The Significance of Creating a Performance Agreement
One of the ways to improve employee’s performance in a company is by introducing a performance agreement. Employers often use this legal document as a tool for creating a more productive team.
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What Is the Performance Agreement?
The performance agreement is a legal document that sets performance expectations and obligations within a company, as well as the consequences of not meeting them. An effective performance agreement should:
- Outline business needs
- Be achievable and relevant
- Hold employees and employers to account
- Be fair to all participants
Major companies often use performance agreements to motivate employees but also to prevent newly hired workers from developing bad habits. Once the employer sets job expectations, the employee has the opportunity to object before promising to fulfill them.
Terms and Conditions of the Performance Agreement
While some terms may vary depending on the business, every performance agreement should include the following sections:
| Performance Agreement Sections |
Description |
| Employer and employee information |
|
| Goals statement | The employee states their goals and expectations for the following period |
| Work performance expectations | The manager lists his or her expectations based on the employee’s responsibilities |
| Individual behavior expectations | The manager and the employee present their expected code of behavior |
| Employee statement | The employee makes a statement confirming they understand the terms and conditions of the contract and agree to them |
Details of Enforcing the Performance Agreement
Making an employee sign a performance agreement is only the first step towards improvement. Managers have to collaborate with their employees and be continuously involved in their progress to get faster results.
To ensure the best possible outcome of creating a performance agreement, the employers should do the following:
- Be clear about their expectations
- Note the employee’s expectations
- Track the progress of the employee
- Determine a follow-up date to check the progress
- Establish outcome results and consequences
Explain the Expectations in Detail
An employer needs to do more than specifying the behavior they want to see in an employee via the agreement. They also have to explain in person why that behavior is necessary.
Get the Employee’s Feedback on the Deliverables
Employers should avoid “dictating” their expectations to the employee. The progress will be achieved faster if both parties determine the goals together before defining them in the performance agreement.
Monitor the Employee’s Progress
Employers should follow the employee’s progress gradually. This approach is less likely to cause surprises during the performance evaluation. It also helps keep employees on track with the performance agreement stipulations.
Set Up Accountability Meetings
When employees know that the employer will follow up on their progress, they are more likely to work on meeting the company’s expectations. Employers should schedule meetings regularly to:
- Review goals defined by the performance agreement
- Check if there are any issues
- Make adjustments, if necessary
Determine Results and Consequences
Employers should state the consequences of meeting or not meeting the goals in the performance agreement. Employees that achieve the company’s expectations can be rewarded with a bonus or continuing employment.
Why Are Performance Agreements Important?
Performance agreements are beneficial for both the company and employees. Some of its greatest advantages include:
- Encouraging open communication
- Aligning company and individual goals
- Providing a realistic objective and a fair method of measuring performance
- Strengthening trust and understanding between the management and employees
- Establishing a system to follow performance and make development plans
- Making performance a shared responsibility between managers and employees
If you need to create a performance agreement, you should consult a lawyer rather than rely on contract templates.
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