Performance Management: 5 Steps to Improving Employee Performance

Performance Management – Have you ever found yourself thinking:

“I guess I really should focus more on managing my employees, because I know there are some areas of their performance that needs improving. But there are so many other things I need to do it just doesn’t make it as a high priority.”

“I need to improve employee performance but I’m a business owner, I’ve never been to management school. I don’t know enough about how to get the best out of people. I’d rather do nothing than mess it up.”

“I know  performance management makes some sense –but here’s what I don’t understand. Why don’t my employees don’t just do what I want them to do?”

You have? Well believe me, you’re not alone!

Over the last 15 years I’ve worked with hundreds of business owners and managers in organizations probably very much like yours. Many of those people are, by their own admission, not taking action to improve employee performance through performance management. Of course on a day by day basis they manage their employees – they answer questions, allocate work, check some of that work, maybe even hold some team briefings.

But what they most often don’t do is apply a focused and structured system to make sure that their employees are ‘effectively managed’.

The type of ‘effectively managed’ that:

  • Improves employee performance
  • Boosts your business productivity and profitability
  • Improves customer satisfaction ratings
  • Lowers your staff turnover
  • Improves your employees level of job satisfaction

How do we know that performance management actually improves employee performance?

There’s a lot of research around employee performance management and employee engagement. Here are some examples to help us understand how ‘effective management’ improves employee performance.

Research 1

In a Gallup study of performance at unit level, covering more than 200,000 employees across a dozen or more industries, teams that rated managers highly on four factors were more productive and more profitable. They also had lower staff turnover and higher customer satisfaction ratings. So, what are the four factors?

  • Knowing what is expected of them
  • Receiving positive feedback and recognition regularly for work well done
  • Having a role that fits their abilities
  • Having a manager who shows care, interest and concern for each of them


Research 2

Gallup research in the US on employee engagement shows that during the ‘heat of the recession’ (2008 – 2009) employee engagement has remained relatively stable. Before we begin the celebrations let’s take a look at what ‘relatively stable employee engagement’ means .

  • 28% of employees are ‘Engaged’ – passionate, connected to the company, driving innovation
  • 51% are ‘Not-Engaged’ – checked out, sleepwalking, and putting in time not energy
  • 17% are ‘Actively Disengaged’ – actively unhappy, with the emphasis on ‘actively’

So, although employee engagement hasn’t plummeted during the recession, that’s still just 28% of employees with the engagement levels that our organisations need to be effective. Gallup says:

“Managers who focus on just a few items can enjoy a big payoff not just for their team but for the organisation as a whole.”

The few items:

  • Making expectations clear
  • Providing frequent feedback and recognition
  • Encouraging development
  • Helping workers connect their efforts with the mission and purpose of the company


Research 3

Proudfoot Consulting’s Annual Productivity Survey for 2007 shows that on average, including studies undertaken in the US and UK, over 18% of working hours are unproductive (taking into account an optimum ‘labour utilisation’ time of 85%)

Here’s what they say about the reason:

“Whatever business you’re in, pay particular attention to the calibre and capabilities of those who directly supervise frontline workers. Poor worker supervision has always been a prominent reason for wasted working time in our Business Reviews and in the last two years has risen to become the dominant factor.”

What does the research mean to you?

It doesn’t take a genius (which is lucky as we don’t have one here) to see that the research points to a number of key actions that make up the idea of ‘effectively managed’ – the type of ‘effectively managed’ that improves employee performance;

“Effectively managed” is…

Making your expectations of your employees clear

  • Helping employees connect their efforts to the mission and purpose of your business
  • Frequently giving feedback and recognition
  • Encouraging development and helping employees match their abilities to their role
  • Showing care, interest and concern for your employees

The practical application: performance management

So how do you apply these actions? Here is a five step system for improving employee performance through effective performance management:


performance management

Performance Management; Is it time to assess yourself?

Is it time to assess yourself / your managers against this 5 step performance management system so that you can identify where you need to improve?


8 Responses to Performance Management: 5 Steps to Improving Employee Performance

  1. […] In a previous post, I also detailed 5 tips for improving employee performance. […]

  2. […] If you’d like to see a five step system for managing employee performance take a look at 5 Steps to Improving Employee Performance. […]

  3. […] And of course once you have described the behaviours you need you can then communicate those behaviours to your employees so they can see the bigger picture and then manage performance against those behavioural objectives. […]

  4. […] then is that they either don’t take any action at all (a big mistake in my view – read why here) or they spend so long planning what they need to do that by the time they get around to taking […]

  5. Jim Morgan says:

    In addition to the sources you cite, Joan, I could list dozens of scientific studies from peer-reviewed journalists supporting your excellent approach. Independent reviews of the research literature by leading teamwork scientists in 2010 and 2006 noted the value for performance objectives and frequent feedback. Another study on “transformational leadership” found that in practice that style is little different from a goal-and-reward system critical to the success of transformational leaders. Every year, the companies that appear in the “America’s Top 100 Plants” list from Industry Week have higher-than-average training budgets. You mention the importance of a “structured system”; a 2001 Dartmouth study estimated that at the team level, structure has four times the impact on performance of day to day coaching.

    Managers and business owners who think they “don’t have time” to focus on people management need only look at the cost side of the profit-and-loss sheets. What is the biggest cost item by far? People. Where, then, will most of your revenue increases and cost savings come from? By improving people processes and productivity.


    -Judge, T., and R. Piccolo (04), “Transformational and Transactional Leadership: A Meta-Analytic Test of Their Relative Validity,” Journal of Applied Psychology 89(5):755.
    -Kozlowski, S., and D. Ilgen (2006), “Enhancing the Effectiveness of Work Groups and Teams,” Psychological Science in the Public Interest 7(3):77.
    -Hackman, R., and N. Katz (2010), “Group Behavior and Performance.” In Fiske, S., D. Gilbert, and G. Lindzey (eds.), Handbook of Social Psychology (5th ed.), Wiley: New York.
    -Wageman, R. (2001), “How Leaders Foster Self-Managing Team Effectiveness: Design Choices Versus Hands-on Coaching,” Organization Science 12(5):559.

  6. joanhenshaw says:

    Hi Jim
    Many thanks for your comment and for your excellent input.
    The sources you cite and your comments on the research are extremely valuable. We certainly are in agreement on the value of performance management!
    I look forward to reading more of your work
    Best wishes

  7. This is a simple and very useful article. The practical management tips which we all know should be practiced in business today but very rarely are, are backed up by research results and feedback from employees. Too many businesses today are so target driven that their managers concentrate on the task rather than their people. This article reminds us that if we can look after our people the task is achieved much more efficiently and effectively.

    -Neville Beardsmore (Chapelfields Associates Ltd)

  8. joanhenshaw says:

    Many thanks Neville. Of course I totally agree with your comments! My view is we need to both support managers in applying good people management skills and (importantly) hold them accountable for doing so.

    Best wishes, Joan

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