5 Tips to move from annual reviews to strategic performance management

Looking to transform your performance process? Read how strategic performance management can help.

Key performance indicators (KPIs) have generally led the charge in employee performance conversations, and although they provide a convenient framework for performance evaluation, they are only one part of the picture.

There is so much more that shapes an employee’s performance and how they contribute to organizational outcomes – from effort and behavior to team dynamics and continuous feedback – which is why we recommend taking a more holistic, strategic approach to performance management.

Strategic performance management aligns employees with overall organizational strategy through clear objectives and expectations, leadership, and communication to ensure that everyone is working towards the same goal.

In this post, we’ll take a look at some of the key tenets of strategic performance management (that you can easily add into your current process).

Key elements of strategic performance management

  1. Communicate vision and cascade goals

  2. Measure performance with more than KPIs

  3. Provide continuous, constructive feedback

  4. Round it out with peer and 360 degree feedback

  5. Rewards and recognition

1. Communicate vision and cascade goals

Frequent, clear and transparent communication is a key component of strategic performance management and has important implications for employee engagement and performance. For example, by communicating your company’s vision, mission, values, objectives and results you will facilitate greater alignment between employees and your organization in terms of their ownership over those objectives, their identification with your company and commitment to the cause.

In practical terms, one way to achieve alignment is by cascading company goals down to teams and individuals as smaller sub-goals or tasks. This not only links individual activities directly to company goals (helping to show them how and why their contributions matter), but also creates efficiencies in working towards those goals.

Key Takeaway

intelIiHR’s goal management tools allow you to easily cascade and track goals across teams, departments and individuals.

2. Measure performance with more than KPIs

Measuring employee performance shouldn’t just be about targets and numbers.

Performance is driven by effort, process, behaviors, ability, and sometimes, luck. So in applying a strategic performance management approach to evaluating employee performance, you will want to factor these into the equation (read more about the employee performance equation here).

Similarly, if you promote values of innovation, flexibility and creativity throughout your business, then why not translate this into your employee’s performance appraisals, too?

Incorporating broader, values-based metrics shifts the focus from satisfactory or unsatisfactory rankings against select criteria to a more individualized, human-centered approach to performance. This approach factors in the employee’s alignment with and impact on the organization as a whole.

When setting KPIs and goals, business and performance expert Bernard Marr encourages the use of thought-provoking questions like:

  • “What goal will this KPI help our organization achieve or what problem will it resolve?”

  • “What decision will this KPI help drive?”

Using these questions to create meaningful KPIs for each of your employees will help them identify and work towards clear objectives or points for improvement. It also demonstrates the importance of their role within the business – how and why their contributions matter.

3. Provide continuous, constructive feedback

Ever walked into a performance review and been told “you’re doing a great job” or left one hearing “keep up the good work”? While nice to hear in-the-moment, without any further explanation to back it up or suggestions for improvement (because there’s always room for improvement), these statements are overall pretty meaningless and don’t do much for performance improvement or career development.

Your employees are instead seeking fair, accurate and tangible feedback to help improve their quality of work.

Better feedback has benefits for the business too. Gartner found that when feedback was specific and clearly articulated actions to take to improve performance, productivity increased by 2%.

While this may not seem like a lot at first, when done as part of a continuous performance management framework, which involves monitoring and nurturing performance through regular check-ins, feedback and coaching, the benefits will compound.

In contrast, trying to annually provide useful feedback adds an extra challenge for both employees and managers. Reflecting on the last 12-months retrospectively to find key areas for praise or improvement can stretch the memory to say the least. Also, how meaningful is being told you could have performed better six months ago, really?

Timeliness is key to providing useful feedback that drives employee development.

4. Round it out with peer and 360 degree feedback

Adding peer feedback and collaborative goal setting into performance reviews can not only help elevate the team by promoting open communication, but it also provides employees with a broader assessment of their performance. Interestingly though, in Gartner’s research on performance, only 17% of employees said they were evaluated by their team members – a missed opportunity for a different perspective that could enhance growth.

According to Marr, it’s about finding out “how well your employees are performing in the eyes of those who have a stake in their performance”.

This could include your employee’s direct reports, peers, customers, suppliers, and so on.

If done correctly, this provides employees with another benchmark to consider their broader organizational impact.

Key Takeaway

Assist your employees to get a holistic picture of their performance with 360 degree feedback (alongside goals, achievement and training).

5. Rewards and recognition

The final step in strategic performance management is recognition. Whether it’s through a personal thank-you or a public shout-out, everyone likes to be recognized differently. That’s why it’s important to find out what drives each of your employees and reward their efforts accordingly. Giving credit where credit is due will result in happier, more productive and engaged employees.

Bringing it all together

Gone are the days of dusty professional development plans (PDP), filed away annually and forgotten for the next 12-months. Instead, strategic performance management, when supported by robust performance management tools, will create a tailored, flexible and evolving action plan. This provides a format for both managers and team members to track performance and nurture development throughout the year.

You can document the reflective discussions and planning from your performance review conversations, and continue to support employees throughout the year by adding additional feedback and notes on progress towards key objectives and achievements.

Combined with regular check-ins, this progressive approach to performance will keep goals and objectives relevant and top-of-mind, keeping staff motivated and ensuring goals are met by the next performance review.

In summary, upping your strategic performance management game benefits:

  • Your employees, helping them to have tangible goals to achieve and feel more motivated and connected to the organisation

  • Your teams, ensuring everyone is on the same page and are lifting each other up to achieve key objectives.

  • Your managers, allowing them to spend less time looking retrospectively and more time planning and kicking goals.