The difference between a performance review and performance management

performance management

As you endeavor to help your employees thrive and deliver their best, all the while ensuring that your organizational objectives are being met, you may have found yourself wondering about the most effective approach to managing and nurturing employee performance.

In this article, we’ll unpack two (at times confused) processes – namely, performance reviews and performance management – and will highlight which may be the most suitable solution when it comes to retaining your top performers.

Let’s begin with a brief overview of each strategy.

A piece of the puzzle

Also referred to as an appraisal, performance management reviews are held on a semi-regular basis, usually annually, and are essentially done to evaluate or reflect on an employee’s performance. This approach zooms in on the individual, their contribution to the company, their achievements and development, or areas where attention is needed.

By nature, performance reviews are ‘reactive’ and tend to focus on the past – in other words, what the employee has accomplished in a given time period. Employers also often use this platform to decide on pay rises or bonuses, based on the employee’s performance.

The downside to this type of review is that delayed responses are not as effective as ongoing feedback. Long gaps where matters are left unaddressed can leave the recipient feeling confused and resentful.

To summarize, a performance review could be considered a ‘piece of the puzzle’ that, in some cases, slots in with what we’ll discuss next – a performance management strategy.

A holistic, continuous approach to performance management

Conversely, performance management – while it may relate to the entire organization, a department or an individual – focuses on the entire employee lifecycle as an overarching strategy. Its purpose is to help you establish a work environment that allows employees to perform to their best ability.

It involves effective onboarding and integration, training and career development, and a culture of continuous feedback to ensure that employees are equipped to do their jobs well. Across each of these components, it supports your organizational objectives being reached.

This approach is proactive, rather than reactive, and emphasizes addressing matters as they happen (rather than waiting for a performance review to discuss things). Essentially, performance management encourages feedback in real-time, which supports employees in reaching and maintaining the desired level of performance.

The benefits of real-time feedback

To refer back to one of our previous blogs in brief, real-time feedback is considered highly effective – when coupled with fair and unbiased management – for the following reasons:

  • It can build relationships
  • It can improve the team’s communication skills
  • It builds confidence
  • It’s a more natural management approach
  • It can make you a better, more considerate manager
  • It’s a form of mentorship
  • It can encourage dialogue, innovation, and creative thinking
  • It can mitigate risk
  • It can boost morale
  • It can boost retention

Which process encourages retention most effectively?

As we previously referred to, it’s important for organizations to develop turnover prevention strategies that integrate, advance, and include employees. From the point of hiring new employees and throughout the employee lifecycle, organizations need to be involved in retention efforts.

As mentioned, performance reviews may form part of a performance management process. But, since employee engagement and retention go hand in hand (and only one-third of the American workforce is actively engaged), it’s clear that employers can’t rely on sporadic performance reviews alone to connect with employees and encourage engagement. A holistic performance management approach, on the other hand, is far more comprehensive and can be seen as complementary to a retention strategy.

An effective retention strategy involves the following stages, and your performance management process should feed into each of these areas too, keeping your organizational goals in mind:

  • Onboard employees with a new hire integration plan to help them become happy, productive and high-performing individuals as soon as possible.
  • Nurture employees with real-time feedback, and help them to course correct where necessary. Similarly, offer them recognition when it’s due.
  • Invest in them by helping them draw up a career roadmap, and supporting their professional development.
  • Advance employees through continuous learning opportunities, and give them the chance to expand their knowledge.
  • Grow their skills through internal gig opportunities, and help them broaden their interests and abilities.
  • Include them by creating a work environment that empowers people from all walks of life.

Equip yourself with the right performance management tools

Performance management might seem like it would necessitate a lot of time and effort, but with the right tools – like ours – you can easily, confidently and effectively manage this kind of process, while reaping the rewards of a more engaged workforce.

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