The ability to manage employee performance well is a critical part of any successful organisation. Yet, too often, performance management is misunderstood or executed in a clumsy way that can actually harm employee engagement, motivation and, ultimately, performance. Here are the 10 biggest mistakes I’ve seen companies of all sizes make time and time again.

1. Not ensuring your people understand the big picture

Too many companies fail to make their employees aware of the bigger picture around performance management, specifically how their individual performance relates to the company’s wider strategy and goals. To feel empowered and invested in a common purpose, employees need to understand what direction the company is moving in, and what goals it is working towards. That’s why the most successful companies are ones that clearly articulate shared goals and foster a sense of working towards a common mission. It’s therefore vital that leaders regularly communicate key messages about the company’s future, and connect the work of individuals, teams and departments to that future.

2. Not getting employees’ buy-in

Leaders must get buy-in right across the company if they are to effectively execute performance management processes. Transparency is critical here. When employees feel that a set of benchmarks or a new review system is handed down without dialogue, without understanding what the process is about, they are far less likely to be engaged with the process. But, by making sure your teams understand the bigger picture, and how that picture is relevant to their jobs and performance, you create a sense of buy-in, trust and inclusivity.

3. Having no regular (and meaningful) two-way conversations about performance

Many companies think performance management is about holding an annual performance review, where various metrics are reviewed and targets set for the following year. Annuals reviews are certainly one part of the picture. However, good performance management involves reviewing performance more regularly, and in an open, meaningful way. This means not just giving feedback on individual performance, but also receiving feedback from your people, for example, on leadership performance and system management.

4. Having no indicators at all, or the wrong indicators

If you aren’t measuring indicators, you have no way of knowing how the business is performing and whether it is on the right track to achieve its strategic goals. So, it’s crucial you set up the systems to measure key performance indicators. However, some companies go to the other extreme and measure everything that can possibly be measured. But, having too much information, or the wrong information, can be as harmful as having none at all, because it wastes precious time and resources.

5. Setting vague goals

Most leaders know that the best goals are SMART goals: Specific, Measurable, Achievable, Relevant and Time-bound. Yet, all too often, goals can be incredibly woolly. It’s no use charging individuals in a team with a goal to improve customer service, without pinning down exactly what that means and how it will contribute to the organisation’s overall performance. It is far better, for example, to set specific goals like reducing the average time customers spend on hold in a call centre queue from three minutes to 90 seconds.

6. Not dealing with under-performance

Managing under-performance is tricky and no manager enjoys it. This means it’s often swept under the rug and ignored. Sometimes metrics are even manipulated to give the impression that everything is fine. This doesn’t do anyone any favours – not the individual in question, who is deprived of the opportunity to learn and grow, not the manager, who may face resentment from other team members who have to “pick up the slack”, and certainly not the organisation as a whole, which needs every area of the business to be performing at its best. It’s therefore important to identify low performers and have those difficult conversations where necessary.

7. Not recognising, celebrating and rewarding good performance

Just as low performance is often overlooked or ignored, sadly, good performance often goes unrecognised. This can leave employees feeling unmotivated and disconnected from the business’s common purpose. That’s why every company should develop appropriate ways to recognise and celebrate high-performing individuals and teams. And, although financial rewards are commonplace, they aren’t the only kind of recognition. Employees often value praise, opportunities for development, and flexibility as much as (and oten more than) financial compensation.

8. Focusing too much on tools and tick-boxes

A lot of business leader think that, because they have various performance improvement systems and tools in place, that they have everything covered. This can be a dangerous way of thinking, as it can encourage stagnation. The best kind of performance management isn’t about fancy tools, rigid systems and tick-boxes – it’s about creating a culture of continual improvement.

9. Chasing targets rather than improved performance

Building a system of targets and incentives can be dangerous in business. When individuals and teams become so focused on hitting targets, they can become pretty creative in how they manipulate information so it looks like they’re bang on track. However, while there is a place for setting targets and benchmarks, it should always be within the wider scope of creating a high-performance culture. Focus should therefore always be on how well the company or team is performing in relation to the company’s wider goals.

10. Using performance management tools to micro-manage and control

Done well, performance management should empower your people, not be used as a system to control and micro-manage them. Employees who are invested in the performance management process, and who understand the bigger picture, feel a greater sense of trust, authority and accountability. This means they are far better equipped to manage their own performance, make good decisions that benefit the company, and respond to the organisation’s needs appropriately. When they feel like performance management is a one-way dictatorship, motivation – and performance – plummets.

By avoiding these mistakes and making proper use of performance management tools and techniques, business leaders can lay the foundation for an organisation that is built on trust, transparency and a sense of working together to achieve common goals. This creates the perfect conditions for a high-performance culture and business success.