One of the keys to a successful firm is creating a goal-setting and performance management process for employees to encourage participation and reward results.

An effective performance management process is best when performance is linked to compensation, which in turn, encourages employee engagement. This process can be used for both individual and team performance, and it includes setting, measuring and rewarding achievable expectations.

Creating such a process also helps identify and address performance gaps, improve employee skills and help staff members develop in their jobs.

A disciplined performance management process ensures that the management team is communicating to employees on a regular basis, reinforcing what they are doing well and letting them know when improvement is needed.

Here are steps to take to create an effective performance management process.

1. Define and communicate goals. The first step in performance management is defining individual goals and aligning them with the firm’s goals and strategy. The process of setting goals should be a collaborative process between a manager and his or her employees.

Performance goals help employees:

  • Know what is expected of them beyond their basic job descriptions
  • Take responsibility for their performance
  • See where their goals support the firm’s objectives
  • Believe that their performance evaluations have an objective basis
  • Receive recognition for their accomplishments.


Performance goals can be identified from the following sources:

  • Firm goals and key initiatives
  • Routine job functions and job descriptions
  • Firm issues, such as business development, client retention and work processes
  • New innovative ideas
  • Individual development, such as completion of professional designations (CFP, CPA, etc.) acquiring new skills, knowledge or experience.

Goals, expectations and standards are clear when both the team leader and team member understand the same end results. A common and often-used tool for creating clear and measurable performance goals is the SMART goal framework.

This is the process I use with our consulting clients, and I recommend working with each employee to create the goals together.

The SMART Goal Acronym Definition:

S = Specific: Tell employees exactly what is expected, when and how much. The desired outcome or results are clearly defined.

M = Measurable: Establish concrete criteria for measuring progress toward the attainment of each goal. Provide milestones to track progress, and motivate employees toward achievement.

A = Achievable: Success needs to be attainable with effort by an average employee, with a bit of a stretch. The goal is challenging but realistic, given time and resources.

R = Relevant: The goal is aligned with the job description and/or firm objectives and direction.

T = Time Bound: Set specific deadlines for goal accomplishment and to create urgency for completion.

2. Monitor progress on goals. Creating a high-performance culture means talking to each employee individually every week on an informal basis, not once every six or eight weeks and certainly not just once a year. Leaving too much time between reviews, even informal ones, leads to backward-looking discussions focused on what has already happened. Implement weekly check-in meetings that focus on looking ahead, making slight tweaks or course corrections.

Try asking at the check-in meetings what is going well for the employee this week and where is help needed.

Managers must be aware of employees’ progress on goals in order to step in with coaching assistance or resources when it appears that targets may be missed or, even better, to acknowledge success with appropriate monetary or non-monetary rewards. In addition, it is also important for employees to track their own progress.

Use a written quarterly check-in process that documents each employee’s performance. Employees come prepared to the meetings by providing information on what they accomplished in the areas of business outcomes, client satisfaction, teamwork, new skills development or knowledge related to job performance.

Having the quarterly meeting information documented comes in handy for the all-important annual performance review. Managers can use quarterly meetings as an opportunity to review the progress on goals and adjust timelines, find out if additional resources are necessary for the achievement of goals or even broaden the goals as needed.

3. Provide feedback. In order to get the most out of employees, the appraisal process should include listening, observing, giving constructive feedback and providing recognition. The most important part of the appraisal is to provide feedback about what the employee has successfully learned and still needs to learn and create a plan to provide the opportunity to develop those necessary skills.

This can be an important factor not only in the employee's growth but also in the health of the entire organization as employees have a greater sense of loyalty to companies that develop talent from within. In addition, engage in a conversation about career goals and a specific path at the firm.

Find out what career goals and plans employees have, and discover whether those are in alignment with the company’s plans, and then talk about the skills and experience that they will need to develop. These development plans also allow the company to create a pool of talent for strategic succession planning.

Ditch the “old school” numerical system of rating or stack ranking employees to a more qualitative approach for the annual performance appraisal. Work has become more collaborative, more knowledge-based and, as a result, more difficult to measure.

At the same time, technology advances have made employees crave real-time feedback. Satisfying employees’ need for feedback can only be achieved by meeting with them regularly and frequently soliciting their input and feedback, in turn.

4. Pay-for-performance compensation. A successful compensation strategy is the key to retaining top talent and driving organizational performance that exceeds all expectations. At its core, pay-for-performance compensation aligns employees with the goals and objectives of the company and motivates and rewards top performers, while continuing to develop the underperformers to become greater assets.

It is important for employees to know that if work performance meets or exceeds expectations they will be rewarded through pay raises, bonuses, or things such as a flexible schedule, time off, gifts or educational reimbursement. Pay-for-performance compensation structures not only account for the individual but also for the working environment and performance of the team as well, encouraging employees to band together to reach goals.

A highly successful performance management plan is the key to creating an engaged and aligned workforce, which is the hallmark of all successful businesses. Without one, an advisory firm could lose not only time and money but knowledgeable employees and, in the end, a competitive edge.

Kelli Cruz is a Financial Planning columnist and the founder of Cruz Consulting Group in San Francisco.

This story is part of a 30-30 series on smart strategies for RIAs. It was originally published on Jan. 4.

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Kelli Cruz

Kelli Cruz

Kelli Cruz is a Financial Planning columnist and the founder of Cruz Consulting Group in San Francisco. Follow her on Twitter at @KelliCruzSF.