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Ultimate Guide to Performance Management

Your People Matter

Your business is growing fast, and it’s time to think about implementing or

revamping your performance management process to create an amazing

employee experience and help drive your business forward.

Your employees are your most valuable asset to help your business grow.

So what can you do to engage your top talent, help them work smarter and

be more productive?

In this eGuide, you will learn about the incredible power of performance

management and how you can harness it to accelerate your business growth

and success.

Let’s get started!

Ultimate Guide to Performance Management 2

Table of Contents

What is Performance Management?

Why Performance Management Matters

Top Performance Management Challenges

Secret Sauce to Successful

Performance Management

Your Checklist for Effective

Performance Management

Why Should I Automate My Performance

Management Process?

Is My Business Ready for a Performance

Management System?

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PAGE 5

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PAGE 11

PAGE 15

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PAGE 20

What is Performance Management?

Performance management is more than just an annual performance review.

It is a continuous, year-round process where your managers and employees

work together to plan, track, and review the employee’s career goals, work

objectives, and contributions to your company. An effective performance

management process ensures your employees get the ongoing coaching,

feedback and development they need to succeed in their roles and deliver

the results you need to grow your business.



Why Performance Management Matters

If you ask your friends, family or co-workers about performance

management, chances are they will tell you how much they dread the process

or how useless it is. If that’s the case, why should your business invest in a

performance management process?

An effective performance management process can help you unlock your

talent’s full potential and turn your small business into a major threat to your

biggest competitors. Here are 5 reasons why performance management

matters and how it can improve your bottom line:

Aligns Strategic Goals

A well-designed performance management

process helps your employees understand how

their work contributes to the overall success

of your company’s strategy and goals. This

connection makes sure your employees know

what is expected of them, to keep them focused

on the most impactful activities that provide real

value to your business.

Drives Employee Development

Performance management ensures your employees

are continuously developing their skills and

capabilities, and have the knowledge and experience

they need to deliver top performance and success for

your business today and tomorrow.

Reason #1 Reason #2


Engages Your Employees

Ongoing employee development empowers

your employees to take the driver’s seat for their

own performance and career advancement,

while contributing to the overall success of

your business. The business result of engaged

employees is a higher level of employee satisfaction

and retention, which means your employees are

happier, more motivated to work harder, and less

likely to leave your company for your competitors.

Improves Your Bottom Line

When done properly, performance management helps you increase employee productivity, improve employee

engagement and reduce turnover, which ultimately lowers your costs and improves your bottom line.

If performance management can make such significant impact on the overall business performance, what

are companies doing wrong? Let’s take a closer look at some of the most common reasons why performance

management fails.

Encourages Performance Conversations, Feedback and Recognition

An effective performance management process

encourages your managers and employees to have

regular, ongoing conversations about goals and

expectations, accomplishments and challenges,

as well as development needs. This ensures your

employees get the feedback and recognition they

need to continue to improve and succeed.

Reason #3

Reason #5

Reason #4

An effective performance management process can help you unlock your talent’s full potential.

“ “

Top Performance Management Challenges

Performance management is often seen as a bureaucratic process forced

by HR, which adds little or no value to the business. If you don’t have

performance management in place yet, or are looking to improve your

current process, here are 7 challenges you want to address during your

planning stage to ensure you get the highest return on your investment.


2Lack of Timely, Meaningful Feedback

1The company’s overall strategy and goals must be integrated into your performance

management process to deliver real business value. A well-designed process begins with

focus. Having too many company goals and relying on a “cascade” process will likely leave your

employees feeling confused, unaligned, and inefficient. Simplify and prioritize your company

goals, and focus your performance management on a few critical goals that are key to your

business growth. Then help your employees understand how their everyday work and individual

goals will help achieve these objectives.

Lack of Strategic Focus

Challenge #1

Don’t wait until the formal performance review to provide feedback. Employees may feel

blind-sided, and this can lead to disappointment, confusion, frustration, and disengagement.

Disengaged employees are less productive and less motivated to improve their performance.

