How to Create Performance Management Policies That Work

Four employees in a performance management meeting


Performance management is a necessary evil, right? But everyone despises the performance review process. You’re either inundated yearly with writing performance reviews for an entire team or in a constant and endless review cycle based on anniversary dates. 

Either way, it’s a dreaded task. Employees don’t look forward to the reviews — it creates so much stress for the employee that their fight-or-flight kicks in. Managers dread a process that saps their energy and their limited time between daily meetings. And guess what? HR professionals also dread performance review season. There has to be a better way!


Why Annual Performance Reviews Don’t Work

Pre-COVID, companies understood that the annual review cycle just wasn’t working and were starting to change their performance management process. In a study in 2020, Gartner found, “Organizations are redefining performance management strategies, to enable employees to contribute in a way that drives business growth. They are moving from an annual, backward-looking review process that ensures employees meet performance standards to a series of ongoing conversations that help employees identify and prioritize ways they can add value to the business.” 

This same study found that small pay decisions don’t really move the needle in performance. Think about it: you’ve worked hard all year, taken on extra work, and had results above the norm for someone in your role. Yet, you get an increase that’s a mere 1% more than a colleague who has “just met” expectations. You’re not really motivated at that point to get better, right?

I worked for an organization earlier in my career where I was willing to do whatever it took. I helped them open offices in several states, expanded my territory from four locations to 10 locations, and created both an HR onboarding program and training for new leaders, something this company hadn’t had in the past. 

When I got my review, I was rated a “3–meets expectations.” I was stunned. I approached my boss with a long list of how I went above and beyond. Her response was, “I had to align with the bell curve.” 

So, all of my efforts and work were null and void because of the bell curve. I was not motivated to go above and beyond after that — in fact, I ended up leaving.

The performance management process of the past is outdated, ambiguous, and doesn’t give us the results we want —to drive performance. 


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Performance Management That Works: The Sales Model

To understand what drives behavior, I would argue that you look at sales commission programs. With sales, you set a quarterly goal, and you review that goal quarterly. If employees hit that goal, they get their commission. If they exceed their goal, they make more money. 

With a sales-inspired program, employees know exactly where they stand at any moment in time, and with real-time feedback, they can adjust along the way. It also puts the ownership in the employees’ hands. They know what they need to accomplish the goal and they go after it.

Sounds easy, but what about the softer roles? It’s admittedly harder to measure those. But setting quarterly goals that are tied to business results not only builds a connection to the business, it helps each employee understand their connection to the overall goal of the business. Setting quarterly goals also means continuous feedback. With annual goals, we wait until the end of the year, then hurry up and rush. When you shift to a quarterly structure, goals are front of mind, timely, and easy to adjust as quickly as the business needs.


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Performance Management That Works: The Weekly One-on-One

As for feedback, this should happen at weekly one-on-one meetings. This gives the employee time to change before it becomes a more significant issue. It also affords you time to course correct before the end of the quarter or year. 

But, employees are also looking for “feed-forward.” That means that they want to know what’s next for them. What are the goals for next quarter? What does the future look like for them at your company? Suppose you’re missing out on that feedback. In that case, you’re risking more turnover in your organization. 


Performance Management That Works: Quarterly “Ownership” Meetings

Using an agenda for your quarterly meetings puts the ownership into the employee’s hands to help them answer some of those questions — or at least start the conversation. I created a quarterly touchpoint agenda to focus on feedback and feed-forward for employees. I’ve found that this quarterly touchpoint agenda has successfully started these conversations. The employees would fill it out ahead of time, like a self-review, but this template generates a valuable discussion of what the business needs, what the employee needs, and an update on goals. 

In a time where things change so quickly, why are we still relying on an annual review process? Employees are being measured daily on their performance. Adjusting your feedback process and implementing a feed-forward process could impact performance at a critical inflection point. And by rewarding employees based upon achievement of goals, you’re removing the ambiguity and truly rewarding overall performance.