You might think that Performance Management is self-explanatory, but it actually isn’t. Many people misinterpret Performance Management! Our performance in the workplace links to the desired result. So what we do ourselves, managing our actions so we can achieve good results is what we can call Performance Management. It does not have anything at the top of our game every day, and it is not a new game-changing motivational tool.

Having a set program of what performance management looks like within a business sets it up for success. Quite often in smaller operations, which is often the case for entrepreneurs, performance management is not a major focus. It’s seen as something more innate and “there”. When outcomes are good it means everyone is performing at their peak, but this isn’t always the case.

Coming in from the get-go with a performance management program is ideal as it creates a healthy culture. Setting expectations and linking them to their natural outcomes is good for everyone. Doing this early, and not when things are going badly avoids the appearance of it being a Band-Aid solution. The appearance of being reactive never instils confidence in any leader, after all.

It’s crucial that a performance management program not be punitive or heavy-handed, especially in tone. It should convey notions of being a team, being responsible to yourself and those around you and contributing in a positive way. A good performance management program should have more ‘pats on the back’ and “How are you going?” as opposed to “We need to do a performance review.” Consistency, fairness and compassion are like a holy trinity for a healthy work environment.

In a work environment, employees focus much harder when it’s annual review time. It’s the ‘Santa Claus’ effect, where your team will work especially hard just before their review (kids are really good before Christmas). A performance management program prevents this and keeps everyone focused and honest. It motivates people to be at their best year-round.

Motivation is healthy for a workplace. It contributes to the success of a performance management program. When intrinsic motivation is high it’s because of a functioning performance management program.

In short, think of Performance Management as an equation, if you will. Declarative Knowledge (knowing ‘stuff’) + Procedural Knowledge (how an organization functions) x Motivation = a healthy work environment. If all these values are high, then the result, a healthy work environment will be high too. But if a value is low (or zero even), then so will the result.

This article was based on a conversation I had with Vaishnavi Hariharan on the Simplifying Entrepreneurship podcast where we discussed the benefits of a proper performance management system in every business!

You can watch the full interview below.