Performance management – techniques for effective improvement plans

Every business owner dreams of having a high-performing workforce. Here’s how to set and deliver targets for individual, and business, success.

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Written and reviewed by:
Helena Young

Performance management refers to any efforts taken by managers to monitor and evaluate an employee at work. It’s a broad term that is usually quantified by HR teams using KPIs (key performance indicators).

However you define workforce success, performance management gets the best out of your people. It’s a collaborative process where both manager and employee agree to a list of expectations, goals, and targets. The catch? These individual aims must also align with the company’s overall vision.

Below, we’ll cover every aspect of the performance management process. From setting expectations, to providing feedback, to managing the difficult process of performance improvement plans, we’ll explain how to foster a culture of continuous growth and improvement in the workplace.

What is performance management?

The primary goal of performance management is to create a work setting where employees feel motivated and supported to perform to the best of their abilities. Second is to align this with the organisation’s broader targets.

As any manager knows, there is (sadly) no shortcut to a super productive and high-powered workforce. That’s why performance management refers to a diverse range of business and managerial techniques. Here are the five most common:

  • Objective setting – usually in the form of development KPIs, these goals should be measurable and achievable within a specific timeframe
  • Progress monitoring – tracking of employees’ performance against the set goals helps workers stay on track and engaged
  • Feedback – whether positive or constructive, feedback helps employees spot opportunities for improvement
  • Recognition – rewarding employees can boost morale and motivation
  • Coaching – a supportive leadership style can serve to aid employees’ learning and development

Why is performance management important?

Performance management is important for both individuals and organisations. It gives managers an understanding of the top performing (and underperforming) employees. These are both crucial insights for improving productivity and overall business performance.

At a personal level, it’s important to remember that every employee must start somewhere. Performance management also provides opportunities for skill development and growth through coaching, training, and constructive feedback.

This can bring a psychological advantage to teams. When a manager shows genuine care about an employee’s career progression as part of their leadership style, the employee will feel valued and appreciated. This is almost guaranteed to keep staff engaged and committed to their workload.

Having a performance management system in place also sets clear expectations and standards for workers to meet. The individual knows how to succeed and is accountable for the task; building trust with the employer and their colleagues.

In other words, it’s a win for both parties.

What are the benefits of performance management?

One of the key benefits of performance management is that it helps with succession planning. Companies can identify potential or upcoming leaders, ensuring a qualified talent pool for senior or leadership positions in future.

You don’t have to find the next CEO to recognise the value of good performance management. Encouraging any learning opportunities within your staffing is a great way to help them figure out what direction their career should take – and how their journey might benefit the business long-term.

Performance management is also a cost-efficient people strategy. Putting money into your existing workforce means you’ll spend less on recruitment and onboarding costs, preserving company culture, improving loyalty and reducing staff turnover.

In fact, a report by e-learning solutions provider IMC recently found that 86% of employees would remain with their current employer for longer if they had offered more learning and development (L&D) opportunities.

The performance management cycle explained

Defining a subjective concept like performance management can sometimes feel redundant – especially given the diversity of today’s workforces.

After all, no employee is the same, and it’s important that new hires feel comfortable to bring their unique working style to their role.

The performance management cycle aims to address this challenge. It’s a four-step model that gives management and employees a structured process to organise their development, while still leaving room for flexibility.

The four foundations of the cycle are planning, monitoring, reviewing, and rating. Whatever format managers choose to monitor an employee’s performance via, their method should follow the below outline as the smoothest course for corrections and development.

Performance management cycle

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1. Plan

Managers work to establish a clear set of performance expectations that align with the organisation’s Objectives and Key Results (OKRs). Employees are invited to state what skills they want to develop, and how their learnings will benefit the company.

2. Monitor

Managers meet with employees on a monthly or quarterly basis to check in on progress towards goals and offer help if needed. These meetups also give space for new goals to be introduced that align the business direction.

3. Review

One year after the goals were set, managers organise a formal meeting with the employee to review if the goals were met, and how positive the experience was. Keep the tone positive and solution-oriented. Now is also the time to discuss takeaways for future improvement.

4. Reward

Managers distribute merit-based rewards in recognition of the employee’s time spent meeting objectives with incentives. These can be financial (a bonus), progressive (a promotion) or social (a positive write-up by a manager).

Don’t get carried away with participation trophy medals, however. Colleagues rewarded without cause could hit staff morale. But, employees that see a high-performer receive fair remuneration will see the tangible value of reaching their goals.

How to do a performance review

Appraisals are a delicate balance. Managers need to give an accurate reflection on the work of the employee and motivate the individual by identifying opportunities for growth and development.

To answer this dilemma, HR teams must take an empathetic, people-first approach to performance analysis. Here are seven best practice steps to ensure line managers conduct a structured and thoughtful review process:

Step 1. Prepare ahead of time: review the employee’s job description and take notes on their performance so far via self-assessments, observation, and peer feedback. This will help to give a well-rounded picture of the worker’s performance to complement the manager’s personal, subjective assessment.

