Performance management helps organisations become more successful and stay ahead of the competition. It essentially involves measuring, reporting and managing progress in order to improve performance, both at an individual level, and at a corporate level. There are many, many performance management tools designed to make the process easier and more effective. Here I look at some of the most common tools.

Key performance indicators (KPIs) and metrics

KPIs and metrics provide a way to measure how well companies, business units, projects or individuals are performing in relation to their strategic goals and objectives. But the primary value of KPIs is not in measurement per se, but in enabling rich data-driven performance conversations and better decision making. Measuring everything that moves provides little more than an illusion that performance is being managed. Instead, it’s important to ask, “What goal will this KPI help my organisation achieve,or what problem will it resolve?” and “What decisions will the KPI help drive?” Well-designed KPIs should be vital navigational instruments, giving a clear picture of current levels of performance and whether the business is where it needs to be.

Performance appraisals

Alongside KPIs, performance appraisals are probably the most commonly used performance management tool. When used properly, performance appraisals are incredibly powerful for aligning the goals of individuals with the strategic aims of the organisation. To get the most out of this tool, however, employees must feel that the appraisal process is a regular, honest, fair and constructive two-way conversation. If not, appraisals can be a powerful de-motivator, leading to a decline in performance.

360 degree feedback

This tool is all about answering the question, “How well are our people performing in the eyes of those who have a stake in their performance?” It provides individuals with a broad assessment of their performance based on the views of those around them, including their supervisor or manager, direct reports, peers, customers, suppliers, and so on. Results are confidentially tallied and presented to the employee, usually by a manager. The insights from 360 degree feedback are typically used in employee training and development. Done well, 360 degree feedback helps to democratise the review process, by weighing the opinions of many people, instead of just the individual’s line manager.

Management by objectives (MBO)

MBO is the process of defining specific objectives and then setting out how to achieve each individual objective. It’s particularly powerful for specific work that needs to be done one step at a time, and is a great way to create a culture of working towards common goals. The idea is that, as each objective is achieved, those within the organisation are aware of their achievements, which, in turn, boosts morale and motivation. MBO involves measuring individual performance and comparing it with standards that have been set.

Performance management frameworks

Without a doubt, one of the most popular and best-known management frameworks is the Balanced Scorecard (BSC). Voted one of the most influential business ideas ever presented in the Harvard Business Review, the BSC has been massively popular over the last 20 years. The BSC is a strategy execution tool that helps companies to: 1) clarify their strategy and communicate their business priorities and objectives; 2) monitor progress by measuring to what extent priorities and objectives are being delivered; and 3) define and manage action plans to ensure initiatives are in place to deliver the business’s priorities and strategic objectives.

Reward and recognition programmes

When employees feel that good performance goes unrecognised and unrewarded, motivation plummets, and people disengage from the company’s overall mission. Reward and recognition programmes are therefore an important part of any thorough performance management system, creating a method for celebrating those who are high performers. For many companies, this means dishing out financial rewards, such as bonuses, but simple praise and recognition of a job well done is just as important for maintaining morale and continued high performance.

Personal development plans (PDP)

A PDP is effectively a tailored action plan that is based on reflection and awareness of an individual’s performance and needs, setting out goals for future performance and actions that will support personal development. PDPs are often used to identify specific training and development needs and create an action plan for meeting those needs (for example, through specific courses or shadowing other employees). It helps individuals set out how they want to grow, and what actions they can take to achieve that growth. This not only helps the individual feel more invested in the company, and the role they play in its success, it also identifies concrete steps that can help drive individual performance in the future.

Investing in or developing performance management tools, techniques and processes like these, is an important part of creating a culture of high performance. And that’s exactly what every business, regardless of size, in every industry, should be aiming for – strong performance at every single level of the organisation.

Where to go from here

If you would like to know more about the KPIs, check out my articles on:

• What Is Performance Management? A Super Simple Explanation For Everyone
• The 10 Biggest Mistakes Companies Make With Performance Management
• How To Set Performance Targets That Work
• Why Performance Appraisals Are HR’s Most Hated Process

Or browse the Strategy & Business Performance and Key Performance Indicators & Metrics sections of this site to find more articles and many practical case studies.