The Importance of Performance Management:

Aug 1st, 2023 | Hire Wire

In my conversations with CEO’s we speak about their growth plans, and the talent needed to reach their goals. With growth comes great responsibility. Not only do companies need to learn how to attract good talent but must also learn how to develop their talent as well. Forbes even rates performance management as the second most important trait to organizing how and why a company exists. “Without having performance management implemented in the organization, you won’t be able to give clear feedback. Your employees won’t know what is expected from them, how their performance will be measured or what they need to achieve to move to the next level.” (Forbes, August 2022)

Below we have listed clear tips we have passed along to our clients:

Think about performance management early: Performance Management should go hand in hand with Talent Acquisition goals. Our TA professionals love to understand our clients’ needs but as our clients focus on good candidates, often our consultants go a step further. Our professionals have worked with competitors and can suggest strong onboarding and training plans to attract new employees.

As managers, we must understand that our job is to focus on the strategy and innovation of the company, not daily micromanaging of the team (Forbes, August 2022): Crafting specific KPI’s for your organization and communicating goals are the foundations of a good performance structure. Our team is well equipped to work with your managers to develop KPI’s and develop performance management structures. It’s important to ensure that individual department goals contain consistent milestones that can be traced to the larger corporate vision.

Bonuses can be strategic and revenue producing Harvard Business Review mentions that proper incentives can “transform a business” (HBR, 2021). In the article Compensation Packages that actually drive performance. The article illustrates the following example:

“A public company was pursuing an aggressive new growth strategy after a recent business reorganization. But it was risky, and the firm wanted executives’ incentives to reflect that. So, it made a large amount of management’s pay contingent on successfully executing the strategy, which included entering new product markets, changing sales channels, and expanding geographic reach. The compensation committee defined success as a significant increase in shareholder value over three years. In other words, the market would determine whether the executives had implemented the strategy well.

When setting long-term incentives, the committee decided to deviate from the norm in three ways. First it chose to front-load three years of awards and forgo future annual awards. Second the awards were delivered only if the firm hit certain share-price targets. Third the awards were based on a scale, and the targets and vesting schedules were set so that average performance resulted in minimal awards. However, under this plan executives would be rewarded for the risks they took because they could get more compensation sooner than they would have under a traditional approach.” (HBR 2021)

Similarly, bonuses can be managed for smaller startups by linking specific growth milestones to bonuses that pay out on top of the regular pay and bonus and employee receives. These growth bonuses are especially helpful when a company is looking to increase its client base and services.

If interested in learning more about performance management and compensation strategies, please reach out to us!