Performance Management and Employee Outcomes: What Performance Management Processes Drive Improvement of Employee Performance?

Abstract

[Excerpt] Performance management (PM) systems can be a key driver of employee performance when designed strategically to go beyond operational or legal requirements. Organizations aspire for performance management processes to help employees develop, improve employee-manager communications, align individual and organizational goals, and help employees and teams reach their highest potential (Pulakos). These four items all drive employee performance and, ultimately, business performance. To align PM to organizational aspirations, companies are changing their PM processes in new ways (see Figure 1). Sometimes they do so with limited data on results, like when dropping performance ratings. Changes, even in uncharted territory, do generally improve individual performance. Of companies that participated in Deloitte’s 2017 Human Capital Survey, 90% that have redesigned performance management see direct improvements in engagement, 96% say the processes are simpler, and 83% say they see the quality of conversations between employees and managers increases (Schwartz et al.). This is because organizations are strategically implementing effective PM versus doing the bare minimum. To highlight improvements made to PM systems, we will point out changes and results in three key areas: employee evaluation, goal setting, and feedback.