Train your managers to provide timely, meaningful feedback when positive behaviors or

performance issues occur. Waiting too long to give feedback hurts your company’s employee

morale, engagement, and ultimately your business performance.

Challenge #2



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5

3Management and leadership team must support and help drive performance management.

Your leaders have to be committed and actively engage their teams in performance

management activities, and provide support and recognition to managers and employees

who exhibit the expected behaviors and actions. Without leadership support, performance

management will not be successful no matter how well-designed the process is.

Lack of Leadership Support

Challenge #3

Lack of Stakeholder Review

When designing your performance management process, you should involve your major

stakeholders early on in the planning phase since they are the future users of the system.

Without proper consultation with your key stakeholders, your performance management

process may not address all the needs of the business, and you risk losing time, resources,

and buy-in implementing a system that no one wants or knows how to use.

Challenge #4

Lack of Proper Training & Communication

Without proper training and development, leaders and managers may not fully understand

what performance management is and what’s in it for them. In the implementation phase,

it is crucial to have good, relevant communications to explain the benefits of performance

management, and provide ongoing training to help leaders and managers obtain the

appropriate knowledge, behaviors and skills to properly engage their teams in performance

management activities.

Challenge #5


7Whether you currently have performance management in place or not, the process you

ultimately implement should be simple, and easy to understand and use. Your managers

and employees should not have to spend hours to learn your new processes and tools, or to

look for the performance-related information and forms they need.

Bad performance management is costly and delivers very little value. It can actually lower

your employee engagement level and harm your business growth. But when done right,

the impact of effective performance management is significant. Not only will you see an

increase in your revenue growth and bottom line, you will also stop your top performers

from walking out the door.

6Rewards are extremely important in recognizing and promoting top performance, and to

keep your employees engaged, motivated and inspired about their future with the company.

An effective rewards and recognition program should have clear expectations and criteria

around what types of behaviors and actions are rewarded that drive your company forward.

Lack of Appropriate Rewards & Recognition

Challenge #6

Lack of Simplicity

Challenge #7

Secret Sauce to Successful Performance Management

Building an effective performance management process is no easy task.

What works for one company may or may not work for another. It’s no

wonder why so many companies are struggling to get it right.

While you can’t take a cookie-cutter approach with performance

management, there are some best practices to help you get started

with designing a successful process that works for your business.



Assemble Your Project Team

When pulling together the project team to design

and implement your performance management

process, consider recruiting at least one

employee from each stakeholder group within

your organization. This diversity ensures your

performance management process will meet

everyone’s needs and help you gather support

and buy-in across the organization.

Identify Your Performance Management Challenges

Whether you are starting from scratch or are looking

to improve your existing performance management

process, you want to first look at your company’s

business needs, culture, strengths, and weaknesses

of any existing HR processes, as well as employee

feedback on these processes. This exercise will help

you figure out the unique performance management

challenges your company is facing, and the guiding

principles and objectives you seek to accomplish

with your performance management process.

Tip One

Tip Two

Diversity ensures your performance management process will meet everyone’s needs.

“ “


Define Your Performance Management Process

Your project team needs to decide the steps of your performance management process, based on the

business challenges and objectives identified. For example, some key performance management activities you

should consider include:

Tip Three

Goal-setting: Managers and employees meet to

discuss the goals and deliverables employees are

expected to achieve, and the measurements that

will be used to evaluate their performance. Setting

expectations helps employees understand what

tasks are expected of them, and why these objectives

are critical to the overall success of the company.

Check-ins: Managers and employees meet regularly

to discuss the progress employees are making

against their performance objectives, as well as

any challenges that may be preventing them from

achieving their goals. During these check-ins,

managers and employees should also re-evaluate

their goals and measurements, to see if they need to

be adjusted to reflect changing business priorities.

Ongoing Coaching: Managers should engage in

ongoing development conversations and work with

their employees to identify areas of strengths and

development as well as growth opportunities, to

help improve their performance and to advance

their career.

