Why is performance management important to employees

Performance management system: controlling and motivating employees

The performance management system, as it was used in the past, has been criticized for several years in personnel management - it is too static, too selective, too backward-looking.

1. Difference between performance management and performance appraisal


Let's take a closer look at the different terms before we get to the Performance management standards and tools received:


  • When performing a performance and employee appraisal, the HR departments evaluate the development of their employees based on defined criteria.
  • On the other hand, performance management stands for a broader concept of performance management, in which the employee evaluation is inserted. Performance management is the German word for performance management.
  • The aim of both measures is the performance management of teams and employees.



2. Why is a performance management system important for an organization?


The performance is described on the basis of mostly objective goals, linked to an evaluation, and from this the degree of goal achievement or bonus is calculated. To do this, HR managers often use the normal distribution, the so-called bell curvewhat many companies to a so-called forced distribution leads, results distorted and employees incorrectly classified.


Therefore, more and more HR managers are calling for the decoupling of individual goals and variable remuneration than Part of performance management of a business. But why is it like that?


To do this, we have to look at several factors:


  • On the one hand, in these systems the performance and thus the remuneration are linked to the individual development of the employees. In individual cases, this means positioning yourself very well within the discussions in order to receive the highest possible bonus.
  • On the other hand, potentials have to be identified in order to advance one's own development.


This connects two congruent goals, whose informative value may be questioned. In addition, the type and goals of employee appraisals have changed significantly in recent years, as have the dynamics and volatility of the markets. A six-month cycle for employee and performance appraisals no longer corresponds to the reality of most companies. Markets move agile as we continue Measure performance in a rigid system.


A continuous adjustment and ad hoc control are gaining in importance. The continuous exchange as well regular, event-related employee appraisals are central components. Their importance is moving more and more into focus.


In addition, traditional performance management systems are often based on the elimination of weaknesses. However, it is much more difficult to reduce your weakness than to develop your strengths. Accordingly, many companies do not fully utilize the potential of their employees. However, many HR managers agree that it is better to focus on activating individual strengths.


In addition, many managers and employees often view performance management systems as a necessary evil rather than an opportunity. The challenge is therefore to design a process that meets the requirements of the company, but at the same time also takes into account the needs and resources of the employee groups.


Personnel managers are increasingly complaining that the company's internal systems are too rigid, procedural and time-consuming and that they do not reflect the needs of the business. So stay Performance management systems often fall short of their actual potential, even if these were comprehensively designed and set up in terms of content.


A key question should therefore always be whether the respective performance management covers the changed requirements resulting from the market, company organization and employee needs and whether the companies can thus enable efficient performance management of employees.


The performance, i.e. the performance of employees, is controlled by clearly formulated role expectations. If an employee does not know what requirements are placed on him and these are checked regularly, a review of the individual performance is not possible.


Therefore, the performance management system in an organization defines the requirements for each individual and enables the full potential of a company to be exploited.


The control of the overall performance is based on this - to be as objective as possible and the same for all employees. Because effective performance management should:


  • recognize so-called "high potentials" and "high performers",
  • Enable transparency of individual performance,
  • create a basis for a fair salary model
  • and can be used to define development prospects and career goals.


3. Goals in performance management


First of all, I would like to mention at this point that there is no ONE performance management system. A performance management system should always be specific to the requirements of the company and are therefore defined on a case-by-case basis.


Nevertheless, there are individual phases and aspects that I describe in this article and that can be used to help introduce a company's own performance management system.


The corresponding KPIs and target agreements are one of the most important performance management tools. Goals should be as specific as possible and regularly compared.


Target agreements can include:


  • Increase in employee motivation, satisfaction and loyalty
  • Standardized measurement and increase in employee performance
  • Definition of career and development opportunities
  • Identification of the service providers
  • Creation of a uniform and transparent salary system



4. Develop an effective performance management system


4.1. Determine the status quo quo


Personnel management evaluates which tools and instruments are already available in the company and which restrictions they may be subject to.


Questions HR professionals should ask themselves are:


  • Have we already worked with a system that can or should be used as a basis?
  • Who is controlling the topic? (HR, employees, executives, management)
  • How do top management and executives view the project?
  • What is their expectation of the goal?
  • What do we mean by employee motivation, employee development, feedback, leadership, etc.?
  • What resources do we have? (technical, time and budget)
  • Who are the participants? How do we distribute the tasks in the HR department?
  • What does performance mean for your company?
  • What culture and structure does your company have?



