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The PerformYard Blog

A practical look at building and implementing your perfect performance management process.

How to Build a Custom Performance Management System

markus-spiske-763806-unsplashBulky, time-consuming and ineffective. The once ubiquitous annual appraisal has gotten a bad rap — and don't get us started on ratings.

We get it. Employees don't want to be told they're 'better than average, but not excellent'. And we know that 50% of millennials would rather receive meaningful feedback every month than sit down for an hour each December. For many HR leaders, it's clear. The annual review has to go.

But the question is: in exchange for what?

Continuous feedback? Weekly check-ins? Bi-annual reviews? Performance management can be the quintessential HR Rubik's cube if you let it. And while you probably do need to make some changes, those changes might not need to be as drastic as you think.

If you want to change your performance review process but aren’t sure how, here are five steps to help you find a better way.

1. Find out who you are

The number one reason companies stay stuck in an outdated performance management process is perfectionism.

HR leaders become attached to an image, idea or industry case study that made a lot of sense for someone else, but might not be relevant for them. When it comes time to buckle execute on that big idea, the process quickly becomes muddled and eventually stalls out.

But every company has its own unique DNA.

So before you embark on a system change-up, take time to identify who you are as a company.

For instance, if you have a hierarchical structure with highly skilled professionals, many of whom do a similar job, you might have a cultural need to boost employee engagement and motivation. In contrast, a small company with a flat structure of specialist employees all working on different things may need to focus on how they measure performance fairly and consistently across small but diverse teams.

Give yourself permission to do this your way. The performance management process can at should look different at every company.

2. Define your purpose

Once you're clear on what your business is really about, have a good think about what you need your performance management process to accomplish.

In other words: what's the purpose of your performance review?

Is it to increase employee skills or foster greater accountability? To boost engagement or is it there to simply justify salary decisions? Be honest.

If you want your performance management process to produce meaningful outcomes, you need to define why you’re doing it.

For example, there’s no point asking managers to review employees biannually when they work on a monthly project cycle. In a case like that, it would make more sense to have a more regular review schedule while introducing some less formal elements to address issues when they arise.

3. Know your performance management building blocks

Want to know a secret?

This performance management stuff isn't as complicated as it sounds.

It all boils down to 3 simple elements. Once you know those, it's easy to come up with an arrangement of those blocks that makes sense for you. For instance, Asana has an end of the year self-review that it combines with a biannual review, while the video game company Valve has a 360 system where teams of employees conduct performance interviews with everyone in the company.

Here are the 3 simple building blocks every performance management process has in common:

Reviews — Does a formal or informal approach fit better with your company culture? How often do you want to review your employees (annually, semi-annually, at the end of every project)? Who else do you need to hear from (self-appraisal, manager, peer-to-peer)?

Goal Setting — What types of goals will you set? Can you connect individual goals to the company's overarching vision? Have you created an opportunity for employees to include their personal goals?

Feedback — Where in your organization's work streams is it easiest and most natural to provide employee feedback? How do your employees want to receive feedback (in a one-to-one meeting, regular check-ins or through 360-degree-feedback)?

4. Don’t rush it

Rome wasn't built in a day, and you better believe your perfect performance management process won't be either.

Sure, HR case studies make it look easy but for some companies, it can take years to implement a new process. Managers and employees need time to familiarize themselves with it and they need a well-thought-out argument for why they should change in the first place.

So start with small steps like changing or removing appraisal questions, feedback methods or resetting the cadence for your reviews. Some of the most impactful change happens incrementally. You could even start by simply taking a much a smaller version of your current appraisal and executing it four times a year to test the waters.

5. Revisit, refine, repeat

Performance management is a moving target.

Finding an approach that works for your company means getting some things right and some things wrong. You have to be brave enough to take that leap and find what works for you. Create reflection points where you can assess what's worked, what hasn’t and how to remedy it.

And whatever you do, don’t be fooled by thinking you need to create the perfect process, especially if it takes you away from your true purpose for performance management at your company.

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