Measure, Evaluate & Communicate
Keeping your employees motivated and making sure they’re able to perform at their best is crucial for an employer. This is where Performance Management can be a powerful tool to help your employees step up their game and contribute more effectively.
However, the catch is, designing a Performance Management System that aligns with your organisation’s values and culture while consistently providing your employees with constructive feedback that helps them improve.
If you’re considering implementing a Performance Management System, here’s what you need to know
Pros and Cons of not having a formal Performance Management System
A startup ecosystem involves countless decisions, including whether to implement a Performance Management System (PMS). While a PMS can be beneficial in many ways, there are also potential drawbacks to consider.underlying factors that contribute to employee retention or turnover. This can further be done when they examine how to enhance each stage of the employee journey.
| ADVANTAGES OF NOT HAVING FORMAL PMS | DISADVANTAGES OF NOT HAVING FORMAL PMS |
|---|---|
| Not having a formal Performance Management System allows for greater flexibility in adjusting job responsibilities and performance expectations as the startup evolves. | A lack of formal structure can make it challenging to provide employees with meaningful feedback and opportunities for growth and development. When there is no formal system in place for evaluating performance, it can be difficult to provide constructive feedback that can help employees improve. Additionally, without clear goals and expectations, it can be challenging to identify areas where employees can grow and develop their skills. |
| No Performance Management System may encourage a results-oriented culture, where the focus is on achieving key business objectives rather than adhering to a set of predetermined performance metrics. | Without clear expectations and goals, employees may not be able to understand what is expected of them and how to measure their own success. This leads to confusion and frustration, which can also negatively impact job satisfaction and performance. |
| Implementing a Performance Management System can be time-consuming and expensive, particularly for early-stage startups with limited resources. By forgoing this process, startups can save money and direct their resources toward other areas of growth. | Without specific performance standards, employees may feel a lack of accountability, which can lead to decreased performance. When employees are oblivious to clear and consistent standards, it can be difficult to ensure that everyone is working towards the same goals |
Therefore, it is recommended to establish and integrate a Performance Management System once your team has grown to ~50 members. At 50, when your team is smaller, it will be easier to implement and adapt to the PMS software, than it would be once you’ve scaled to a team of 100 members.
What to keep in mind while designing the Performance Management System
Startups in India face unique challenges when it comes to managing employee performance. One of the primary challenges is the lack of a formal structure for designing employee performance. Additionally, startups in India often have a young and diverse workforce with varying skill sets, making it difficult to implement a one-size-fits-all approach to performance management.
Hence, there are specific objectives to keep in mind while designing the Performance Management System.
- Alignment with goals and objectives: The goals should be Specific, Measurable, Achievable, Relevant, and Time-bound (SMART). Ensure that the Performance Management System aligns with the startup’s overall goals and objectives. This will ensure that all employees are working towards the same goals and that their performance is evaluated in a way that is meaningful and relevant to the organisation.
- Transparent: It is crucial to establish a system that is clear and transparent. This means that employees should have a comprehensive understanding of the expectations set for them, as well as how their performance will be evaluated. A clear and transparent system can increase employees’ motivation, and job satisfaction, and prevent any misunderstandings or conflicts.
- Consistent and Fair: All employees should be evaluated using the same criteria, and evaluations should be conducted in a manner that is unbiased and free from discrimination. This will help to build trust and confidence in the Performance Management System and ensure that employees are evaluated based on their performance, not on any personal biases.
- Future-oriented: The system should capture not only the current performance but also the long-term and mid-term goals.
- Team size: One of the most crucial things to remember is the sample space you’ll be dealing with. Late-stage startups can incorporate a more extensive PMS whereas a scaling startup that is yet to hire an HR Rep and deploy an HRMS (Human Resource Management System) can implement a close-knitted PMS.
- Employee participation: Employees should be included in the goal-setting process to ensure that they are aware of the goals and feel a sense of ownership. This will not only boost employee motivation but also enhance engagement.
- Regular feedback and coaching: Employee advice and improvement opportunities are identified through regular coaching and feedback. Also, this promotes trust and strengthens manager-employee communication.
One of the most important factors to consider before incorporating a Performance Management System is laying a base for the Objectives and Key Results (OKRs). This involves setting specific, measurable objectives for employees and working towards achieving them over a set period. It is a results-based system that focuses on outcomes rather than outputs. It is becoming increasingly popular, especially in the technology industry, due to its flexibility and ability to align individual goals with the company’s overall objectives.
- Define your mission and vision: Before setting OKRs, it’s important to have a clear understanding of your startup’s mission and vision. These should guide your objectives and key results.
- Identify your strategic goals: Identify the strategic goals that will help you achieve your mission and vision. These should be specific and measurable and should align with your company’s overall strategy.
- Break down your goals into objectives: Once you have identified your strategic goals, break them down into specific objectives. Objectives should be Specific, Measurable, Achievable, Relevant, and Time-bound (SMART).
- Identify key results: For each objective, identify the key results that will help you measure progress towards achieving that objective. Key results should be quantifiable and should help you track progress toward achieving your objectives.
- Assign ownership and accountability: Assign ownership and accountability for each objective and the key result. This helps to ensure that everyone is clear on their responsibilities and is working towards achieving the same goals.
- Regularly review and adjust your OKRs: Regularly review your OKRs to ensure that they are still relevant and aligned with your company’s mission, vision, and strategy. Adjust your OKRs as needed to reflect changes in the business environment or company priorities.
