Wednesday 8 August 2012

How to Design a Performance Management System - Step 1 (Part 3 of 10 of HRSG’s Guide to Performance Management through Competencies)

When designing a Performance Management process and system I often tell clients that it is not the form or the software for delivering the system that you have to worry about. Performance Management is all about creating a “… a shared understanding about what is to be achieved as well as how it is to be achieved. It is an approach to managing people that increases the probability of achieving success.” The form or software delivery tool simply enables and guides participants in the process. In this respect then, system design becomes very important. Taking a system “ off the shelf” or borrowing one that worked for another organization will in all likelihood not meet your needs.

Engaging Key Stakeholders

Engaging key stakeholder groups in the design of the system is essential to the success of the system. If the major stakeholders are involved, they are far more likely to support the system and encourage others to engage in the process in a constructive positive manner.

Senior Management should be the key champions for the system and should “walk the talk”. If you have unions within your organization, they should contribute to the design of the system; otherwise, they will be a key stumbling block in implementation. Employees also must understand the value of the system– how it will help in understanding the performance requirements of their jobs, and how it will support their growth and development. Customer perspectives interests are also often incorporated, since they are the recipient or your organization’s services or products.

Goals / Purpose for Management

There are a variety of reasons why organizations want to have solid performance management systems in place. You should clearly articulate what you want to accomplish through your system. For example, if the results of the process are used to drive key and important employee decisions like pay increases, bonus or reward programs, succession planning or promotional decisions, disciplinary action for poor performance, etc., then the process should be as objective and as well-documented as possible. Often, it is important to be able to discriminate different levels of performance (e.g., for allocation of incentive pay or bonus schemes), and this is most often done through rating scales that have clear criteria for establishing the level of performance.

In designing a Performance Management system you need to clearly define the goals of your system. In doing so, you should engage as many different stakeholder perspectives as possible. One method we have often used is to engage a Design Committee to represent the interests and perspectives of senior management, middle management, employees, unions (if applicable) and clients/customers, as necessary. Leading them through a structured process, we help them in defining the perspectives and interests and reaching a consensus on systems goals, principles and parameters that will meet most of all stakeholder needs.

Guiding Principles

Closely tied to the goals for your Performance Management process, it is important to define the guiding principles for its design. Here are a few that I have seen many organizations adopt:
  • Align staff goals with the goals of the organization
  • Foster joint accountability and ongoing partnership between superiors and employees 
  • Encourage regular two-way feedback
  • Address both the “what” and “how” of performance
  • Impact performance positively and support development for current and future roles
  • Recognize accomplishments and the right behaviors
  • Be simple and straightforward

The next blog in this series looks more closely at some of the key parameters to consider in designing and implementing a system that integrates competencies. Sign up to our blog’s mailing list through the form on the right-hand side to receive the rest of the series in your inbox.

HRSG is a leader in competency-based performance management solutions and training. Contact us today to find out how we can help you.


  1. Great post. I am writing a paper about performance management so I have been doing a lot of research. That is how I came across your post. I am glad I did because this has been very helpful. Thanks so much for sharing Suzanne.

  2. Nice article Suzanne; I agree that stakeholders must be on board but wondering how to manage balance between for performance evaluators and assessors. Secondly if the strategic process is owned by senior management then they should build a system to measure performance not the stakeholder as they might be looking for financial prospective only. Here is an article which I like
    this talk about developing a performance management system that can capture value preposition and highlight business process performances.