12 Criteria for Effective Performance Management System which Guarantees Success

In this article I will tell you about the 12 criteria for effective Performance management system, which together ensures that we get an exceptionally successful Performance Management System.

Let us start –

  1. Linking Organizational Goals with Employee’s Performance

The purpose of employees’ performance is to ensure achievement of organizational goals. The Performance management System (PMS) must focus on linking the performance & competencies of employees with the organizational goals.

The organizational goals should be divided and cascaded down to the different Departments and functions. The performance of employees should then be linked to the goals of the departments/functions.

  1. SMART Goal Setting or KPI Setting (Key Performance Standards)

Setting of SMART Performance goals / KPIs is another criteria for effective performance management system.

The performance goals gives clear understanding of deliverables to the employees. You must ensure that the performance goals are SMART – Specific, Measurable, Attainable, Relevant and Time-bound.

Specific – Expectations should be very clearly and specifically defined. The performance goal should help to clarify things like – What needs to be done?  What should be the outcome?

Measurable – We should be able to measure the actual achievement of performance goal. Some examples of measurable goals are –

100 units of the product to be sold every month.

Sales to be increased by 30% for the year.

Attainable – Goals should be attainable or achievable. Non-achievable goals will demotivate the employees. If goals are achievable but employees have to stretch a little for the achievement, it will motivate the employees.

Always set achievable but stretch goals.

Relevant – Employees’ goals should be relevant to the business priorities. For eg. If the organization wants to focus on customer satisfaction and delighting the customer, some of the goals for employees can be – (i) Reduce customer complaints by 25% (ii) Increase customer satisfaction score by 10% (iii) Reduce quality issues by 80 %

  1. Discussion and Feedback

For an Effective Performance Management, it is needed that the employee is provided feedback about the work he/she has been doing.

Is the work being done well ? What improvements are expected ? What are the areas in which the employee is good ? …. Every employee wants to know the answers to these questions…

The discussion between employee and the manager is needed so that any performance issues can be discussed and necessary actions can be taken to resolve it.

  1. Ongoing process

PMS is not a one-time process or an year-end process. It is an ongoing process.

For effective performance management, there should be ongoing feedback, guidance, coaching, training, reviews.

Ongoing Performance management keeps the employees on track of high performance.

  1. Objective evaluation

 The appraisal or evaluation of the employee’s performance must be done based on data and facts. There is no place of subjectivity, biases & emotions in a performance appraisal.

The employee should also be given the chance to showcase his actual achievement against the performance goals and evaluation should be based on actual achievements and supporting data.

  1. Reward the performance

Compensation & career advancement related decisions should be done on the basis of Performance appraisal.  Superior performance should be rewarded.

When you reward the superior performance, you reinforce the desired behaviour in the employee. At the same time you are also motivating other employees to deliver superior performance.

  1. Fairness & Transparency

The Performance Management System should be perceived as Fair by the employees. The organization has to ensure that there is required clarity and transparency about the entire Performance Management Process.

Employees should perceive that the elements of performance management are designed well and function fairly. Managers should be trained so that they become better arbiters of day-to-day fairness.

  1. Help to improve the performance

 Performance management system is not about only measuring performance but it focuses on continuous improvement of performance.

So this is an important success criteria for effective Performance management system that it provides mechanisms to identify the reasons of lower performance and opportunity to improve performance.

Ongoing Feedback, Discussion between employee and Manager are such steps of the PMS in which there is a wonderful opportunity to –  (i) identify reasons of low performance and take corrective actions (ii) Identify opportunities to improve performance and implement.

Moreover, the managers should always be ready to help the employees to guide them to improve their performance.

  1. Competency Evaluation

 If you have competency in something, you’re well-qualified to do it. A job typically requires a set of competencies. And the performance of the employee also depends on his/her proficiency in those competencies.

When you evaluate the competencies of the employees, you are able to identify what this employee can do well and what are the areas when he need to improve his competencies. Thus competency evaluation is an important part of Performance Management System.

  1. Focus on development of employees

 A good PMS always focuses on development of employees. By developing the employees, the organization can ensure that it always has the talent which is needed for success of future plans of the organization.

The PMS should provide a means for “Training Need identification” in which employees and their managers specifiy what training & development is required in each of the employee to improve performance and develop talent.

The organization should then focus on providing the necessary Training, Development workshops, coaching, changing projects to ensure development of employees.

  1. Training for employees and managers on PMS

There are a lot of aspects related to Performance Management System which employees are sometimes not aware of. The employees and Managers must be trained well on the PMS and its principles to ensure that we get the maximum leverage from the system.

  1. Support from top management

Last but not the least, the top management support is required to give the due priority and importance to the Performance Management System. The top management must clearly communicate the importance they give to the Peformance Management System, to the employees.

Once you take care of these criteria for effective performance management, you can be sure of hitting the bull’s eye. Fulfilling these criteria will make sure that you get the desired results from your Performance Management System.

We at HR Laptop can help you to implement a robust and effective PMS. Write to us to know more about our end to end service for implementation of Performance Management System.

Feel free to contact us about any other Human Resources related help you need from us.

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