How to Design a Performance Management System

by Pamela Fay; Updated September 26, 2017
...

A good performance management system improves a company’s overall profitability. Performance management systems help establish employee expectations around specific roles, outline resources available to them, and provide the structure for employee appraisals. The best systems are endorsed from top management and align with the needs of the business. Advanced planning can help you implement a performance management system effectively.

Step 1

Get employees involved in the early planning of a new system. The earlier they are included, the more they will buy in to the process. Plus, you will ensure that the metrics, expectations and incentives facilitated by the system make sense to the employees. Do not be afraid to staff the task force with your best opinion leaders, even one who has a negative opinion. These people can be the most effective advocates for the change once they become engaged. Provide a workshop for the task force, if needed, so that they understand the challenge.

Step 2

Ensure that the descriptions of job responsibilities are accurate and reflect the current business needs. Each description should include specific tasks, responsibilities, skills and expectations of the role. Include both internal, i.e. within the company, and external customer, expectations for the role. Job descriptions should clearly define the value that the role brings to department and to the company.

Step 3

Define standards that determine whether performance is above, at or below expectations. One way to do this is to have the task force create scenarios for each job. Each scenario will be comprised of various job processes. How does exemplary performance look for each scenario? What would be unacceptable? Metrics help ensure that the standard is measurable. There are objective metrics, such as numbers and time to completion. There will also be subjective metrics, like attitude or customer satisfaction. Enlist professional help, is necessary, to remove any bias from subjective metrics.

Step 4

Design the assessment tool. This task may be best handled by an external consultant who is experienced in the design of survey and psychometric instruments. Alternatively, a human resource professional may be able to provide assistance. It is critical that the wording encourage objective and honest appraisal based on the goals of the position. Ideally, assessment items should reflect the voice of the customer or internal end user. What outcome would the customer want? Also include a review process. Test run a sample of the tool through actual end users and make improvements as needed.

Step 5

Train evaluators on how to deliver feedback and coach performance. Feedback is only effective if it is received. Managers can greatly increase chances of acceptance through thoughtful preparation and delivery of the message. Spend time prior to assessments to ensure that managers understand how to help employees through the feedback process.

Step 6

Encourage the behaviors you want by putting incentives in place. Employees do what they are rewarded to do. This need not mean a complete overhaul to the compensation system. Rewards can be as small as a public acknowledgment. However, rewards are an important way to reinforce good performance and keep standards high.

About the Author

Pamela Fay has been a business writer for more than 15 years, with work appearing in publications such as "Legal Times." She has also worked in the consulting arena since the 1990s, specializing in leadership development, human resources, change management and diversity. Fay holds an M.B.A. from Dartmouth College.

Photo Credits

  • glasses businesswoman 2 image by Brett Mulcahy from Fotolia.com