Commonly used Performance Management Systems
Here’s an elaboration on the most incorporated Performance Management Systems in the Indian startup ecosystem:
- Continuous Performance Management: Continuous Performance Management (CPM) involves providing employees with regular feedback and coaching throughout the year, rather than just during annual or semi-annual performance reviews. This approach can help managers stay more closely connected to their team members, and provide feedback that is more timely and relevant to employees.
How to implement a CPM
Step 1: Perform regular check-ins: Schedule regular check-ins between managers and employees to discuss progress, goals, and challenges. These check-ins can be weekly or monthly, depending on the needs of the employee.
Step 2: Provide feedback: Use these check-ins to provide feedback to employees. Focus on both positive feedback and areas for improvement. Be specific and provide examples.
Step 3: Encourage self-reflection: Encourage employees to reflect on their own performance and identify areas for improvement. Provide guidance and support as needed.
Traditional Performance Appraisal: This system has been in use for decades and is still widely practised. With evolving times, we are witnessing the Indian startup ecosystem adopting the same which involves a yearly or bi-yearly review process where a manager conducts a formal performance appraisal of their employee’s performance. The performance appraisal typically assesses the employee’s accomplishments, strengths, and areas for improvement, and sets goals for the coming year.
How to implement a traditional performance appraisal:
- Set goals: Set specific and measurable goals for each employee that align with the company’s overall goals.
- Monitor performance: Regularly monitor employee performance to ensure that they are making progress toward their goals.
- Provide feedback: Provide employees with feedback on their performance. Focus on both positive feedback and areas for improvement. Use specific examples to illustrate your feedback.
- Set development plans: Identify areas for development and set plans to help employees improve their skills and achieve their goals.
360-Degree Feedback: This system collects feedback from a range of sources, including managers, peers, subordinates, and customers, to provide a comprehensive view of an employee’s performance. This type of feedback can help identify areas of strength and areas for improvement and can help employees understand how their work impacts others.
How to implement a 360-degree feedback:
- Define Performance Metrics: The first step is to establish clear performance metrics and objectives for each employee based on their job responsibilities and the organisation’s goals.
- Identify Reviewers: In this step, managers and employees identify the individuals who will provide feedback, including supervisors, subordinates, peers, and customers.
- Conduct Assessments: Assessments may take various forms, including surveys, interviews, and focus groups. The goal is to gather feedback on an employee’s performance from multiple perspectives.
- Analyse Results: Once the assessments are complete, the data is analysed to identify trends and patterns, including strengths and weaknesses.
- Provide Feedback: The feedback obtained from the assessments is shared with the employee, and they are given an opportunity to discuss the results.
- Develop an Action Plan: Based on the feedback, an action plan is created to help the employee address areas of improvement and build on their strengths.
- Implement Changes: The employee works to implement the action plan, with the support and guidance of their manager.
- Monitor Progress: Regular check-ins and progress reviews are conducted to ensure that the employee is making progress toward their goals, and adjustments are made as needed.
A guide to setting up a Performance Management System tool
In our conversations with industry leaders in the startup ecosystem who lack a formal Performance Management System (PMS) or are in the process of implementing one, we noticed that as the company grows and reaches a certain headcount, it becomes increasingly challenging for them to maintain individual employee records and track their performances. The task of tracking employee performance becomes tedious and time-consuming, especially when done manually. Based on our conversations with the leaders, here’s how they have incorporated performance management tools –
Where can you integrate your Performance Management System?
The software available in the market may or may not include both employee management and performance management. Here is a checklist of the best tools available in the market and what they have for you on the table
| Zoho | Darwinbox | Mesh | KekaHR | |
|---|---|---|---|---|
| Offers employee management, attendance management & payroll modules | Yes | Yes | No | Yes |
| Offers Performance Management | Yes | Yes | Yes | Yes |
| India Based | Yes | Yes | Yes | Yes |
| Cost | Essential ($1 per employee per month), Professional ($2 per employee per month), and Premium ($3 per employee per month) *only professional and premium plans offer performance management | Customised based on the kind of products the org. need | Customised based on the kind of consulting and products the org. need | Lite (₹999 per month for up to 20 employees), Pro (₹49 per employee per month), and Premium (custom pricing). The Pro and Premium plans include performance management features. |
| Zoho | Darwinbox | |
|---|---|---|
| Offers employee management, attendance management & payroll modules | Yes | Yes |
| Offers Performance Management | Yes | Yes |
| India Based | Yes | Yes |
| Cost | Essential ($1 per employee per month), Professional ($2 per employee per month), and Premium ($3 per employee per month) *only professional and premium plans offer performance management | Customised based on the kind of products the org. need |
| Mesh | KekaHR | |
|---|---|---|
| Offers employee management, attendance management & payroll modules | No | Yes |
| Offers Performance Management | Yes | Yes |
| India Based | Yes | Yes |
| Cost | Customised based on the kind of consulting and products the org. need | Lite (₹999 per month for up to 20 employees), Pro (₹49 per employee per month), and Premium (custom pricing). The Pro and Premium plans include performance management features. |
How can we help?
We understand designing and implementing a Performance Management System can be a daunting task but don’t worry, we’ve got you covered. Our in-house Talent Branding Team can help you build your Performance Management System as per your requirements. You can reach out to trishla@metamorph.work and akash@metamorph.work.