3 Indispensable Elements of an Effective Performance Management System

Effective Performance Management

Despite So Many Tools Available To Change The Way Ineffective Systems Of Performance Management Works, There Are Seldom Good Things Said Or Experienced About Them.

Everyone has a performance review once or twice a year, but rarely would anyone go out of their way to mention how positive the whole experience is. Because let’s face it, it is mostly not!

What’s So Wrong With Performance Management?

The biggest problem with the way performance management is done is focusing too much on the past. A past that is long gone and a time period, the accurate details of which are impossible to remember. The extreme focus on things of the past makes it an unpleasant activity and experience for both the managers and employees. Focusing too much on the past results in negative outcomes over 30% of the time. Highlighting failures of the past affects the self-esteem of employees and can hurt them emotionally. Employees may also lament that performance reviews focus on parts of recent events that do not highlight their accomplishments. This gets worsened by the fact that managers carry their own subjective bias in their reviews. Peers often know more about employees than their managers. The end result is a system that does not meet its most basic intent of actually improving performance but ends up damaging relationships and perceptions of employees towards their managers and the companies at large.

Because of so many such issues with performance reviews, organizations have been and continue experimenting with a number of fixes. The biggest response has been to eliminate annual reviews altogether and make people management a much more regular process. Other companies have made feedback a part of company culture, with detailed quarterly plans and reports by employees on their activities and results. Employees want regular feedback about their performance and organizations are trying to help employees know how they can continuously improve their performance.

But the solution does not lie in the complete abandonment of annual performance reviews.  A system that has been going on for decades cannot be uprooted and done away with in one review cycle. The answer lies in revamping the old method, aligning it to the needs of the workforce and business objectives, while keeping in mind its original advantages. Below I have listed the top three things that need to be included in this revamp list.

First things first, the performance review system needs to be fair and accurate. Getting judged by a manager who probably has not even invested that much time in the employee is not fair. Similarly, expecting a manager to review his subordinates in a period of one week isn’t fair either. These activities seem like stressful tasks for both parties and are often a one-time event, which makes its validity highly questionable. Reviews should involve multiple perspectives and reliable information over a period of time. This should include inputs from not just managers, but also from peers and even customers.

Secondly, if reviews are to be efficient, the way it is conducted needs to be directed by the right kind of objectives. Most processes involving reviews take an inordinate amount of time, clearly missing the goal. Such a process makes it tiring for everyone to give it importance in addition to their busy schedules. Instead of making reviews a never-ending process of endless paperwork and box-ticking, it should aim at ways of actually improving performance levels of employees.

Lastly, compensation decision is not the only thing why performance reviews are conducted.

Sure, compensation decisions are made on the basis of review meetings, but they are not the reason why reviews exist. Reviews help make people better people and performers, and compensation or salary structure is just a part of this initiative. Culture tops compensation any day and with time, and solely relying on compensation to get a more productive workforce can only be a temporary solution. For benefits that are sustainable over the long run, it needs to go beyond the limits of just salaries. It should include elements of coaching and formal training, to help talent grow and develop into their best versions.


Long story short, reviews are here to stay and new processes of performance management need to focus on remodeling older processes, not abandon it completely. This new system should preserve the best things about the past models and do away with elements that do more damage than good. The needs of a more modern workforce need to be included in the new model so as to make it achieve goals.

Contributing Author
vijay