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performance evaluationFor most companies, the end of the year is a time when employees and leaders go through the annual review process. This process is designed to rate performance for the year and, if applicable, apply a merit increase. Many companies consider this their performance management system. A true performance management system however is much more involved.

True performance management is an ongoing process. It occurs all year long. It involves ongoing dialogue between leader and employee. It requires constant alignment of employee goals against business objectives. It fosters the ability to make a meaningful impact on employee performance for both the sake of the employee and the company.

When implementing a performance management system, there are three keys to making the system effective.

Performance Management Alignment

As I mentioned above, an effective performance management system aligns business objectives with employee goals.  It takes a look at company culture and strategic direction and creates goals based on those objectives.  This alignment helps each employee understand how they contribute to the growth of the company. When employees feel that their contributions make a difference, they are more effective.

Communication Between Leader and EmployeeMary Kay Ash Quote

Effective performance management systems create an environment where open communication between leader and employee is not only encouraged but expected.  The leader should be willing and able to provide performance feedback at any given time, not just at annual performance review time. In turn, the employee should be able to provide feedback about what they may need to better perform their job. Similarly an employee should feel free to talk about the desired direction they want their career to go and how the company may help them get there.

Consistency Identifying Good or Poor Performance

In any performance management system, the true test of its effectiveness is whether it can consistently identify good or poor performance. Meaning, the system should be very clear about what good performance looks like, what bad performance looks like, and the rewards or consequences associated with both. This system should be applied across all employees at all levels. To accomplish this, identifying behaviors and goals must begin early in the design phase and, once completed, everyone must be trained on how to  identify effectively the differences in performance.business valuation report A performance management system that does not apply standards consistently serves to inhibit company growth rather than  influence it positively.

While the overall design of a performance management system can be a bit complicated, keeping these three keys in mind will help focus the project. In the end, moving from just an employee appraisal system to an overall performance management system is what allows employee performance to truly have a positive impact on company performance. Without it, chances are good that leaders and employees are just checking the box at annual performance review time and giving it little to no thought the rest of the year.

Three Keys to an Effective Performance Management System
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