Guiding Principles for Developing and Setting Employee Performance Goals
Every organisation aims to achieve its business objectives through efficient and intelligent utilisation of its workforce. This would be a relatively simple exercise if every employee was aligned and understood the strategic goals of the organisation and also, clearly understood what exactly they need to do to meet their individual goals.
Goal setting is the process of setting objectives or milestones to be achieved over a defined period. One of the crucial steps in the performance management process is setting and communicating the goals of employees. This process entails setting specific and clear expectations from a performance standpoint for every employee. It also provides regular formal as well as informal feedback about the performance of employees regarding their set goals. HR professionals need to ensure that all their managers are trained well on how to develop effective performance objectives and share and discuss them with each employee.
This article discusses the following points regarding developing and setting employee performance goals:
- The roles of HR, managers, and employees
- Types of performance goals
- Minimum standards for formulating employee goals
- Utilising the goal setting process to build a high-performance organisation culture
- Considerations about communications, legal issues, technology, and the global workplace
The Facts on Employee Performance Goal Setting
While most of the organisations have a performance evaluation process in place, they do not take the necessary measures to ensure the success of the process. As per the results of a 2011 SHRM poll, around 98% of organizations were found to have a formal employee performance evaluation process in place. However, less than 46% of them expressed the desire to send their managers to formal training regarding the performance process. The poll also revealed that around 44% of organisations were providing voluntary training to their managers. There were also around 8% of respondents who surprisingly said that they provided no training at all to their managers.
It has been observed that the performance evaluation process is not supported by effective goal setting, adequate training, regular communication, and constructive feedback between the managers and their employees. Owing to this sad state, the performance management process appears to be the Achilles heel of the human capital management. As such, it fails to accomplish the objective of enhancing the performance of employees. According to a survey result, only around 30% of respondents claimed that the performance management system followed by their organisation established proper goals, provided timely feedback, and genuinely helped them in improving their performance level. Instead of driving amazing performance, these programs often tend to irritate and frustrate employees and end up wasting the managers’ time and organisational resources.
The first step in the performance management system is to develop and communicate individual goals.
The Business Case for Improving Performance Management
One of the major tasks of effective leadership is to drive employee performance. The process further supporting employment decisions regarding career development, compensation, promotions, terminations, discipline, and reductions in the workforce.
Apart from the above mentioned administrative processes, a well designed and implemented performance management system by managers can lead to better business outcomes. Some of these business outcomes are:
- Increase in the rate of retention of key employees. Studies show a reduction of 50% on staff turnover can be realised by implementing the performance management system.
- Increase in the rate of employee engagement and commitment. The crucial drivers of employee engagement and performance are almost the same. It entails setting clear expectations, helping the employees to accomplish their work, offering regular feedback, and seeking new opportunities for employees to develop and succeed.
- High Level of Customer Satisfaction Ratings. Research has indicated around 10-30% high customer satisfaction ratings for managers who have been engaged in following effective performance management practices.
- Improved Level of Overall Business Performance. Managers who are seen to be engaged in effective performance management produced double the profits compared to those who do not follow the process.
The above points support a strong business case for improving performance management. One of the most crucial focal points of improvement is the area of employee performance goals. According to the research conducted by Gallup, one of the crucial points to attract, develop, and retain the most talented employees is to have your employees know what is expected out of them.
Crucial Roles for Setting Individual Performance Goals
The HR department, managers, and employees have all different roles and responsibilities in setting individual performance goals.
The Role of HR
The HR department plays a crucial role in developing the performance management system of an organization. HR offers support to managers for implementing the process, including the goal setting phase. The HR professionals support the managers and supervisors to develop effective employee performance goals by adopting the following steps:
- Design the goal setting process
- Develop forms that can be used during the goal setting meetings
- Provide training and education in:
- The importance of clear and measurable goals
- The various elements of written goals
- Means of creating a productive and safe environment for setting goals
- Means of engaging in goal setting dialogues with employees
- Establish the required mechanisms to ensure that managers discuss, set, and document goals with employees at an early stage of the performance appraisal cycle.
In the event of a disagreement between an employee and a manager regarding performance goals or performance evaluation, getting HR involved is highly regarded. HR should review the written goals and performance documentation with the employee and manager.
The Role of Managers
The manager’s role is to communicate the expectations of the management and the goals to the employee. The manager also needs to ensure that they work in a collaborative manner to develop the individual goals while being in alignment with the organisational goals. To be effective during goal setting and other phases of the performance management process, it is imperative that the managers build trust within their employees. This can be achieved by communicating the big picture, diagnosing performance issues, and training. Managers also need to reinforce their expectations and the significance of developing the employee through experience.
