Performance Management: Guide For Employers

In our recent poll on LinkedIn, we found that only 28% of you have ditched the annual review process.

Business researcher Josh Bersin estimates that about 70% of multinational companies are moving toward a new performance management model, even if they haven’t arrived quite yet. But is the annual review process that bad? What is best practice? Before you decide what works for you and organisation, let’s take a look at the foundations of performance management, the best practices, employer obligations, and everything in between.

P.S. We’ve also got a very useful webinar coming up on this exact topic, on Wednesday 26^th July at 11:15. Register here and get it in the diary!

For now though, check out this guide, designed to give you a clear and practical overview on all things performance management!

What exactly is performance management?

Performance management is essentially the process of creating a work environment or structure in which your people are enabled to perform to the best of their abilities. It is about establishing a culture where employees and teams share responsibility for the continuous improvement of business processes and their own skills and behaviours.

Why do we do it? What are the benefits?

Clear Expectations and Goal Alignment: A performance management system helps establish clear expectations by defining goals and performance standards. It ensures that employees understand what is expected of them and align their efforts with organisational objectives.
Continuous Feedback and Improvement: Performance management systems enable regular feedback and coaching conversations between managers and employees. This ongoing dialogue helps identify strengths, areas for improvement, and development needs, fostering continuous growth and improvement.
Performance Recognition and Motivation: A performance management system provides a framework for recognising and rewarding high performers. By acknowledging and appreciating employees’ efforts and achievements, it boosts motivation, engagement, and job satisfaction.
Data-Driven Decision Making: Performance management systems collect and analyse performance data, offering valuable insights for decision making. HR professionals and managers can use this data to identify trends, make informed decisions on promotions, training needs, and succession planning, enhancing organisational effectiveness.
Employee Development and Succession Planning: Performance management systems support employee development by identifying skill gaps and development opportunities. By investing in training and coaching, organisations can nurture talent, prepare employees for future roles, and ensure a robust succession planning process.

What is a performance management system?

A performance management system is a structured approach that organisations use to set goals, evaluate employee performance, provide feedback, and support development. It involves establishing clear performance expectations, regularly assessing progress, and offering feedback to employees. The system may include performance appraisals, goal-setting processes, ongoing feedback mechanisms, and development plans. The primary objective is to align individual performance with organisational goals, drive continuous improvement, and enhance employee engagement and development.

What are some typical approaches to performance management?

Performance management approaches can vary among companies in Ireland and the EU. While there is no one-size-fits-all approach, here are some typical approaches to performance management:

Annual Performance Appraisals: Many companies in Ireland and the EU still use annual performance appraisals as a formal evaluation process. These appraisals involve setting performance goals at the beginning of the year and conducting a comprehensive assessment at the end, often accompanied by a rating or ranking system.
Continuous Feedback and Coaching: Some organisations emphasise continuous feedback and coaching as a core component of their performance management approach. This involves regular check-ins, ongoing dialogue, and informal feedback sessions between managers and employees throughout the year to address performance, provide guidance, and offer support.
Objectives and Key Results (OKRs): The OKR framework, popularised by technology companies, is gaining traction in Ireland. It involves setting clear and measurable objectives and key results that align with organisational goals. Progress is regularly tracked, and feedback is provided to ensure alignment and focus on key outcomes.
360-Degree Feedback: Companies may implement 360-degree feedback processes, where feedback is collected from multiple sources, including supervisors, peers, subordinates, and sometimes external stakeholders. This holistic feedback provides a well-rounded assessment of an employee’s performance and can contribute to development plans.
Agile Performance Management: Agile performance management approaches align with agile methodologies used in software development and project management. They focus on regular feedback, continuous improvement, and adapting goals and priorities based on changing business needs and market dynamics.
Strengths-Based Approach: Some organisations emphasize identifying and leveraging employees’ strengths rather than solely focusing on weaknesses. This approach aims to capitalise on employees’ natural talents and abilities, fostering engagement and personal growth.
Development-Centred Performance Management: This approach places a strong emphasis on employee development. It involves creating personalised development plans, providing training opportunities, and supporting employees in acquiring new skills and knowledge to enhance performance and career progression.

It’s important to note that these approaches are not mutually exclusive, and organisations often tailor their performance management practices to align with their unique needs, culture, and industry requirements.

How do we manage underperformance?

In Ireland, HR professionals and managers typically handle underperformance by following a structured approach that aligns with legislation and best practices. Here are some key steps:

Identify and Document Performance Issues: HR professionals and managers should promptly identify and document instances of underperformance. This involves gathering evidence, specific examples, and relevant documentation to support the evaluation of the employee’s performance.
Provide Timely Feedback and Support: HR professionals and managers should schedule a meeting with the underperforming employee to provide clear and constructive feedback regarding their performance issues. They should offer guidance, support, and resources to help the employee improve.
Develop a Performance Improvement Plan (PIP): If underperformance persists, a Performance Improvement Plan (PIP) may be implemented. This plan outlines specific objectives, performance expectations, and timelines for improvement. It should be fair, realistic, and provide necessary support to the employee.
Regular Monitoring and Review: HR professionals and managers should monitor the employee’s progress during the PIP period. Regular check-ins should be conducted to provide feedback, address concerns, and assess whether the employee is meeting the agreed-upon targets.
Training and Development Opportunities: If skills or knowledge gaps contribute to underperformance, HR professionals and managers should identify relevant training and development opportunities for the employee. Offering support for skill enhancement can demonstrate a commitment to the employee’s growth and improvement.
Employee Representation and Right to Appeal: HR professionals and managers should ensure that employees have the opportunity to express their views and concerns during the performance management process. Employees have the right to be accompanied by a representative during any formal performance discussions or meetings. They should also have the right to appeal against any disciplinary actions taken.
Documentation and Compliance: Throughout the performance management process, HR professionals and managers must maintain accurate and comprehensive documentation of discussions, warnings, improvement plans, and any disciplinary actions taken. This ensures compliance with employment legislation and provides a record of the steps followed in addressing the underperformance.

