Poor performance management has some clear risks such as underperformance, and decreased productivity; however there are other, less obvious, effects that are equally important to address in order to avoid major issues and get the best from employees.

Additional risks of not managing performance include behavioural issues; for example when a person’s work is below standard and other team members become hostile as they are forced to make up for the shortfall or fix mistakes. This type of situation can damage workplace culture and make those who are functioning well also feel undervalued. The lack of action in this scenario can easily damage the wider team’s confidence in management and the internal reputation of the employer.

Reviewing workers’ performance also allows managers to identify candidates for promotion, secondment or development programs, as well as to identify strengths and training needs within a team. Developing workers helps to drive the business forward and improve engagement and retention, so ignoring performance management needs can stunt business growth and present a risk of ‘talent bleed’ as workers continue to take their knowledge, experience and ideas elsewhere.

Terminology: Performance management and the role of appraisal

The concept of performance management is a more broadly framed and integrative view of performance appraisal. In performance management, appraisal is one of several components of a performance management process, the others of which include planning (for goal-setting, training and development needs, and identification of major tasks), and progress reviews (to ensure the employee is on track with what they have been asked to accomplish), Appraisal is the final part of the performance management process, where the coaching concludes and feedback on actual performance achieved takes place.

So how should organisations begin to address the issue?

1. Policy

As in many areas, policy and procedure are important to underpin the process, provide guidance to managers and set employee expectations. In iHR Australia’s HR Maturity in Multi-location Operators survey report, it is encouraging to note that ninety two percent of respondents did have a formal performance appraisal system. Disappointingly though, twenty percent of these did not have their appraisal system linked to job descriptions or work plans. For optimum return, HR consulting firms recommend performance management systems be fully integrated, linking with job descriptions, benefits and compensation.

2. Training for employees

iHR Australia’s Workplace Investigations: Causes and Cures report shows that issues with performance management are a key factor in complaints being made; fifty percent of the investigation reports examined showed this to be a contributing element. The report also found that only twenty five percent of complaints were upheld.

Evidence from recent cases supports the notion that in a number of cases, employees’ understanding of performance management is lacking, which in turn leads to a belief that they are being treated unfairly. Workplace bullying training should be provided to all employees and must include clear information on what is not bullying, with examples. However, all employees (not just poor performers) should also expect that their performance will be reviewed and should be informed about the process by management to avoid confusion and surprise.

3. Training for managers

Workplace bullying training for managers needs to explain what ‘reasonable management action’ means and what ‘a reasonable manner’ is. However, further training which specifically deals with performance management practices should also be provided to managers to ensure that they adhere to organisational policy, follow a fair process, communicate appropriately with employees and truly understand the purpose and intent of performance management.

4. Consistency

In the HR Maturity survey, twenty two percent of participants responded to the question of whether performance appraisal systems were applied uniformly across operations with either a negative or ‘unsure’ response. For the benefits to be fully gained and risks to be reduced, employers must ensure that the policy and procedure is applied consistently, to all workers, in all teams. This will also help to avoid further perceptions of favouritism or victimisation and will affirm performance management as a continual process, rather than one engaged in only when there is a ‘performance problem.’