Performance management should be a process that contributes to your organization's overall success and has a positive impact on your employees. It's about letting employees know what is expected of them, and providing feedback throughout the year on how they are doing and how they can improve.

The impact of effective performance management is clear: Employee performance affects company performance. If you express clear expectations to your employees, you—and your company—will enjoy increased motivation. And all that translates directly into clearly measurable goals, improved morale, a happier workplace and higher profits.

Here are the main steps you need to take:

1. Develop a Strategic Plan

• Put your vision into writing

2. Identify Organizational Goals

• Determine what needs to be achieved to realize your strategic plan

3. Translate Organizational Goals into Measurable Employee Goals

Goals must be S.M.A.R.T.

• Specific – What are you going to do? How are you going to do it?
• Measurable – Establish criteria to measure progress
• Attainable – Identify goals that are important to you and realistic to achieve but not a slam-dunk. Stretch yourself!
• Relevant – The goal should help you achieve your ultimate goal
• Time-bound – Set a time frame for the goal to be achieved

4. Review Employee Progress on an Ongoing Basis

• Acknowledge good performance, identify how the employee can improve and provide coaching and support

5. Identify Specific Training and Development Needs

• What knowledge or skills need developing to ensure performance expectations are met?

6. Conduct Formal Progress Reviews at Mid-Year

• Summarize ongoing informal feedback and coaching and evaluate progress toward achieving goals

7. Annual Performance Review

• Review performance results; identify accomplishments and areas for improvement

8. Establish Development Activities for the Coming Year

9. Rate Employee Performance

Establishing a performance review policy will help you support your employees, recognize weak areas (or areas of your operation that need your attention), improve morale and enhance productivity. As well, you will be creating a work environment that makes your employees look forward to coming to work, reducing sick days and helping all your staff take pride in their jobs. In other words, performance management is not optional, it is an essential aspect of your business success.