The Role of Employees
Employees also have an active role to play in the performance management process by doing the following:
- Staying informed of the purpose and comprehending the steps in the process.
- Staying aware of the expectations of the management from them.
- Seeking and responding appropriately to feedback regarding performance.
- Accomplishing tasks and documentation regarding performance management as requested.
Perhaps the biggest role of employees in individual performance targets, setting is the commitment towards achieving those goals.
Types of Goals
There are various forms of performance goals. While some goals focus on what needs to be done, others focus on how things need to be done. There are also some goals which focus on measuring the results. Some of the types of goals that are commonly used include the following:
- Job Description goals are focused towards the achievement of pre-determined duties. These goals are expected to be met in a continuous manner till the job description undergoes modification.
- Task or Project goals are focused towards the achievement of a certain objective. These goals are likely to be changed as the project or task gets completed. These kind of goals are suitably best for jobs which are constantly changing with time, yet have defined, shorter-term tasks or milestones.
- Behavioural goals are focused upon how an employee needs to do his or her job. This type of goal is more relevant for knowledge workers. For instance, if there are goals such as “treat others respectfully and in a professional manner” is a behavioral goal.
- Stretch goals although challenging, are achievable goals which are typically utilized to increase the capabilities of employees with high potential.
A lot of organizations want individual goals to have certain specified characteristics. For instance, SMART goals are Specific, Measurable, Achievable, Relevant, and Time bound.
While developing individual goals, the HR professionals and managers should avoid the following potential drawbacks:
- Goals that are set too much in advance may prove to be either too difficult or too easy to achieve.
- Some of the goals may be impacted by certain external factors which are beyond the control of an employee such as changes in the economy. Such factors are difficult to take into account.
- It may be difficult to coordinate the individual’s goals with the overall goals of the organisation.
- There may be times when the individual goals may make it difficult to compare employees for promotions or salary reasons.
Guiding Principles for Formulating Employee Goals
These guiding principles may be used in creating, re-designing, updating, or evaluating their performance management process.
The words used in formulating goals may vary considerably. However, at a bare minimum level, the content of an effective goal needs to be:
- Specific, with defined results.
- Measurable, both in terms of the current state and the desired state.
- Challenging but attainable.
- This means that the goal needs to be relevant to the employee’s current scope of responsibility and the employee has the means to achieve the desired outcome.
- Subject to a time frame for achievement.
- Flexible enough to accommodate changing circumstances.
To develop effective goals the following criteria needs to be met:
- The goal needs to flow from top down and it should align with the organisation’s business philosophy, vision and mission statement.
- The goals should involve both the manager and the employee to ensure that it is clearly understood and they need to be committed towards it.
- The goals need to be documented, either in electronic or hard copy format and stored so that records are readily available for review and continuous management.
- The goals need to be monitored and the progress needs to be acknowledged.
Flexibility and Adjustment
While managers should step into a goal setting meeting with a general idea of the goals that they wish to set for their employees, they need to be flexible if they receive some information from an employee that indicates the need for modification of a certain goal. Managers need to convey to the employees that it is important to provide their inputs before the goal setting meeting so that they can prepare accordingly.
Goal Setting to Build a High-Performance Culture
Research has indicated that employee performance and engagement is increased not just with annual performance reviews, but by communicating on a day to day basis, providing feedback, and developing the talents of employees. Management leaders can help in building a performance-based culture with the help of strategies such as improved communication and better relationship skills. To build a high-performance culture, organisations need not focus on reinventing the formal systems; rather they should focus towards building the mutual trust between the managers and the employees.
Managers Should Communicate the Big Picture
Managers need to clearly communicate to every employee how their work relates to the overall mission of the organisation. This will help the employee to function more effectively and independently. It will also give the managers more time to implement their strategies, develop their teams, and take up high-level responsibilities.
Since cascading goals do not seem to work most of the times, managers can provide a description of how the group and each employee contribute to the overall mission of the organisation. Such description helps to provide clarity on how the employee’s work fits into the department or the team.
Share Expectations and Feedback on a Regular Basis
Effective performance management needs sharing of ongoing expectations and short-term goals with employees from time to time, instead of sharing only once in a year. Similarly, managers need to share feedback on a regular basis. Managers should also help the employees to convert targets into concrete activities, milestones, plans, and short-term deliverables that they can accomplish on a day to day basis.
Managers and HR need to clearly communicate their expectations in a clear and precise manner so that the employee can comprehend and implement it effectively.
To ensure every employee understands their individual performance goals, the goals should be communicated in writing shortly after the goal setting discussion. Other supporting documentation can also be tendered to reinforce specific goals and to serve as reminders to employees regarding their progress. Such supporting documentation may include job descriptions, e-mails, or company forms developed for use in the goal setting process.