Performance management basics.

Performance Management: Not Just an Annual Review

Performance appraisals (PA) get a bad rap in organizations. Seen as the dreaded yearly review, they are often treated with scorn or derision by employees and management alike. However, it doesn’t have to be this way. When performance systems are implemented incorrectly, they can cause more harm than good. According to researchers Kluger and DeNisi (1996), job performance was decreased after feedback was given in one third of the studies that they collected. Individuals are less likely to respond to PA feedback and improve their performance if they think that the system is inaccurate (Kinicki et al., 2004).

However, if a performance management is implemented correctly, they can help improve a company’s bottom line. With careful planning and cooperation from management, performance reviews can become a useful tool for your organization’s business strategy. First, let stop thinking of it as an annual review and start thinking about it in terms of performance management (PM). How are performance management systems different?

PA: performance is measured infrequently
PM: performance is observed and reviewed multiple times per year

PA: inconsistent or infrequent feedback from supervisors
PM: consistent feedback from supervisors, coworkers, and subordinates

PA: used to evaluate employee performance
PM: multisource tool that can be used for employee feedback, compensation, succession planning, termination, or other purposes

PA: not used strategically
PM: provides a link between an individual employee’s performance and the organization’s goals

As one can see, the PM system is more complex than the traditional yearly performance review. However, it may also be more rewarding if it is implemented correctly. The focus of the performance management series will be to cover many of the important considerations for developing an effective PM system. Topics in the series include the following: