Performance Management Traps To Avoid

Despite the widespread Performance Management systems, only 23% of UK employees feel engaged at work. So, what’s going wrong?

The issue often lies not in the systems themselves, but in how they’re applied. Leaders frequently fall into one or more common performance management traps. Here’s how to avoid them.

Trap #1: Unjust Reward Systems

Recognition is a powerful driver of engagement and employee retention. When people feel seen and appreciated, they’re more likely to stay motivated, collaborative, and committed to their roles.

Here’s the trap… when recognition is delivered in isolation and secrecy, it can unintentionally foster competition. Employees talk. They compare performance reviews, results, and rewards. Before long, the workplace becomes a battleground for individual achievement rather than a hub for teamwork.

This type of environment often leads to misplaced priorities where people start chasing KPIs that promise rewards, rather than concentrating on their responsibilities. Routine tasks get sidelined in favour of ones that help achieve certain milestones. This creates an imbalance where some team members need to pick up the slack for those chasing KPIs.

So, how can you rethink your reward system to achieve a collaborative environment rather than a competitive one?

1. 1. Competition can be mitigated by shifting the focus towards team-based recognition and ongoing feedback. Whilst individual appraisals are still significant, they should not dominate the performance management process.
   2. Encourage ongoing, informal feedback that promotes growth without creating rivalry.
   3. Make your reward criteria transparent and inclusive.

Trap #2: Inadequate Metrics

Metrics matter, and you only have to look to Six Sigma to see how powerful data-driven decision-making is. But metrics only work when they measure what truly drives success.

The problem? Data can be manipulated. Paired with a competitive environment, the numbers become the goal rather than the guide. When KPIs dominate, employees naturally want to hit them, even if that means gamifying the system.

For example, a retail chain sets a KPI for customer service teams based solely on the average call time. To hit the target, employees rush through calls and cut off customers before fully resolving their issues. On paper, they hit their KPI. In reality, customer satisfaction fell and complaints increased. This is what happens when you focus on the wrong metric, it undermines the very outcome you’re trying to improve.

“A bad system will consistently defeat even the most capable individual” – W Edwards Deming.

What can you do instead?

1. 1. Avoid relying on a single metric, as it rarely tells the full story. Adopt a balanced scorecard approach that combines multiple metrics for a more holistic view of performance.
   2. Use a mix of quantitative and qualitative indicators.
   3. Have regular KPI reviews to ensure they drive the right behaviours.
   4. Involve employees in designing metrics to make them fair and achievable.

Trap #3: Bias Thinking

Leaders often measure their teams against themselves, using their own performance or experience as the benchmark. This creates challenges because many leaders are promoted internally because they’re good at what they do. They already have the knowledge and experience, so obviously, this creates a bias and an unrealistic expectation, because if everyone held the same skills and experience, they could be leaders too.

The truth is, everyone is different. We all see the world through unique lenses and progress at different speeds. When performance management tries to homogenise abilities, it stifles individuality and growth. Leaders should not be aiming to create clones of themselves.

Bias can take many forms, especially for those who worked their way up from the shop floor to leadership. It can create a halo effect, where past relationships overshadow current performance, leading to unfair evaluations and missed opportunities for development.

How can you minimise bias thinking?

1. 1. Acknowledge individuality and recognise that success looks different for everyone.
   2. Avoid cloning and focus on helping employees to become the best version of themselves, not a replica of you.
   3. Mask identifiers, and where possible, anonymise performance data to focus on outcomes, not personalities.

Trap #4: The Wrong Purpose

Too often, performance management is reserved for those who are underperforming. But that’s not its true purpose. Effective performance management should support the growth and development of everyone, including high performers. It’s about unlocking potential across the entire team, not just fixing problems.

This is where coaching comes in. Great leaders understand what employees can influence and what they can’t, and they measure the right things. They also engage in frequent, meaningful conversations, because a lot can happen in a week, let alone six months. These don’t need to be formal appraisals, as informal check-ins can be just as powerful.

Unfortunately, coaching is often misunderstood. It’s not about giving answers, it’s about helping employees find their own solutions, nurturing their growth, and enabling them to become the best version of themselves. To do this, leaders need to listen with intent, seek to understand, and demonstrate empathy.

How can you use performance management for the right purpose?

1. 1. Make coaching continuous, replace annual reviews with regular, informal conversations.
   2. Focus on influence and measure what employees can realistically control.
   3. Empower, don’t instruct, by guiding employees to discover answers rather than providing them.
   4. Lead with empathy, listen actively, and understand each person’s perspective.

The Manufacturing Institute

To manage performance successfully, training is really important. Our Team Leadership Development Programme first looks at your own leadership style and how to get the best from your people. There is a focus on improving productivity and performance. Designed to sidestep the traps mentioned here and lead your team to achieve real return on training investment.

Click here to check out our upcoming Team Leadership courses.

Click here to get in touch with our team to talk through any questions you might have.