It is essential for HR professionals and managers to remain fair, consistent, and respectful throughout the underperformance management process, adhering to legal requirements and following best practices to protect both the employee and the organisation.

What is a PIP?

A Performance Improvement Plan (PIP) is a structured intervention used by employers to address and support an employee who is underperforming. It is a documented plan that outlines specific performance objectives, expectations, and a timeframe for improvement. The purpose of a PIP is to give the employee clear guidance on what needs to be achieved and to provide support and resources to help them reach the required performance level. A PIP should be fair, reasonable, and focused on providing opportunities for the employee to succeed. It should include regular monitoring and feedback sessions to assess progress and offer guidance. A PIP should be implemented in accordance with employment legislation, including fair procedures and the employee’s right to representation and appeal.

What are some key aspects of performance management that we need to be conscious of?

Risk of constructive dismissal claims: HR professionals must be aware of the risk of constructive dismissal claims that may arise from poorly managed performance issues. It is crucial to follow fair procedures, provide clear communication, document performance discussions, and offer support to employees during performance improvement initiatives. Seeking legal advice and adhering to employment legislation can help mitigate the risk of such claims.

Probation: HR professionals should ensure that performance expectations and evaluation criteria are clearly communicated during the probationary period. Regular feedback, coaching, and support should be provided to employees during this critical phase to assess their suitability for the role.

“Probation isn’t designed to give organisations an easy way to dismiss someone who isn’t performing well. Remember, you can set the employee, and your organisation, up for long-term success during the probation period, so treat it accordingly!” Liam Barton, Senior HR Consultant, Insight HR.

Micromanagement: HR professionals should educate managers on the importance of providing autonomy to employees while still setting clear expectations. Micromanagement can hinder employee engagement and creativity, so HR should encourage managers to delegate tasks, provide guidance, and trust employees to deliver results.

Retention: HR professionals should consider performance management as a tool to improve employee retention. By addressing performance issues promptly, offering development opportunities, and recognizing high performers, HR can create an environment where employees feel valued and motivated to stay with the organisation.

Training Line Managers: HR professionals should provide training and support to line managers on effective performance management techniques. This includes coaching managers on providing constructive feedback, setting SMART goals, conducting performance appraisals, and addressing underperformance in a fair and consistent manner.

How do we choose a performance management system that works for us? How do we get started?

To choose a performance management system that suits their needs, organisations can follow these five key steps:

Assess Needs and Objectives: Begin by evaluating the organisation’s specific requirements and performance management goals. Identify the pain points and areas for improvement in the current system. Determine the desired outcomes and functionalities needed to align with the organisation’s strategy.
Define Requirements and Prioritize: Based on the organisation’s needs, define a list of essential requirements for the performance management system. Consider aspects such as goal setting, performance tracking, feedback mechanisms, reporting capabilities, and employee development support. Prioritize these requirements to focus on the critical elements.
Engage Stakeholders and Gather Feedback: Importantly, involve HR professionals, managers, and employees in the decision-making process. Seek their input, understand their pain points, and collect feedback on system features and usability. Consider their perspectives to ensure alignment with their needs and expectations.
Research and Compare Options: Conduct thorough research on available performance management systems. Compare their features, functionalities, user-friendliness, scalability, and integration capabilities. Read customer reviews, seek recommendations, and evaluate vendors’ reputation and track record.
Conduct Demos and Pilots: Arrange demonstrations or pilot phases with shortlisted performance management systems. Evaluate their ease of use, user experience, and suitability for the organisation. Gather feedback from users and stakeholders during the demos or pilot phases to make an informed decision, and to boost your business case.

By following these steps, organisations can select a performance management system that aligns with their specific needs, supports their performance management objectives, and contributes to overall organisational success.

How can Insight HR help?

Insight HR has the experience and expertise to ensure that we can help your organisation to design a strategic and integrated performance management system which will help you get the best from your people. From design and development, right through to coaching and training, the team here at Insight HR will give you quality, consistent, and tailored service, equipping your organisation with the skills and confidence it needs to succeed in this area.

“With Insight HR, your investment will never just be about fixing a problem or developing a strategy. Instead, our partnership approach arms teams with the knowledge they need to make better decisions. We leave HR teams better informed and more confident in their abilities to resolve future HR issues.”

Mary Cullen, Founder and Managing Director at Insight HR

Can we hear what some of the market leaders are doing in performance management? Can we get additional insights and ask questions directly to the experts?

In short, yes! We’ve got an upcoming webinar where we’ll be discussing Performance Management with our very own Mary Cullen (Founder & Managing Director at Insight HR), who will be joined by our very special guest, Aisling Teillard (Chief Customer Officer at Beqom) and Alex Hogarty (Global Program Lead of Performance Management at Novartis).

Book your space today before you miss out!

And for further guidance and discussion on these topics, and advice and support on anything HR-related, get in touch with us today at 0567701060 or send an email to info@insighthr.ie.