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How to get performance management right

An organisation can want performance management arrangements for a variety of reasons. 

To create arrangements that best suit the needs of your business, there are a number of actions you, as an employer, should consider.  

Identify clear aims

The purpose of performance management can vary from organisation to organisation. As an employer, ask yourself if your aim is to:

  • celebrate good work?
  • reward employees?
  • better meet your organisational goals?
  • support and improve staff performance?
  • develop your staff?
  • identify and remedy problems with performance?

Most performance management arrangements have a mixture of aims, but it is important to get the balance right.


Example 1: if your main aim is to develop staff, then remember that this requires managers and employees to have honest conversations around performance, possible skills gaps and development opportunities. However, if your system is also used to decide pay and bonuses, employees may worry that admitting to any perceived shortcomings could risk their bonus. This can make performance conversations less open and effective than they should be.


Example 2: if your main aim is to use performance arrangements to increase productivity, then you will have to be clear about how organisational goals link to personal objectives. You will also need to consider how best to keep staff motivated. If you cannot guarantee pay increases, are there others ways to reward staff - for example, through a greater focus on work-life balance and wellbeing?

Recent Acas research pdf icon 'Improvement required'? A mixed-methods study of employers’ use of Performance Management systems [1Mb] found that employers can often make the mistake of wanting performance management arrangements to be all things to all people.

There can be a particular tension between the desire to have informal arrangements that encourage good relationships between managers and staff and formal systems that are used as an audit trail of someone's working life in the company.

Getting the balance right between 'people' and 'process' is often the most important factor.   

Recognise your aims may change

The workplace is constantly changing and so over time the aims of your performance management arrangements may change too.

This might be because of:

  • internal pressures - such as staff changes, skills shortages and changes in business priorities
  • external pressures - such as economic environment, customer demand and changing technology.

 
Where the aims of the organisation do change, you should review your existing systems to consider if further action is required. For more information, go to Maintaining effective performance management arrangements.

Think about your organisation

The arrangements that work best for you depend upon the needs of your organisation. An engineering company will probably want to do things a little differently than an NHS Trust, for example. So it's worth spending some time thinking about:

What's more important: what we do or how we do it? A production line environment may place more emphasis on their workers outputs, while a customer facing business, such as retail, may consider the way things are done to be equally important.

What kind of arrangements would fit our size and structure? Smaller firms may like the idea of more informal arrangements based upon regular face-to-face contact between the employer and staff. Larger organisations will need to think about the number of teams they have, how hierarchical their management levels are and how they can best measure staff performance consistently across the organisation.

How will the performance arrangements complement other workplace policies? There are often overlaps between managing performance and managing absence, discipline, training and wellbeing. Often minor concerns around performance or attendance can be best resolved through informal performance catch-ups. However, serious issues might need to be dealt with separately through the organisations disciplinary procedures.

The key values of effective performance management arrangements

Acas research pdf icon 'Improvement required'? A mixed-methods study of employers’ use of Performance Management systems [1Mb] has shown that the values employers and staff consider most important to effective performance arrangements are:

  • transparency
  • consistency
  • fairness.

Transparency

Transparency means being clear about the process, how decisions are made and giving employees the chance to raise concerns about any aspect of the system they are unhappy with. To do this, you need to clearly outline to staff:

  • how the system works in theory. For example, the criteria against which assessments will be made, the type of ratings that can be given and how many meetings should take place.
  • how the system works in practice. For example, what training will line managers receive, how will marks be reviewed and the system be monitored?

Being transparent includes managers being clear about any final rating or marking they give to employees, communicating their thinking with other managers, and explaining it to staff.

It also means that the rationale behind how any bonuses are awarded is clear. Bonuses can be contentious if not properly explained to staff. For example, if the criteria is increased sales, then employees must be aware of this and clearly understand what is required from them to achieve their bonus.

Consistency

Inconsistent approaches to performance arrangements can lead to resentment and loss of morale and employee engagement. Typical barriers to a consistent system include:

  • a lack of clarity as to how performance is measured or how frequently meetings will be held to discuss performance. For example, managers might interpret vague guidelines on how to set performance measurements in different ways, or meet one team member three times a year to discuss performance and another team member six times. 
  • providing inadequate training on how the arrangements should be approached. For example, without proper training, managers might assess and rate performance differently to one another or may not approach issues around performance in the same way, leading to unfair decisions being made.

