Performance Management Explained

Performance management is the key to happy workers and increased income but few agencies have a formal performance management system in place. If focusing on performance management is on your to-do list, this article should be the catalyst to make it happen. Paula Irvine explains how to get started.

In the cut-throat world of real estate, agencies need to continue to improve their performance if they are to remain competitive. Therefore the monitoring and reviewing of staff performance is critical. Employees need to understand what is expected of them via a performance management plan that links the strategic objectives of the agency and individuals’ key performance indicators (KPIs). This article explores the key steps required to develop and implement a performance measurement process that enhances the earning capacity of your agency and ensures your staff operate efficiently and effectively.

The performance management cycle
Performance problems in an agency can be traced back to a failure to explain and agree on expectations and/or a failure to understand and provide the help that employees need. To avoid these problems, you must first have a sound understanding of the performance management cycle.

The broad stages of a performance management process are:
Planning – agreeing on the performance required (setting the standards)
Performing – actioning the agreed performance
Reviewing – actual performance against agreed performance

Once the review phase has been completed, the performance cycle should commence again.

Remember, performance management is the responsibility of the owner/manager, not the employee. As a manager you should not assume that everything is understood and within people’s capabilities. Instead, take time to explain, check and ask until everyone concerned understands what needs doing, why, when and how.

Importance of induction
Comprehensive staff induction is a MUST! The induction process should provide new staff with the information they need, and get them up to speed on how the agency works. It should also ensure that the new staff member understands what is required of them in their role and how and when their performance will be measured. Induction is vital in ensuring that new staff are productive as quickly as possible.

Establishing performance standards
The standards by which performance is to be measured should be clearly defined and communicated to the staff member. Certain expectations of performance are mandatory and should be part of employment contracts, or referred to in appropriate operational procedures, for example, compliance with the relevant agents act and codes of conduct.

Performance standards also need to be based on the requirements of the job. When establishing job related standards, three things need to be considered:

1. Relevance – how does the measure relate to the objectives of the job? For example, a proposed measure could be that all sales enquiries must be responded to within 24 hours. If responding to sales enquiries is part of the job description for the role of a real estate salesperson, then the standard is relevant to performance.

2. Reliability – is the extent to which the measure is a reliable indicator of performance. Ideally, these measures are ones that would show individuals tending to maintain a certain level of performance over time. For example, the measure might be sales volume per month with similar target sales levels for two sales managers. However, one sales person deals with standard homes which are highly popular across all market segments, whereas the other sales person might have responsibility for a highly specialised home that is subject to seasonal conditions. Therefore, performance measure of volume could vary considerably so the measure may need to be re-assessed for reliability. While sales volume per month might continue to be used as a performance indicator, different targets might be set for each sales person to ensure reliability.

3. True comparisons – is the comparison of performance. Going back to the example above, a comparison of performances between two sales people should take into account the fact that significantly different areas can differ widely in sales volume.

Once performance measures have been established they can then be used by managers to specify and communicate precise information to staff regarding quantity and quality of output, and be fed into the development of individual performance objectives.

Developing key performance objectives
“Objectives are the specific things we need to do and the results we need to achieve, and enable staff to monitor their progress throughout the year.” Without objectives it is difficult to know what is expected of staff.

Well written, effective key performance indicators are:

  • They are SMART objectives.

Performance review
With performance measures agreed and communicated, individual performance can be evaluated against these measures. Record keeping is essential in the performance review process so there is a documented record of any discussions that have occurred and agreements reached. Performance appraisals must adhere to the principles of equal opportunity and need to be based on a fair assessment of a staff member’s ability.

The aim of the performance review is to:

  • Assess the achievement of agreed goals
  • Identify rewards for the achievement of goals
  • Identify training and development needs
  • Develop a performance plan.

Types of performance appraisal include:
Ranking – this is a process of comparing an individual’s performance with those of other staff members. This can be highly subjective.
Grading – describes performances on a scale from poor to excellent (or similar scale).

Management by objectives – where objectives are agreed between staff and manager and these measures are then used to assess performance. The staff member is assessed as having achieved or not achieved the objectives.

However the appraisal system is structured, the three key qualities that an effective appraisal system should have are:

  1. Goal/objective setting
  2. Regular performance feedback
  3. Performance improvement as a result of performance appraisal.

Manager preparation for a performance review meeting
“Managers need to be prepared to ensure that they apply the appropriate level of rigor to a performance discussion and that the process is fair.”

Preparation enables the manager to:

  • Tailor the performance requirements of staff members to the requirements of the agency plan
  • Demonstrate their support for the personal development of staff
  • Think through how they will deal with potentially difficult or sensitive issues in performance meetings.
  • The purposes of planning and review meetings

Purpose of the performance planning meeting

  • To agree the performance objectives for the staff member
  • To specify the skills and behaviours the staff member needs to demonstrate
  • To establish a Learning and Development Plan for the staff member
  • To establish the performance required by the manager to support the staff member

Purpose of the performance review meeting

  • To discuss and agree on the performance of the staff member
  • To discuss and agree on the skills and behaviours demonstrated by the staff member
  • To evaluate progress on a Learning and Development Plan for the staff member
  • To review the performance of the manager, in supporting the staff member

The following list features tips for preparing for and conducting both planning and review meetings.

Before the performance planning meeting:

  • Review the staff member’s Performance Plan – note what has been accomplished and what has not.
  • Review the agency plan including reviewing the agency values and behaviours.
  • Think about changes and major events that will be occurring during the next six months and estimate how they might impact on the team member.

At the performance planning meeting:

  • Ensure that all the materials needed are available, including previous performance plans, team and business plans and preparatory notes.
  • Set the performance context for staff. Discuss the priorities of the team and the agency as a whole.

Before the performance review meeting:

  • Review the staff member’s performance plan thoroughly; noting which goals have been achieved and which have not.
  • Use a blank Performance Review form and write down your discussion notes. Think of examples and gather evidence to support your views.

During the performance review meeting:

  • Allow the staff member to begin by explaining how well they think they have performed. Support them where appropriate and give some further examples. Provide specific examples and give them plenty of opportunity to question your assessment and provide their own supporting evidence.
  • Make sure adequate time is devoted to discussing learning and development opportunities.

After the performance review meeting:

  • Ensure documentation is completed.
  • Have regular performance discussions; encourage and provide feedback in these sessions.

Ways to boost staff acceptance and use of performance feedback include:

  • Base reviews on performance objectives that are clearly documented and agreed with the staff member.
  • Solicit and use staff input before the review discussion.
  • In areas of weakness, focus on the outcomes, not the person.
  • Provide balanced feedback that covers both strengths and opportunities for growth.
  • Highlight specific and actionable opportunities for growth.
  • Encourage feedback discussion where the staff member is a full participant and contributor of views.
  • Give the staff member an opportunity to challenge or refute the review.

In summary…
The task of monitoring performances, including the setting of relevant, reliable performance measures, is one that is often shied away from by agency owners and managers. However, it is important that managers take responsibility for this vital task, because a well developed and implemented performance measurement process will ensure that your agency is operating efficiently and effectively, and consequently, will enhance the earning capacity and sense of achievement of all involved.

Give the staff member an opportunity to challenge or refute the review.

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Paula Irvine

Paula is a well respected Real Estate agent with over 25 years of practical experience across the industry and property training. Paula is the RTO Manager at Harcourts Academy.