4.2. Create a project plan


Define the following points in a project plan, which you can use at the same time as a decision template or presentation for management:


  • Goal setting
  • Content (end product)
  • Timeframe
  • Costs as well as necessary resources
  • Responsibilities (who is responsible for what?)
  • Individual implementation steps
  • Open points to be clarified


Get all relevant stakeholder groups on board. Starting with the top management up to the respective executives. One of the most critical points in the Introduction of a performance management system is the conviction of the stakeholders who later become involved in the implementation and implementation phase as a driver or ambassador for the topic and thus make an enormous contribution to the acceptance and successful implementation of the system.


When defining the framework, ask yourself which levels the performance management process should consider and encompass.


If you look at the definition of performance = ability + willingness + being allowed, there are several Levels on which performance management should be implemented within a company.


Limiting performance management to the "employee - manager" level ignores other important control elements and sources of information. A performance management that is only based on the annual employee appraisal is no longer up to date.


The organization itself, but also the management, the executives and the individual employees are components of a comprehensive performance management system and assume different responsibilities. Feedback as well as the handling of the results and the will to continuously improve play an important role. For this reason, it is necessary to collect and evaluate feedback on various levels and at regular intervals.


5. Various performance management tools




Employee management

Company-wide survey of the entire organization, e.g. engagement surveys, eNPS as a regular pulse check

Employee - manager

“Classic” employee appraisals, goal setting interviews, regular 1: 1 meetings, check-ins

Employees - employees

Peer-to-Peer Reviews


Illustration: own illustration by Bea Pönisch

6. Develop performance reviews


Based on the respective instruments that you have decided on, the following processes must be defined in the next step:


  • the goals,
  • individual content,
  • the scope,
  • the measurement,
  • the implementation (e.g. tool-based),
  • processing the results.


This procedure is often introduced step by step in practice. This means that you start with the implementation of one instrument and add more later.


6.1 Definition of objectives


First you start with the Setting goals for your performance reviews. These should, for example, later serve as the basis for other HR-relevant issues such as salary, promotions, etc. or make the performance of each individual in the company visible and transparent.


6.2. Define the performance management cycle


In addition, a so-called performance management cycle should be defined:


  • How often do you want to offer a performance review per employee?
  • For which groups should the employee interview be set up?
  • Is the same content requested for all employee groups?
  • Are there any other additional instruments that are part of the Performance Management Cycle?


For example, one sees Performance Management Cycle out:


Illustration: own illustration by Bea Pönisch


6.3. The content of the performance review


Here you describe how you want to measure performance within your company. That can be due to


  • Competence measurements or the
  • Definition of quantitative as well as qualitative goals take place.


In this article, I will limit myself to the competence-based measurement, as this procedure is part of the definition of performance.


Competency-based requirement profiles serve as the basis. These can be specifically described for positions, functions or employee groups.


Important: It is essential to define the requirements against which performance is to be measured.


Options for defining competence-based requirement profiles:


  1. Analysis: Job descriptions, internal job descriptions, etc.
  2. Survey of stakeholders: on the basis of a predefined questionnaire or the method of critical events (what distinguishes a successful employee from a less successful one?)
  3. Definition of core competencies, derived from the company values ​​plus the corresponding professional competence per position or function


In addition, HR managers should also evaluate the overall performance and potential of the individual and ask about the performance of the respective manager. In addition, open questions about your own successes, goals or need for support can be added to the employee interview.


6.4. Determine the scope


How many competencies do you want to record? Is the number the same for all employee groups? In practice, many competencies are often described at once. As a result, these are often not clearly defined separately from one another. And as a result, the results can be skewed quite a bit. Implementation is also very time-consuming and can lead to acceptance difficulties or loss of quality.


6.5. Define competencies


In order to define competencies in human resource management, human resource managers need to describe behavioral indicators. Behavioral indicators or behavioral anchors reflect behavior in the corporate context. They show, so to speak, successful modes of action and progress and thus enable a certain degree of objectivity.


6.6. Measurement of competencies


Different scales can be used here. A distinction is made in the number: is this even or odd? Both scale formats have different advantages and disadvantages and are based on the objective and description. In addition, the number of stages must be determined. For example, do you want to work with a 3, 4 or 5 scale?


You can also find yourself working with Performance conversations have different definitions. You can define the review on the basis of expectations or describe it on the basis of levels - depending on whether a career path exists in the background or is to be developed at the same time. A common scale in the corporate context is the expectation scale (from 1 = dissatisfied to 3 = meets expectations to 5 = excellent).


The challenge when using such expectation scales is that many executives and employees often rate a scale of “fulfills expectations” as “good” and, so to speak, “depicts the middle”, even though a job fulfillment corresponds to 100% In practice, there is a shift and the employee is considered not good enough. As a result, the “right skewed” performance appraisal means that a differentiation of individual performance and a fair appraisal are distorted.


Important: If you work with expectations, you define them in advance in order to increase the objectivity of the results and to enable transparency of the results.