Senior management and HR have a key role to moderate a consistent approach in the way managers behave and performance management is organised.   

Fairness

Discussing performance can be very emotive. Many employees will feel that they are being criticised personally and not just being assessed as workers. You should therefore do your best to make staff feel like they have been treated fairly.

To ensure fairness, remember:

  • avoid surprises. If your managers have a good rapport with staff then they should be discussing and addressing problems and giving praise along the way. It is usually unfair to surprise someone out of the blue. For example, concerns should be discussed when they arise and not left until the formal end of year performance meeting.
  • avoid favouritism. The system and the manager should not be seen to favour one individual or team over another. For example, use objective criteria to measure people's performance. Ensure managers communicate and build relationships with the whole team.
  • avoid discrimination. The arrangements must not unfairly disadvantage staff because of a protected characteristic. You should actively consider the diversity of your workforce and ensure the arrangements are fair to all. For example, an employer must make reasonable adjustments to remove any disadvantage where an employee with a disability is disadvantaged by performance measurements.

Any arrangements must not only be fair on paper but also feel fair to your staff too.

Engage and consult with staff and their representatives

There are occasions where you must consult staff and their representatives (where they exist). In regards to performance management, this is usually because:

  • there is a relevant collective agreement that covers it in place
  • of a requirement to inform and consult due to the ICE regulations
  • the change might require a change to the terms of the employees' contracts.

However, even if it is not a legal obligation, it is still useful and good business practice to seek their views to help you design appropriate performance management arrangements.

Involving staff

Staff will usually know what issues already exist and have ideas about how things could be improved.

Their views can be gathered quickly and easily by:

  • creating a staff survey
  • having a discussion at a team meeting
  • setting up an online forum or similar tool
  • running focus groups with a representative mix of staff
  • discussing proposals with an advisory group that includes staff from across the organisation.

Making staff feel involved in the design of new arrangements can help them engage with it. They are then more likely to want to work with their managers and colleagues to make them successful. You should regularly update staff on its progress, its benefits to them and what will be expected of them.

Working with trade union and employee representatives

Trade union and employee representatives can provide greater insight into issues that their members and colleagues are having with any existing processes you have in place. They may also be aware of how other organisations with similar needs and aims have approached performance management.

In workplaces where trade union and employee representatives exist, you should arrange meetings to discuss the design of the performance management arrangements and try to reach an agreement with them on its objectives and its design.

Reps can play a vital role in helping you get key messages about the new arrangements across to everyone.

Get senior managers on board

Any performance management arrangement will take up staff and management time and resource. For it to be effective, it needs to be supported from the top of the organisation.

You should get the commitment of senior managers from the outset.

Senior managers will need to accept that some working time will need to be dedicated to performance management. You may also need to work with them to make resource available so that managers and staff are not overloaded. 

Senior managers play an important role in getting buy-in from across the organisation. If staff believe senior management are taking it seriously, they are more likely to as well.

Encourage your senior managers to champion the new arrangements by:

  • being enthusiastic about the benefits it will offer staff
  • encouraging staff to consider it an important part of their job
  • regularly discussing the arrangements with managers that report to them
  • being role models.

Consider the skills and needs of managers

Managers play a critical role in performance management arrangements. They are the ones who will often get to know staff and find ways to motivate and engage them.

Training needs

To get the best out of the arrangements, your managers need to be trained on how to have clear and open conversations as well as on how the new arrangements are going to work. Further training may also be needed. For example, if managers are expected to assess the performance of staff, would they benefit from training in unconscious bias, which may help them do this more fairly?

Creating online guidance and resources, shared by managers and staff, can help create a sense of transparency and openness, and reduce concern around the new arrangements.   

Resource requirements

The greatest barrier to effective performance management arrangements is often time.  Ensuring that managers have the time for performance meetings may be the single most important thing you do.

Many processes fail because a manager has more important duties. For example, personnel meetings are often seen as less important than business meetings. However, making your performance management systems work should be an equally important objective for all your managers.

If more management resource is required than is currently available, you should consider reducing the size of teams or reducing the other duties your managers carry out.

Further tools and training available

Acas offers training courses and e-learning on Performance Management. These are designed for supervisors, managers, team leaders and HR professionals tasked with creating new processes.

View event dates and locations

Access Acas learning online

We can also offer support for any individual issues your organisation may be facing. Find out more about our in-company services or contact us on our online enquiry form to let us know how we can help.