With performance management to success

performance management cycle
What is Performance Management

The demands on management and employees are constantly increasing in times of digitization. In addition, the complexity of the tasks increases, while the processes shorten at the same time. Although German companies are aware of the importance of using digital change and the associated opportunities, this is often still insufficiently implemented.

Employees in particular are coming to the fore with the digital transformation - but here, too, those responsible are not exploiting the potential offered. Too often they are helpless in the face of challenges. Managers are encouraged to create the appropriate conditions, to respond to the modern requirements of the workforce, to motivate their employees at all times, to bind them to the company and to increase the performance and efficiency of the company. Performance management can offer a way to success.

Performance Management - Definition

Every product and service is linked to a service or benefit. This must be done in the best possible way by all parties involved in companies in order to be successful in the market in the long term. For this reason, it is particularly important to keep the motivation and motivation of the employees always high, true to the motto:
"There is achievement without success, but no success without achievement" (Fran├žois de La Rochefoucauld (1613 to 1680)).
This is where performance management comes into play. Both sub-terms are derived from English and are to be translated as follows: While performance means performance, success, result, execution and efficiency, under management, on the one hand, the definition of goals of the organization, on the other hand, to understand the development of a strategy for achieving objectives. It also means the organisation of production factors and the management of employees.

In summary: Performance Management refers to the performance and increase of employees through appropriately installed framework conditions. It is thus one of the most important human resource instruments and specifically promotes the willingness of employees to perform. In addition, performance management contributes significantly to achieving the strategic corporate goals.

Quality and quantity

Performance management is becoming increasingly important. Numerous companies have already made changes in the associated processes in the past and many managers want to follow suit in the coming months. With the help of effectively used and designed performance management, managers enable their employees to achieve top performance. This includes, in particular, the creation of suitable framework and working conditions in which employees can focus on their tasks and thus make targeted use of their skills and competences. In this way, the agreed standards and goals are achieved in the best possible way.

The basis for this is the measurement of the quantitative and qualitative performance of a company - this includes all individual areas as well as the employees. For example, variable wage remuneration serves as an incentive. However, in order to increase the company’s success, it must be based on previously defined goals. Because: If the performance of the employees increases, this also has a positive impact on the entire organization of the company. In combination, performance management leads to a long-term continuous optimization of business processes.

In the right tracks

Performance management is to be understood as a system for controlling and influencing company and individual employee performance. There are two approaches to the procedure: on the one hand the regulation and on the other hand the control of the performance management. The former refers to the achievement of a certain degree of the size to be regulated. The basis for the analysis is provided by feedback on the current level of target achievement.

Subsequently, an attempt is made to find a solution for possible problems, to take measures and to compensate for disturbances after their occurrence. The approach of control also focuses on achieving a certain degree of relevant size, but with the aim of striving for a feedforward process. This method means that solutions can be planned at an early stage. The right choice of framework conditions ensures the achievement of the objectives.

Select instruments

For successful performance management, executives rely on a wide variety of instruments. These include competence and potential assessments as well as target agreements and performance assessments. Target agreements are particularly popular with companies: they are established between employees and managers and contain the goals to be achieved in a certain period of time. As an incentive to achieve this, those responsible often rely on variable remuneration.

In addition to target agreements and performance assessments, competence and potential assessments are established. These approaches are mainly used in management as well as out-of-pay employees and focus on the "assessment" tool. Direct employee interviews are particularly suitable for this. As a result, managers show their employees that they are committed to the well-being of their employees and are always interested in further developments. If these discussions take place promptly after completion of a project, they additionally promote the motivation of the workforce.

It is important that constructive feedback is always given, addressing both positive and negative aspects. Because employees also have to draw positive approaches from mistakes in order to develop further. Companies that threaten their employees with fines receive negative rather than positive performance increases. Rather, in this way they increase distrust on the part of their workforce and stir up fears.

Variable remuneration

In the future, the so-called variable remuneration will remain popular with managers as an incentive to increase motivation. What was previously usually applied personally to the individual employee, is now also to be applied to teams. Collective and team-related bonus components thus continue to be the focus. In addition to performance-oriented rewards, bonus systems are becoming increasingly important. These promote a performance-oriented corporate culture and additionally increase the attractiveness of employers.

Meanwhile, however, not only financial aspects are among the incentives to increase the motivation of employees. Flexible working hours and the possibility of working in the home office can also be mentioned in this context. This means that there must be a balance between monetary and non-monetary offers that is interesting and appealing to employees.

Underestimated resource: employee ideas

The influence of digital transformation on work processes must also be taken into account in connection with performance management and increasing the performance of employees. The constant change of employees between project and day-to-day business as well as overarching areas of activity and responsibilities make it difficult for the managing directors and department heads to overview the respective responsibilities and the respective workload. The result: lack of transparency, overloaded specialists and a lack of opportunities for innovation and creativity.

In order to ensure the motivation of their employees, managers must create freedom. Role-based work offers a way to provide trouble-free and stress-free time windows. In this way, employees can concentrate on the task at hand in the respective time periods and are not interrupted during this time. So that departments are still accessible to customers and colleagues, it is important to plan the respective resources and put them together in an overview. This also allows managers to see who sits at which task and when and where possible resources can be distributed. This methodology also supports the innovative power and the formation of productive ideas in companies by allowing employees to focus on one topic, thus motivating them to Trouble-free working and thus a timely completion of the tasks as well as productivity increase allows.

This increase in productivity creates freedom and thus the possibilities for innovative ideas. They hold the potential for unique new services that create added value for the customer. The most important driver of these innovations today is technology, alongside its own employees. Managers must therefore consider how they can best use the technologies for the design of innovative products. But far too often, companies do not involve their employees in this process, and their ideas often have great potential. The implemented developments make a successful idea management for companies lucrative, as well as the resulting savings. However, these alone do not drive digitalization forward.

Long-term performance management

For managers and employees, Performance Management offers a great support in permanently increasing the company’s success. Those responsible should pay particular attention to two aspects: a balanced strategic orientation of the company both on the competitive environment as well as on the interests and potentials of the employees and a consistent operationalisation. This is based on the corporate strategy, which means that the key figures are defined in such a way that they reflect the degree of achievement of the Strait objectives of the company and allow active management.

This makes it clear that measuring instruments must also be defined at the tactical level for controlling the most important management disciplines as well as the processes and IT systems. Performance measurement is often used here. This is a process in which information about the performance of individuals, groups, organizations, systems or components is collected, analyzed and presented. This information is then the so-called key performance indicators, or KPI for short. In doing so, those responsible should limit themselves to a few selected but meaningful key indicators in order to make a targeted control regarding the achievement of the goals transparent at all times.

Increase employees

One thing is certain: In order for performance management to be successfully implemented, those responsible must create the corresponding framework conditions - and these vary from company to company. Because in every business there are different requirements and processes that need to be adapted.There is no patent recipe. Only by means of optimally interlinked processes is it possible to successfully promote the willingness of the employees to perform and thus increase the motivation of the employees as well as the success of the company. Because a successfully implemented performance management strengthens the achievement of the company goals substantially.
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