Real-time Feedback & Recognition: Specific, relevant

positive and constructive feedback should be

solicited and provided to employees frequently and

in a timely manner, from their managers, peers and

stakeholders. Real-time feedback is a powerful tool

to recognize excellent work, engage and motivate

employees for success, and to help employees

get on the right track if they are not meeting their

performance expectations.

Performance Reviews: Managers and employees

review overall feedback and discuss performance

evaluation. Managers and employees sign off on the

written performance review form, with performance

ratings if applicable.

Review Performance Results: Key stakeholders,

including HR, senior leaders, and managers, meet

to review the results and ensure alignment and

appropriate adjustment of performance reviews, as

well as ratings if applicable. You should also review

company-wide performance trends and gaps, with

plans of action to address those gaps.

Review Performance Management Process:

Together with HR, your project team should review

overall findings and stakeholder feedback on your

performance management process every year, to

identify trends, areas for improvement, and actions

to optimize your current process.


Determine Your Performance Management System

Once you have established your performance

management process, your project team needs to

decide how it will be implemented and managed.

Performance management can be conducted

manually using printed or electronic paper forms, or

it can be automated by implementing a performance

management software developed in-house or by an

external vendor.

To make an informed decision, your project team

should conduct research and identify the pros and

cons of each approach, taking into account your

company’s resources, existing processes

and timeline.

Tip Five

Create Schedule for Performance Management Activities

Regardless of the interval of performance and

feedback reviews your project team chooses, you

want to make sure the timing of employee goal-

setting and performance planning aligns with your

organizational goal-setting. Your business objectives

should be ready and available to managers and

employees when they meet to set their individual

goals and performance expectations.

Tip Four

Your Checklist for Effective Performance Management

As you prepare to introduce your new performance management

process, here is a checklist to help ensure you are addressing all

the major people-related activities and challenges.



Your Checklist for Effective Performance Management

Align with the company’s business needs, strategic direction and culture, and meet all our

stakeholder needs

Provide a process that is dynamic, easy to understand and use

Ensure employees’ individual goals support the strategic direction and goals of the business

Empower leaders, managers and employees to be successful with the appropriate

performance management training, resources and tools

Give an accurate picture of each employee’s performance, including their strengths and

development areas

Include collaborative goal-setting process, regular check-ins, and ongoing development

conversations between managers and employees

Establish clear understanding of what employees are expected to accomplish

Monitor and measure performance results and behaviors

Include real-time, relevant positive and constructive feedback

Provide training and development opportunities to maximize strengths and address areas

for improvement

Recognize and reward employee accomplishments and positive behaviors

Support compensation, promotion, and termination decisions

Provide legal documentation to defend my company against litigious ex-employees

Simplify and eliminate time-consuming people-related activities and processes

Does our performance management:

Why Should I Automate My Performance Management Process?

In today’s world, businesses move quickly and so do their strategies and

goals. Effective performance management means creating a consistent

but agile process that can adapt quickly to changing business priorities,

providing employees with a clear understanding of how they can support

your corporate vision through their work and individual goals.

The goal alignment process is a difficult, complex process that many

businesses struggle with, even for larger and more established companies.

To help accomplish this challenging task, small businesses are turning

to automated performance management solutions, to more effectively

communicate and align goals across the organization and help their

employees work more efficiently.

If you are implementing a performance management system for the first

time or are considering changing your existing manual, paper-based

process, here are 7 things you should know about automated performance

management software to help with your evaluation process:



Create A More Effective Goal-setting Process

Performance management solutions enable you to automate, simplify and create a more

effective goal-setting process. The best performance management solutions come with both

goal setting and goal tracking software to help your managers and employees set objectives

that are specific, measurable, and relevant to your company strategy and goals.

An automated performance management system can send your managers and employees

automatic reminders to complete their tasks, helping to keep your goal-setting and

performance management process on schedule.

Achieve Business Goals Faster

Tighter goal alignment reduces redundant efforts and focuses your talent on the

most critical company-wide goals, so your business can achieve your strategic

objectives quicker.

