

Paycor Creates HR Software for Leaders Who Want to Make a Difference

Our Human Capital Management (HCM) platform modernizes every aspect of people management, from the way you recruit, onboard and develop people, to the way you pay and retain them. But what really sets us apart is our focus on business leaders. For 30 years, we’ve been listening to and partnering with leaders, so we know what they need: HR technology that saves time, powerful analytics that provide actionable insights and dedicated support from HR experts. That’s why more than 40,000 businesses trust Paycor to help them solve problems and achieve their goals.