Understanding Performance Management & Its System

Performance Management is a way of working and a process for measuring activities aimed at achieving goals and improving performance. It applies to both employees and the business as a whole and is ultimately about increasing the company’s efficiency. Here, you can find out more about Performance Management systems and processes and how to create a good performance culture.

Definition of Performance Management

Performance Management involves planning, measuring, and following up on the performance of employees or departments about the company’s goals. The goals and sub-goals are set based on the company’s strategy and business plan, and Performance Management continuously measures how well the company is performing and ensures that the company’s strategy is being followed.

The idea is that measurement and follow-up should lead to creating an understanding of what needs to be done and thus increase commitment and performance. A high level of transparency and dialogue are cornerstones of Performance Management and contribute to a good performance culture.

Performance Management can be used to measure specific operational tasks and how well different teams are performing in processes or projects. It is therefore also an important framework for managers to plan and follow up on employee activities.

Performance Management System

A Performance Management system should be able to measure performance over time and be linked to the company’s goal management (for example, OKR) through reporting, performance measurement, analysis, and KPI follow-up.

The system can be both software and processes that support performance management, such as conversations between manager and employee.

In the best-case scenario, you have both systems and processes in place and an agile working tool and working method that can support operational activities (activities) and dialogue in the team.

Performance Management software, such as Hypergene, links strategic planning with operational planning and monitoring processes and is an important tool for managers, decision-makers, and controllers.

Operational planning and monitoring includes, for example, budgeting, resource planning, goals and key figures, or visualization of data in the tool.

The steps of the Performance Management process for managers and employees

The Performance Management process can partly refer to the overall planning and follow-up process at the company level, but can also be defined as the process of continuous communication and feedback between a manager and an employee to achieve organizational goals.

In cases where the process focuses on the employee, the individual’s performance naturally becomes the focus. This usually includes the steps below:

1. Planning: The responsible manager sets the goals to be achieved in both the short and long term and overall priorities for how it should be done (may differ depending on organizational level, industry, etc.). The employees, with insights from their work areas, should then be able to provide feedback to reach a consensus on goals and expected performance.
2. Measurement: Consistent monitoring of progress based on goals, key figures, and the plan in place to both see and anticipate when problems arise and to help manage the problems.
3. Coaching: Regular, scheduled meetings, with a prepared agenda, between manager and employee.
4. Performance reviews: Usually held once a year and are an opportunity for in-depth dialogue and to review previous reviews during the year. This also provides an opportunity to ask questions about whether personal and organizational goals were met (why/why not), challenges, tools, effectiveness, whether feedback helped, and what can be done better. This of course also includes other elements, such as discussion about skills and career development.
5. Act: Follow-up should lead to goals and plans being updated and lessons learned for the next step. It is also important that the employee receives positive feedback when goals are reached and is allowed to progress in their development. Equally important is that all of the employee’s insights are taken into account and implemented into the plan for the coming period.

The part of Performance Management that focuses on the individual and their performance should lay a good foundation for both how an employee works and what they should work on.

If this is done throughout the business, the conditions for a good performance culture are created. Continuity is important here, which means regular conversations between managers and employees.