HR Management & Compliance

10 Flaws of a Typical Performance Management System

Many organizations will most likely say they utilize a performance management system but far fewer will admit that it’s not actually achieving its original goals. Namely, performance management systems often fail in motivating better employee performance!

Why is that? The short answer is that it’s too simple to not follow through with the very components required to make the system work well.

In order to actually motivate employees to perform at their best, a performance management system should be tied closely to organizational and personal goals and should be a means for employees and managers to stay continually on the same page. It can also house employee development plans.

So, where does it all go awry? There are several ways that a well-meaning organization can miss out on the benefits of a performance management system. Here are 10 of the biggest mistakes—try to steer clear of them!

1. Not Giving Employees Timely Feedback

If the only time an employee hears of how he or she is performing is once per year, there are bound to be some surprises in there. Many managers use the existence of a performance management system as an excuse to delay giving feedback until the formal review period—but this is a recipe for disaster. The formal review period should be just that: a formal summary of status. There should be no surprises at that time if employees are given feedback at appropriate times throughout the year. In other words, this should not be the first time an employee hears how he or she is tracking against goals and expectations.


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2. Setting Inappropriate Goals

For example, consider these simple missteps:

  • Not tying employee goals to company goals. If employee goals are set randomly, they may help individuals achieve their goals but may not bring the business any closer to achieving its organizational goals or mission. Ideally, individual goals should be clearly linked to company goals.
  • Failing to set stretch goals. Goals that are set at levels that are easily achievable without any extra effort don’t motivate employees to perform at their best. Goals should be realistic, but they should require some effort to achieve and maintain—otherwise the system isn’t helping to motivate behaviors.
  • Creating goals that are not measurable or objective. There should be a clear understanding of what it looks like to achieve a goal and how it will be measured. Goals need to be specific, measureable, achievable, relevant, and time-bound (commonly referred to as “SMART” goals). Goals should not be vague.

Also remember that goals should be updated as needed for changes in the business’s situation. They should also be reviewed often to see whether you’re on track.

3. Failing to Follow Through on the Performance Appraisal Schedule

Even worse than not providing timely feedback is not providing feedback at all! If managers cannot be bothered to treat the program with the respect it warrants, then why bother even having a system? Employees will get discouraged if they’re never given feedback.

4. Not Explaining Clear Paths to Improvement

Even if a performance management system is used well and employees are given appropriate feedback, the system can go awry if an employee needs to improve but does not understand how to do so. The performance management system should have a clear path for employees to meet expectations as well as a clearly communicated plan for when they don’t.


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5. Not Documenting the Process

The rating of employees should be justified, and that justification should be put into writing. The appraisal should be clear, complete, and easily interpreted (that is, able to be correctly interpreted) by a third party.

6. Ignoring Problem Employees

This is a problem on multiple levels:

  • It decreases employee morale because others don’t feel like problems are being addressed.
  • It can make other employees resentful that they cannot get away with the same actions of their coworkers.
  • It fails to solve productivity problems. Managers often mistakenly think that giving a performance review that is better than the employee deserves will be a motivator—but instead it sends the signal that the poor performance is acceptable.
  • It can be a legal nightmare if the employee is later let go for poor performance, and there is no record of performance reviews indicating any problem at all.

7. Not Recognizing Star Employees

On the other hand, if an employee is performing well above average, he or she should get the deserved recognition. If every employee is given a “satisfactory” (or equivalent) rating even if some are going above and beyond expectations, star performers will lose faith that their efforts are being recognized. Managers should understand how important it is to use the system to give appropriate ratings across the full spectrum of options—they should not be trying to avoid tough conversations, and they certainly should not be simply giving everyone the same rating because they don’t (or won’t) have the time to put real thought into it.

In tomorrow’s Advisor, we go over the final three of our 10 flaws of performance management systems, plus an introduction to our guide, HR Playbook: HR’s Game Plan for the Future.