Performance management is one of the people processes with the highest potential for creating positive impact, yet it hasn’t always been as highly valued as it deserves. It’s a powerful process for communicating performance expectations, helping people steadily improve and grow, and driving better business results.

When implemented effectively, performance management has the power to transform how you help employees improve their performance.

This quick guide covers what performance management is, what makes it successful, and what to look for in a performance management software system.

Performance management is the process managers use to track their team members’ performance over time. Using a mix of formal and informal check-ins, managers can provide their people with the tools and resources they need to improve their performance. Each person’s improvement in performance contributes to the organization’s overall efficiency.

The performance management process has come a long way. What used to be a transactional and backward-looking annual process is now an ongoing conversation that looks to the future.

The old process worked like this: Once or twice a year, managers would meet with employees to name performance issues that had accumulated over many months. Sometimes this annual or biannual review raised issues the employee wasn’t aware of. In many cases, workers felt the criticism they received during these reviews outweighed the recognition for their good work — and you can see how that can be discouraging.

Performance management today still uses formal reviews, but that isn’t the only contact between managers and employees. Instead, today’s process relies on regular check-ins where managers can give praise and correct performance concerns as they arise. At the same time, team members can flag anything that’s getting in their way (like missing resources, an inefficient process, or misaligned expectations). Finally, incorporating feedback not just from managers and employees but also team members produces a well-rounded picture of employee performance.

Modern performance management doesn’t exist in a vacuum. It’s deliberately aligned to business goals and growth. The process orients people toward improving their ability to accomplish personal work goals by helping them identify their strengths and discovering how to use those strengths to support the business strategy.

More employers have seen the benefits of real-time performance management and are using it in their organizations. But there can be a steep learning curve for managers, especially when they aren’t always used to addressing performance in real time. It’s a different approach to performance management, and one that requires training if you want managers to excel.

What makes a performance management program successful? You can’t improve employee performance without these three elements.

2-Way Communication

Communication is the most important factor in a successful performance management program. Trust and connection are critical for helping employees feel like they can talk to their managers about performance concerns.

Start fostering trust from the get-go by aligning managers and employees on shared performance expectations. Team members will underperform when they don’t know what their manager expects from them. But when managers clearly define their expectations, people have a better sense of what they’re working toward and how performance will be evaluated.

Defining performance expectations from the start also helps team members clarify misunderstandings and raise concerns before they get far along in the work. Two-way communication about performance expectations grounds the working relationship in transparency and mutual trust – and if you ask us, that’s the only way to start a relationship.

Meaningful Changes in Behavior

The thing about behaviors is that once they take hold, they’re hard to change. One of the greatest advantages of performance management in real time is that it gives managers and employees the chance to discuss behaviors before they become habits.

For example, team members will become attached to how they think about and perform their work, even if that approach is incorrect. Correcting misaligned behaviors is much more challenging when they don’t receive feedback until months later during the annual review. Daily interactions, however, empower team members to adjust their behavior quickly without putting efficiency and productivity at risk. When a manager can address incorrect actions or misaligned behaviors in the near term, employees are better positioned to shift gears.

This applies to values-based behaviors, too. For example, employer brands that emphasize inclusion should create performance management processes that hold employees accountable for behaviors that aren’t inclusive.

Performance improvement plans are an important part of your performance management program. Most people react negatively to performance improvement plans, also called PIPs, but it’s really just a targeted approach that focuses on changing behaviors. These plans generally rely on more frequent formal performance evaluations to help team members become more aware of and deliberate about their behaviors.

Opportunities for Growth

Performance management isn’t meant to look backward — although that’s what we’ve come to expect from traditional performance reviews. Performance management is supposed to boost employee performance and guide future development.

In this function, managers serve as coaches who encourage employees to find their long-term roles within the organization. Train your managers to help employees discover their strengths and interests. These may come out conversationally during regular performance check-ins, or you might use resources like assessments to help team members discover more about themselves. Assessment results offer a starting point for deeper conversations about an employee’s long-term career goals.

Once managers have collaborated with employees to identify where they want to go, the next step is to connect them with training and development opportunities. Making those connections helps people take the next steps toward their career goals.

Performance management software makes it easier for managers to keep tabs on performance, but that isn’t the only advantage. The primary purpose of performance management software is to streamline the performance management process so that managers can help their people shine.

Communication is key to successfully managing performance. Using workflow software to drive performance management can help automate — and improve — communication between managers and employees. For example, an employee responds to a post-project survey by saying they struggled with a particular task. The manager can be alerted about this survey response and follow up quickly.

You can also automate the employee journey. Let’s say that a worker earns new skills that unlock career paths in your org chart. You can automate communication based on employee milestones to help them discover new opportunities and move their career dreams forward.

Selecting the right software is always a challenging decision, especially for something as important as performance management. Keep these three must-have features in mind as you search for new performance management software.

Integration With Your Daily Tools

The thought of managing performance for every employee on a team can be overwhelming to managers and may even stop them from participating — especially if they have to log into many different systems and manage individual accounts.

But if your performance management system integrates with the tools that managers already use, it’s much easier and simpler for them to use. If managers can receive alerts and reminders right in Microsoft Teams, for instance, they’re more likely to follow through on regular employee check-ins.

A solid integration suite can also give you a clearer picture of employee performance. You can pull data in from task management software, for example, which shows what’s being accomplished and where there might be hiccups. You can share that data with managers to help them better support employees.

An Easy-to-Use Workflow Interface

Ease of use is an absolute must for performance management software. Managers should be able to record performance data to track a team member’s performance over time without feeling overwhelmed.

Look for tools with intuitive interfaces. Drag-and-drop workflows with pre-populated communication, for example, make it easy for managers to keep employees engaged and working toward their potential.

Scalable Employee Journeys

Performance management plays a big part in an employee’s daily life at work. This software can help workers learn more about what they’re capable of, where they want to go next, and how they can get there.

Because performance management is such a core part of your workforce’s daily life, look for software that lets you lead with experience. Design the journey that you want workers to experience through the performance management process, and find software that supports that level of customization at scale.

Maybe you want performance management to forge deeper connections between managers and employees who work remotely. Automating nudges and conversation prompts can help managers not only stay in touch with their team members, but also form meaningful bonds over time.

Good performance management is all about connection. When you connect employees with their managers through meaningful and engaging conversations, you create two-way feedback, provide critical information, and show employees they’re supported. Connecting employees with opportunities for growth fuels their potential — and the success of your business.