Step 2. Involve the employee: notify the individual well in advance of the upcoming review, and let them know of any materials they should prepare. During the meeting, craft a comfortable, non-confrontational atmosphere that acknowledges any achievements made within the timeframe being discussed.

Step 3. Address areas for improvement: engage in a candid dialogue about areas where the employee may have veered from the expectations of their role. Try to focus on behaviour and outcomes, rather than personal traits or character, to keep things professional.

Step 4. Set goals: decide on a list of performance goals and objectives and a deadline for when they should be reached (eg. the end of the current quarter). Speak to the employee to understand their strengths and aspirations, and discuss together how these might align with the organisation’s wider objectives.

Step 5. Employee self-assessment: at this stage, the employee should be asked to evaluate themselves. This will let them know their opinion is valued and promote personal accountability for how they perform in the job.

Managers should listen actively to the employee’s input and concerns and address any questions or clarifications they may have. This is particularly important during probationary periods, when the employee’s performance influences if they pass or fail.

Step 6. Design a development plan: once the current situation has been acknowledged, look ahead. Keeping in mind the ambitions of the company, discuss how the staff member may develop new skills to bolster their career. Map out the resources and training required to help them grow the right way in the role.

Step 7. Provide written feedback: it’s vital not to lose momentum once the meeting is over. Start the employee down their new development path immediately by sending them a written summary of the discussion (including any agreed targets). Schedule regular check-ins to keep communication lines open for ongoing feedback and support.

What is a performance improvement plan?

A performance improvement plan (PIP) is a process that outlines the steps an underperforming employee must take to improve their conduct or productivity at work.

Unlike a development plan, which is usually designed for an employee who shows potential and a desire for career advancement, a PIP is typically introduced when a worker’s performance falls below acceptable standards or expectations.

Common issues that might trigger a PIP include missing deadlines, submitting poor work, and exhibiting skill gaps that hinder job performance or business growth.

PIPs test the employee’s willingness and ability to improve. Like all assessments, there should be a pass/fail element involved. Being unable to meet the new standards set by the PIP will result in further action, including even dismissal.

Remember, a PIP is designed to rectify performance deficiencies. It should only be initiated if there is a particular concern that needs to be addressed – not as a way to accelerate the termination process.

Additionally, a PIP must not be designed so that it is arguably impossible for the employee to pass. You want to give the staff member a fair chance at improvement. Should they fail the PIP, the manager can then be reassured there are fair grounds for termination.

How to create a PIP

Most PIPs follow a similar structure. They usually start by specifying the amount of time the employee has to demonstrate improvement, typically between 30 to 90 days.

If senior leadership decides that a PIP is appropriate, the employee’s supervisor should design a PIP and submit it to the HR manager for approval. Here’s how that should work in three steps:

1. Develop a PIP: start by identifying specific performance issues that need improvement. Don’t feel you need to keep these secret; engage the employee with the process and ask them to suggest targets they feel they could and should meet.

Once listed, these should be turned into an action plan to establish clear milestones for the worker to meet. Your action plan should state clear metrics to measure progress, and clarify what success looks like for ‘passing’ the PIP.

2. Meet with the employee: because the PIP is a formal process, best practice demands it includes a discussion between the manager, employee, and a HR representative to confirm that the worker has been given a fair opportunity to understand what’s happening.

In fact, it’s best to keep an open-door policy throughout the PIP process. The employee should be given the opportunity to meet with their manager regularly to discuss their progress.

3. Monitor progress: typically, a person on a PIP has a deadline they must meet to ‘pass’ the process. Whatever the time frame allotted, it should provide a realistic amount of time for improvement (two to three months is a good length of time to expect progress).

Keep an eye on how the employee is performing during the period between the initial meeting and the deadline. Record any notable examples of good performance or underachieving so you can refer back to these in the final decision.

4. PIP outcome meeting and letter: if insufficient progress has been made in the allotted time frame, bosses may consider stricter measures like investing in mandatory training or – in the most extreme cases – terminating the employee’s contract.

Schedule an outcome meeting at the end of the PIP when you will let the worker know what has been decided. If you decide to fire the employee, make sure to communicate this both in person and in writing and provide proper reasoning to avoid any miscommunication.

Setting objectives for performance management

Whether as part of a development plan or a PIP, the performance management process should always culminate in the setting of new targets for the employee to accomplish.

This is to ensure that the worker knows what steps they need to take to improve their performance. Managers are recommended to suggest around three to six performance objectives for employees to meet, to maximise their chances of being realised.

For example, a junior marketing executive may be given the following SMART objective to “improve presentation and communication skills.”

This objective is beneficial to the worker in that it focuses on improving soft skills essential for marketing professionals, such as public speaking and effective communication.

