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The Difference between Performance Management and Performance Reviews

When you first start your business, you have so many hats to wear that soon enough you feel your hat is as large as Cat in the Hat “yeeeeeeep”.  You take the plunge and start to grow your business by employing staff, but soon realise that this is one of the greatest challenges you have faced in your business – managing staff. 

You are not alone as many business owners struggle with how to manage staff to get results in their businesses.  One question I get asked all the time is ‘what is performance management” or business owners tell me that they do performance manage their staff “Yes, we do our annual performance reviews.” 

I wanted to help business owners understand what is performance management and what is a performance review, so I have written this blog to provide clarity on the difference between the two and how important it is to implement both into your business. 

“People are your greatest asset”.  I am sure you have heard the statement many times over.  Even though it is an over-used phrase it does ring true.  However, people are your greatest asset, but only if they are the right people and you continually empower, motivate and provide feedback.

You can recruit the best people for your business, but if you do not continually communicate and engage with your employees, you will not retain them.  

Let me first explain and provide a definition of performance management and performance review.

Definition of Performance Management

Performance management is an ongoing process (forward looking process) of communication and engagement between a manager and an employee throughout the year, which supports the overall strategic objectives of the business. The communication process includes clarifying expectations, setting objectives, identifying goals, providing feedback and reviewing results.

The ultimate goal of performance management is to continually motivate your employees to increase engagement and create high performing employees.

Definition of Performance Reviews

A Performance review (also referred to as performance appraisal or employee appraisal) is a method (system) in which an employee’s past performance is evaluated and documented.  It is a formal process that is conducted annually or can be more frequently dependent upon the business. 

A Performance review is only one aspect to Performance Management.  The table below further describes the differentiating factors. 

The Difference Between Performance Management and Performance Review

How to Implement Performance Management Successfully into your Business

I hope now you have a clearer understanding of the difference between the two. 

To be a high performing business, you need to have high performing employees and there are steps you need to take to ensure top performance as well as deal with underperformance issues as they arise. 

Let’s discuss how to implement these Performance Management steps into your business when you have limited experience. 

Your business already has standard operating policies and procedures (SOPs), automated processes and checklists in place (if you don’t, we need to chat further!) so performance management is no different.  It is called a Performance Management system and consists of the following steps:

Step 1              Plan

Step 2              Discuss

Step 3              Monitor & Performance Coaching

Step 4              Performance Review

Step 1 – Plan

The first step is to look at your business goals for the year ahead.  Once you understand that employees and employee’s roles are linked to strategic business goals, you will be able to effectively think about creating individual goals for each employee that will assist the business reach its goals.  You can then create a performance plan that you will discuss with your employee. 

Remember to ensure that employees know what is expected of them.  Employees cannot perform well if they do not know what is expected of them.  Unfortunately employees are not mind readers. 

Employees need to understand where their role fits in, the impact it has on the business and how their job’s responsibilities link to business objectives. The range of performance expectations can be broad, but can generally be broken into two categories:

  • Results (the end product produced by an employee often measured by objectives or standards)
  • Actions & Behaviours (the processes and methods the employee is expected to use, how you expect them to act with clients, management and colleagues and the values they must demonstrate within the business)

Step 2 – Discuss

Set up a meeting with each employee and discuss their individual goals.  These should be SMART goals.  Specific, Measurable, Realistic and Relevant to the employee’s duties.  Agree on these goals and document them in the Performance Plan as well as the support you will provide the employee to reach their goals (e.g. training).  Establish a meeting schedule for when you and the employee will meet to review the performance. Make sure that both you and the employee have a copy of the Performance Plan.

Step 3 – Monitor and Performance Coaching

Always remember communication and engagement with your employee at every stage.  Employees love to receive feedback and appreciation.  Remember to provide praise and appreciation when it is due and to coach your employee to grow, develop and improve performance.  Think of the following when providing positive feedback: 

  • Describe the positive performance and be specific with details
  • Allow the employee to talk about the positive results and what contributed to the success of these results.  This allows them to feel proud of their achievements
  • Discuss ways in which you can support continued positive results
  • Reaffirm the value of the employee’s work, input and how it fits into the business’ goals
  • Value the successful moments and let them relish in it.  This boosts employee morale
  • Remember to show your appreciation of the employee’s hard work, successful results and that you have the utmost confidence in them to continue to produce positive results

Step 4 – Performance Review

Conduct a formal Performance Review with each employee every 6 or 12 months to assess their performance against their goals and set goals for the new performance cycle. 

Even though a Performance Review is a formal process, it is important to ensure that a review remains productive and positive to ensure successful outcomes, rather than seen as a negative experience for employees.  It should also be a chance for employees to provide feedback and share any concerns. 

Performance Management and Performance Reviews are crucial to business success, however only if you have the right employees (A-grade employees). Learn more about a successful recruitment model by reading the 5-STAR Recruit Method.

Would you like guidance and advice on how to implement a Performance Management system into your business? BOOK A FREE CALL to discuss further with us.

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