Increase Employee Productivity

Effective performance management solutions include employee

management software and tools that help your managers monitor employee

performance against their goals more effectively. This allows managers

to provide employees more accurate evaluations and more meaningful

feedback to improve their future performance.

Boost Team Collaboration

Most company objectives cannot be accomplished alone. An automated

performance management software enables you to cascade and align goals

across your organization, and to drive a team-oriented culture where your

employees will work toward the same vision of success together.

1

2

3

4


5

6

7

Provide Higher Quality Feedback and Coaching

Leading performance management software provides managers with the tools and advice

they need to coach and give better feedback, to help your employees understand how they

are doing, and what they need to do to be more successful.

Gain Powerful Insights Into Your Employees

With a manual paper-based performance management system, it

can get extremely messy and time-consuming to sort through piles of

paper and files to find the forms you need. Automated performance

management software stores all your valuable information online and

helps you pull up the data you need quickly and easily at your fingertips.

Effective performance management software should give you the ability

to see how your company is performing against its objectives, and

identify employee performance trends and competency gaps that may

be preventing your employees from achieving your business objectives.

Improve Your Company’s Bottom Line

An automated performance management

process can provide huge returns and savings

for your business by increasing employee

productivity, improving retention, and

reducing turnover.

Automating your performance management

process increases employee productivity

by ensuring your employees align with your

business objectives, and are collaborating

effectively across the organization to work

toward the same company goals.

Automation also ensures your managers are

equipped with the information and data they

need to engage in meaningful performance

conversations with employees, to help them

succeed, stay engaged and motivated.

Highly engaged employees means lower

employee turnover and attrition, which can

potentially save you thousands of dollars

annually. This frees up financial resources for

you to focus on critical business strategies and

actions that will drive your company forward.

Is My Business Ready for a Performance Management System?

The business value of implementing an automated performance

management software is significant, but it requires dedicated resources,

time and commitment to do it right. It is a big business decision to make

since the process will impact everyone in your organization.

How do you know if your business is prepared to implement a

performance management system? Take the quiz below to find out if

your company is ready.


The number of employees in my organization is greater than 10 and fewer than 500.

My company has been in business for more than a full year.

My business has an established performance management strategy and process, including the following:

Performance management aligns and supports corporate strategy and company-wide goals.

Managers and employees set, track and document goal plans that align with business objectives.

Managers and employees monitor progress and have regular, ongoing check-in sessions for performance feedback and development conversations.

Managers formally conduct performance evaluations and document performance reviews.

Managers and employees make compensation, promotion, and termination decisions based on performance evaluations.

Current culture encourages real-time positive and constructive feedback to support employee growth and development.

Performance feedback is gathered from managers, and peers and stakeholders if applicable, as part of an employee’s development and performance evaluation.

Current culture promotes recognition and rewards for employee accomplishments and performance.

YES NO

I have buy-in and commitment from leadership and management teams to support the implementation of performance management and the related change management communications and activities.

I have dedicated resources to lead implementation, ongoing training and communications for the company.

1

2

4

3

5



If you answered “yes” to at least 8 of the 13 questions above, your business is ready to

implement a performance management software specifically designed for small and

medium-size businesses. It is advisable to take action on the questions you answered

“no” to before you move forward with the implementation to ensure greater success.

If you answered “yes” to 2 to 7 questions of the 13 questions above, your business may

not be ready to implement a performance management system yet. It is advisable to first

evaluate your company’s business needs, existing HR processes and employee feedback.

This exercise will help you identify the unique challenges of your company and the actions

needed to formalize your performance management process before implementing an

automated system.

Is My Business Ready for a Performance Management System?


If you want to accelerate your business growth and success, you need a powerful but

simple-to-use solution to help you align employees to your business strategy and

maximize your talent’s employee productivity and engagement. SuccessFactors Perform

& Reward software is specifically designed for small and medium-sized businesses like

yours to automate your performance management processes, improve goal visibility and

employee efficiency.

Learn more about SuccessFactors Perform

& Reward solution

See demo or get a free trial

Questions? An SAP representative can

call or chat with you now

Accelerate Your Business Growth with Performance Management Solutions

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