Last Updated On December 09, 2020 / Written By Chloe Henderson

Employee Performance Management- 12 Best Practices

Employee performance management relies on open communication between employees and supervisors to address concerns and monitor progression toward company goals.

It is not enough for organizations to set short and long-term goals, they must also continuously monitor employee performance to ensure objectives are met.

By implementing an employee performance management system, companies can outline each role's responsibilities and expectations so staff can work harmoniously. An effective management system will improve productivity, profitability, and employee satisfaction.

What is Employee Performance Management?

Employee performance management is the use of strategies to improve employee performance, productivity, and effectiveness. Businesses that prioritize employee development in alignment with company goals can foster a work culture dedicated to success.

In order to practice employee performance management, companies must have a system in place to monitor and measure staff performance. Some use automated solutions, such as point-of-sale (POS) systems, to track employee activity, sales, and customer interactions in real-time. This enables supervisors to actively check-in, encourage, and offer feedback to workers.

Other organizations use annual performance reviews to gauge productivity at the end of the year. However, this approach does not allow managers to intervene in real-time. Instead, supervisors have to appraise employee performance retrospectively.

Regardless of the size or type of business, companies need to know what their employees are doing and how well. By establishing a performance management system, managers can-

  • Defines Roles and Responsibilities
  • Understand Employees' Strengths and Weaknesses
  • Provide Feedback
  • Schedule Interventions
  • Reward Top-Performers
  • Offer Additional Training

The three primary objectives of employee performance management are-

1. Keeping Employees Engaged

By routinely checking in with employees rather than conducting an end-of-the-year review, businesses can keep workers engaged. In fact, studies show that 74% of workers feel that receiving frequent feedback improves their effectiveness. Regular check-ins also enable managers to pinpoint and resolve issues promptly.

When employee engagement increases, so do several key performance indicators (KPIs), including-

  • Absenteeism
  • Turnover
  • Shrinkage
  • Safety Incidents
  • Quality Defects
  • Profitability
  • Productivity

2. Decreasing Employee Turnover



Companies that provide employees with the opportunity to regularly discuss performance, issues, and concerns experience less turnover than those that neglect to conduct frequent meetings. When workers see that management is taking the initiative to ensure their success and professional development, they feel valued and satisfied.

3. Developing Leaders


By prioritizing employees' professional development, companies can promote from within rather than filling supervisor positions externally. Developing leaders save businesses significant funds in recruiting, onboarding, and training costs. This also motivates employees to stay within the company and move up.

Top 12 Employee Performance Management Best Practices

Although employee performance management may sound straight forward, there are many different processes that companies must consider-

1. Identify Performance Goals

Before managers create the performance management program, they need to determine the main objectives. Businesses without set goals should ask themselves-

  • Are current productivity levels up to company standards?
  • Does the business want to promote from within?
  • Is the compensation process lagging?
  • How is employee engagement?

2. Define Each Role

Once the objectives are outlined, managers are responsible for informing all employees of the goals and their expectations. Otherwise, workers could be confused about how to proceed.

3. Create a Performance Plan

When goals are set and clearly defined, it is easier to create a performance plan around them. However, performance plans tend to be more effective when centered around smaller, short-term goals, as broad goals can overwhelm employees. By focusing on more attainable goals, workers can envision their own plan of action.

4. Monitor Progress

As employees work towards the goals, managers must actively monitor KPIs to gauge progress. Modern POS solutions can generate detailed sales analytics on each employee so businesses can develop actionable insights.

5. Make Coaching Available

By keeping coaching available at all times, companies can prevent issues rather than investing in damage control. Businesses can hold monthly or quarterly meetings with employees to discuss issues and concerns.

6. Take Advantage of Guidelines

Supervisors should create guidelines for each role that include-

  • Responsibilities
  • Limitations
  • Opportunities
  • Expectations

By outlining a policy for each role, employees can ensure they meet company standards.

7. Establish a Performance-Based Culture

A workplace should be based on company standards and values, so there is no question of what is expected of employees. By establishing a performance-based culture, companies can create a harmonious and healthy work environment.

8. Organize Cross-Functional Workshops

Businesses should hold cross-functional workshops where all departments are present so that staff can understand the functions of each sector. Employees may discover they align more with another department and can make new connections.

9. Offer Feedback

Managers should offer actionable feedback in a constructive, pleasant manner to avoid defensiveness. If criticism is not given appropriately, employees may take it as an attack and become upset. Therefore, supervisors should explain the issue and how it can be fixed to show workers they care about their success.

10. Keep it Professional

Inappropriate and personal feedback can lead to upset employees and a hostile work environment. It is crucial that managers keep feedback professional and focused on behavior rather than characteristics.
For example, being late is a behavioral pattern, while being lazy is a characteristic. Supervisors should stay away from descriptors with negative connotations.

11. Train Supervisors

Employees are not the only workers that need to be trained. Companies must ensure that managers and supervisors also undergo regular coaching to improve their management strategies and gain new skillsets.

12. Collect Multiple-Source Feedback

Businesses can also ask employees to provide feedback to their peers and managers to gain a more rounded insight into performance levels. This could help to uncover challenges and weaknesses that would have otherwise gone unnoticed.

Employee performance management enables businesses to keep an eye on productivity in real-time to avoid serious issues and improve operations.