6.7. Definition of the feedback giver


In order to ensure objectivity, I recommend other sources of feedback, especially for employees who have interface functions (e.g. executives or product managers). The feedback givers can be supplemented by 180 ° or 270 ° procedures, e.g. by interviewing colleagues and employees.



7. Development of a performance management process


7.1. The assessment or review


The assessment is based on the skills defined in advance and usually consists of one Self and external evaluation. The comparison of self-perception and perception of others serves to improve understanding of the people being assessed and to reveal so-called blind spots (blind spots). Self-evaluation is a valuable tool for employees to reflect on their own performance and the degree of their skills and to derive the need for development, always based on the performance components defined by the company.


Specific examples from the work context are ideal for a corresponding assessment. By comparing the behavior shown with the indicators, a corresponding assessment can be made:


  • Which aspects are recognizable?
  • In which areas are there needs?


This procedure increases the objectivity and comparability of the evaluation and enables the employee to better reflect on his behavior and to be able to further develop it accordingly. For this reason, HR managers recommend documenting examples of behavior over the entire assessment period so that no information is lost. In addition, other colleagues or employees can be involved at any time in advance of the review. This commitment promotes additional knowledge about performance behavior or supports the respective superiors or HR departments.


Important: Feedback discussions should always be given as soon as possible in order to give employees the opportunity to work continuously on their behavior.


An unpleasant side effect are possible assessment errors. These can influence the assessment result and influence the objectivity. Training in this area is therefore useful in order to sensitize and train those who give feedback in performance discussions.


7.2. The definition of development measures


The Employee performance appraisal must include how the employee can improve in the future and achieve his development goals.


Questions that can help define further development measures:


  • What are the tasks / goals for the next period?
  • What ideas does the employee have with regard to his development?
  • What types of experiences, coaching and learning does the employee need in order to fulfill his wishes?
  • Which specific competencies and skills need attention?
  • What are the interests of the employee with regard to his / her development (subject-specific, additional tasks or responsibilities)?


Important: Development measures must be linked to goals or results (e.g. in relation to the goals of the company and the department, the requirements of the role or the development goal of the employee). Based on this, HR staff derive individual measures and reflect and, if necessary, adjust them in regular employee appraisals.


→ Example: The goal is to improve an employee's presentation skills. Suitable Performance management measures could be e.g. attending a training course or regular presentations within the company / meetings with regular feedback on the behavior shown.


HR professionals can use the 70-20-10 rule work:

  • 70 percent through difficult tasks and professional challenges (training on the job)
  • 20 percent through the professional environment and largely through the supervisor (learning through social interactions)
  • 10 percent through traditional training (attendance at external events, e.g. training


7.3. Evaluation of the results at company level


Since the results of the performance discussions are usually linked to decisions relevant to personnel management, an evaluation at company level is required.


Determine the following in advance:

  • What are the goals of the evaluation (e.g. identification of low and high performers)
  • Which criteria are necessary for the evaluation (e.g. the overall performance of the employee)?
  • Which decisions should be made? On what basis is this possible? Define rules for e.g. promotions (clear communication of the rules within the company)
  • Who are the people involved in this decision-making process?
  • How are the results reported back to the employees?


8. The communication - the roll-out


Make sure that all employees and managers are adequately informed about the content and the process in advance. Separate formats for employees and managers should be offered.


Suitable content can include:

  • Aim of the discussions, embedding in already existing systems
  • Get to know and be able to apply feedback methods
  • Describe the process and the content of the appraisal interview
  • Describe the assessment process, including addressing assessment errors, providing best practices
  • Dealing with critical cases / employees (e.g. passive or aggressive behavior)


9. Evaluation of the performance management system


Check at regular intervals whether you were able to achieve the goals defined in advance with your performance management, also using new scientific findings. This can be done through standardized surveys or employee interviews with those involved. If necessary, adjust your instruments according to the feedback.


Based on the challenges described, I am convinced that a system once defined is no longer sufficient. Instead, when working with a performance management system, we have to constantly question the status quo and adapt it to the needs of both the business and the employees.


10. Use of computerized HR software


Based on the size of your company, it is advisable to work with computerized tools and HR software such as Kenjo. Make sure to observe the existing compliance and data protection guidelines when making your selection. Create appropriate documents about the use of the system and ensure sufficient acceptance within your company.

About our guest author Bea Pönisch


After studying psychology, Bea has worked in various companies and functions in the field HR department worked. Among other things, she worked for CIMPA GmbH, a subsidiary of Airbus SAS and Volkswagen Coaching GmbH. She currently works as a Senior Learning & Development Manager at finleap connect GmbH. As part of her job, she is responsible for setting up the division and deals with all strategic issues relating to learning and development. She also works as a lecturer in human resource management at the Euro FH.