Business management

How to set effective performance review goals

Come up with the right employee performance review goals and you’ll increase productivity while motivating and engaging your staff.

This article was originally published on 10th February 2022. The article has since been updated on 29th March 2023.

It has been a particularly challenging few years for businesses of all sizes. Many have had to cope with the pandemic, supply shortages, the much-quoted ‘war for talent’, as well as financial pressures related to the cost of living squeeze.

Managing levels of performance amid such disruptive forces requires an integrated approach. Employees need to feel confident their skills, goals and well-being are recognised. Employers want to know their staff are productive, effective and motivated to stay committed to the company for the long term.

Here are some thoughts for business leaders who want to make sure their processes, systems and procedures are fit for purpose in the future.

Providing employees with clarity is key to setting them up for success

Communication and collaboration are harder when teams are working from different locations. With many of us working remotely, clarity is vital, and using digital tools is becoming more commonplace. Here are some tips:

  • Be clear on required outcomes and measure performance via outputs, not what you can physically see on a daily basis.
  • Performance objectives alone are not enough. Think about the behaviours and skills required to be successful in a remote environment. 
  • Objectives and goals should focus on work outcomes as well as goals for future skills development. 
  • Consider the skills your people need to thrive in a world where digital transformation and automation are accelerating.
  • Incorporate development goals to help prepare your workforce for the future.

Measure outcomes as well as circumstances

In a hybrid world, it’s important to measure outcomes as well as the circumstances against which those outcomes are achieved. 

Homeworking has led to the workforce becoming humanised – people want to continue to be seen as individuals, not just employees. 

Great conversations should not only look back and reflect on what has been delivered but also look forward, while considering what support is required to reach longer-term goals.

Natalie Nelson
Technical Advice Lead, NatWest Mentor

When measuring performance, businesses should move beyond focusing on core performance measures and consider:

  • how the employee has achieved the results

  • what their personal circumstances are

  • how they have invested in their personal and continued development to make sure their skills and experience remain relevant in an ever-changing world

  • those assessing performance need to be mindful of any potential unconscious bias linked to homeworkers versus those in the office

Physically being able to see an employee working in the office may drive those assessing performance to think office-based workers are more productive. This is not necessarily the case: in fact, the pandemic has shown that many workers are more productive at home. 

Line managers need to challenge any biases and make sure they are treating all team members fairly and inclusively.

Best practice performance management is ‘always-on’

Businesses should aim to match organisational and personal objectives, with managers central to performance. Smart businesses have realised effectively managing performance moves beyond an annual appraisal process. 

Great performance management involves an ongoing conversation with regular and timely feedback and coaching. This makes conversations and interventions to further enhance performance more relevant and matches the fast pace of change within today’s world of work. 

Great conversations should not only look back and reflect on what has been delivered but also look forward, while considering what support is required to reach longer-term goals. While looking ahead it’s also important to consider:

  • Regular performance check-ins. Quarterly performance check-ins tend to work well, and many companies are now also using this as an opportunity to review and flex objectives. 
  • Objectives set in January may no longer be as relevant in July. It’s important to build in flex where possible.
  • Great performance management should also focus on planning for further career and skills development.

Be fair and consistent when setting performance review goals

How you manage and assess performance should be fair and consistent across teams and individuals. However, leaders must understand and acknowledge individual differences in preferences and motivations of their teams and adapt their style to suit this. 

For example, what motivates a salesperson in their mid-20s may be very different from what motivates a project manager in their 50s. Everyone is different and therefore it is the line manager’s responsibility to:

  • get to know your team members

  • understand their wants, needs and motivations

  • adapt your style and approach accordingly

What are the common challenges with appraisals and how do I overcome them?

Quite often, appraisals are implemented as an annual process at the end of the performance year, which can feel a bit like a non-value-add tick-box exercise. 

If performance conversations aren’t happening until the end of the performance year, businesses are missing the opportunity to drive further improvements and address any issues from the outset.

SME business owners should be really clear about what they would like their employees to achieve at the start of the performance year, including what ‘good’ looks like from a behavioural perspective.  

Rather than viewing the performance appraisal as a once-a-year process, small businesses should have regular continual conversations with their employees about performance, motivations and personal development.

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