However, it is also advantageous for the firm, by bestowing a valuable skill for future potential leadership.

How to set objectives

Companies should use SMART objectives to focus and define each objective. It serves to keep all aims Specific, Measurable, Achievable, Realistic, and Time-bound.

  • Specific – keep the objectives focused and clear. Miscommunication is the enemy of success when it comes to business goals
  • Measurable – the stated target should include a metric that you will use to track­ progress towards a goal
  • Achievable – consider the employee’s job duties, responsibilities, and skill level to ensure you’re not chasing a performance pipedream
  • Relevant – the objectives should also be aligned with the company’s overall goals, otherwise there is little point to their being attained
  • Time-bound – any target needs a deadline to aim for to give the employee urgency. This also makes monitoring progress simpler

For example, for our junior marketing manager, the general instruction to improve presentation and communication skills would become:

“Enhance presentation and communication skills by participating in bi-monthly internal marketing meetings, and deliver at least one presentation each month for the next quarter.”

How to monitor objectives

‘Measurable’ is a very important criteria when setting objectives. Managers must take care to track and record any headway made towards a performance target, so they can more easily quantify what success looks like for the employee.

This also gives staff a clearer picture of what they are working towards, rather than a vague and confusing approximation.

Project management software is a helpful business tool for measuring progress. Managers can use it to build a bespoke Gantt chart that tracks the entire performance management lifecycle from beginning to end.

You can also use it to store relevant information and documents as evidence (important for PIPs). The best systems even allow users to build webforms to collect information from employees about their progress, and any feedback they have.

What are the challenges of performance management?

You might be the best HR manager in the world, yet there is no guarantee that your development and management strategy will foster the best talent within your sector.

Here are the three most common challenges that managers may need to navigate during the performance management process (and how to deal with them when they occur):

1. Gaining employee buy-in: if a worker is not committed to actioning their targets, managers might as well write them off, so make sure employees are engaged with their own performance review from the get-go. During the planning stage, ask them to set their own goals and objectives. Monitor their progress via 121 regular meetings.

Another tip is to ensure that the performance management process is linked to the reward system. Once annual performance reviews are complete, recognising high-performing employees with tangible benefits and perks can be a strong incentive to underperforming colleagues.

2. Setting the right objectives: rushing the planning process is a surefire way to decide on unachievable and irrelevant targets that will undoubtedly be missed by the worker.

Before setting objectives, think: are the goals SMART? Are they aligned with the department’s or team’s objectives? Does the employee want to grow in the area you’re suggesting? Management must feel 100% confident that the aims will – and should – be delivered before they are confirmed in writing.

3. Giving constructive feedback: more likely than not, performance reviews will involve discussing areas where the employee needs improvement or makes mistakes. Understandably, managers may fear their words will be met with defensiveness or anger, which can make the process emotionally challenging.

To avoid any conflict, train managers on how to frame feedback constructively, rather than negatively. Develop their communication skills using managerial training, and make it a requirement that all evaluations are about bettering the employee, not pointing fingers.

4. Handling the emotional toll: it’s important to consider the pressure that a PIP can have on management teams. Telling an employee they are flunking at work can be emotionally taxing for the supervisor, so it’s a good idea for employers to help line managers navigate this challenge effectively.

Encourage the manager to focus their energy on achieving the worker’s objectives, and let them know they can seek HR guidance when needed. Ultimately, the goal is to support the employee’s professional growth, but this should not come at the expense of a manager’s health and wellbeing.


Given the current labour challenges affecting businesses, effective performance management is an ace up the employer’s sleeve. Investing internally provides a cost-efficient route to enhanced employee productivity, skill development, and morale.

Not that these benefits come free. Managers need to straddle the line between criticism and over-praising to ensure that they offer an accurate picture of the employee’s capabilities and interests.

Failure to do so could result in staff missing their performance objectives and requiring a PIP; two outcomes that have real, negative repercussions for the business.

This article provides the know-how for implementing your own performance management system. Using these tips, you’ll be able to build a long-term strategy for securing a productive and high-performing workforce, and with it, future company success.

Performance Management FAQs
  • Is performance management a hard skill?
    Performance management is a tricky subject because there are so many business risks. Being too critical of staff may cause them to feel demotivated, but not pointing out areas for improvement could result in a stagnant team that doesn’t grow. Either scenario also wastes time and resources spent managing the employee, jeopardising business success.
  • How long should a PIP last?
    A performance improvement plan (PIP) needs to give the employee enough time to reach the requested goals and objectives. This means they can range from anywhere between 30 to 90 days, with regular check-ins scheduled to track progress.
  • How can you measure employee performance?
    Employee performance is subjective, making it hard to judge improvement. To get around this, managers should quantify the performance using key performance indicators (KPIs). These are business metrics which provide a target for employees to aim for, such as recording the number of new client contracts signed per quarter for a sales representative.
Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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