Fixing a Dysfunctional Performance Management System

The annual employee performance appraisal process continues to be fraught with serious challenges. I've highlighted what I see as the major problems with the performance management cycle here and elsewhere. However, the appraisal cycle is an important component of an effective performance management system.

It's easy enough to pick out what's not working. It's a much more difficult task to articulate what components are needed in a well-functioning system. Keeping that in mind, I would now like to take a positive approach and talk about what I see as the seven essential elements of an effective performance management system. See if you agree.

1. The goal-setting process aligns all individual goals with team and functional goals. It is a participative event, involving input and agreement from manager and employee.

2. Ongoing and regular communication is critical. The manager has meetings with the team and with each individual employee on a regular schedule. It might be once in 5 or 10 working days. The focus of the discussion is progress updates, with identification of constraints and solutions and future actions.

3. The employee performance appraisal cycle is in alignment with the goal-setting process.

4. The performance appraisal includes feedback from relevant stakeholders, which covers input on performance and behavior (the ‘what’ and the ‘how’). Typically, stakeholders would be customers and suppliers (internal and external), colleagues and managers.

5. Managers and employees are trained in goal-setting and the giving and receiving of feedback, in order to ensure constructive two-way conversations during goal-setting and performance appraisals.

6. Performance ratings are designed to reflect the quantitative and qualitative aspects of goal-attainment, rather than simple numerical scoring.

7. Performance is recognized and rewarded by an array of intrinsic and/or extrinsic rewards, rather than solely via the payment of a monetary award.

There are many highly effective performance management systems out there. I wonder what you would add to this list. What do you think of the factors I have highlighted here? I would appreciate your input.

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