6 Tips for Setting Performance Goals with Your Employees

I recently met with an organization to conduct an after-action review. Our goal was to understand why their process broke down when an employee was forced out of the organization. My biggest takeaway from the conversation was that leaders often have a difficult time distinguishing between three types of employee goals: development, performance, and minimum expectations. Knowing what to do in each of these scenarios significantly increases a manager’s likelihood of success.

In this case, we learned that the manager, with the best of intentions, kept trying to help the struggling employee develop and grow when they should have been focused on following a simple process to help the employee meet minimum expectations. Two different scenarios that needed different responses.    

In this article, I will explain about these 3 types of employee goals and then focus on 6 ways to help you improve the performance goal setting process, since this is what most managers should be doing on a regular basis. 

3 Types of Employee Goals

Development Goals. These goals are conceived of and designed by the employee, and they are forward focused.  What is something new they would like to learn or how should they prepare for a future position they are hoping to obtain?  With development goals, the manager’s role is to be supportive and to act as a sounding-board, but the process is primarily employee-led.

Development goals provide a manager with the opportunity to be a mentor and a coach, following the mantra that the “answers lie in the employee, not the manager.”  Development goals are typically used by employees who are operating at a level where they are exceeding expectations. They are seeking greater autonomy in deciding how they can best improve. The manager can sit back and oversee the process with minimal intervention.

Minimum Expectations Goals. On the spectrum’s other end, we have goals to comply with minimum expectations/standards. These are goals and conversations where an employee is teetering on the edge of whether they should remain with the organization. In this case, HR should be involved and generally there is strong emphasis on process, documentation, and clear, written communication.

While these instances are rare, the need for precision is important. In the anecdote I shared earlier, this was the first termination the manager had experienced in 13 years. The goal is not substantial improvement; rather, the goal is the clear communication of expectations, adherence to a formal process, and eventual compliance with basic minimum standards.

Performance Goals. In the middle of the spectrum is where we find ourselves most of the time: helping employees set performance goals. In this arena, responsibility is shared equally between the leader and the employee. Conversations should be scheduled and routine, but they do not have to be highly formal.

Many performance goals are closely tied to development, and in some cases they may seem indistinguishable. The difference, as I see it, is that a manager has a vested interest in performance goals, as they are striving to build capability that will directly improve business results within their team. Performance goals are tied to measurable outcomes (OKRs) and reflect less of what the employee wants and more of what the organization needs from the employee.

How to Properly Set Performance Goals with Employees

In my view, performance goals are vital not only because they are more ubiquitous, but also because they are critical for team success. Improving performance represents a foundational duty of a high-performing leader. Great leaders constantly strive to build other high-performing team members.

When setting performance goals with an employee, there are 6 tips that, when followed, will greatly increase your likelihood of success.

Tip #1: Focus on Both Tactical and Adaptive Performance

First, determine whether a performance goal is tactical or adaptive in nature. In their book, Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation,[1] Lindsay McGregor and Neel Doshi teach that there are two types of performance: tactical and adaptive. Tactical performance is the ability to complete a task with a high degree of efficiency and quality. Adaptive performance, on the other hand, is focused on an employee’s ability to adapt, solve problems, create good outcomes without a lot of oversight, and to innovate and improve standard processes. Adaptive employees are those that can think outside of the box.

As a leader in search of business results, success will depend on employees that are proficient both tactically and adaptively. In setting performance goals, ensure that employees are focused on both types of performance and help them with access to the resources and tools they need to help them improve on both sides of the performance coin.

Tip #2: Identify the Correct Measuring Gauge

Second, establish a clear understanding as to what measurement gauge will be used to evaluate success. Success can be measured against established competencies, standards of performance, against other employees (ranking system), or against the employees themselves (are they improving year over year).

Some have suggested that self-comparison is the best option[2], but, in my view, there are only two imperatives. One is that the manager and employee come to a mutual understanding of what gauge will be used to determine if goals are being met and improvement is taking place. Second, the gauge should be institutional versus personal. This means that standards for performance should be based on known, objective measures such as previously defined competencies, job descriptions, published team standards and/or institutional policies, procedures, and OKRs (objectives and key results).

Tip #3: Understand and Manage Biases

Evaluating human performance is challenging, just ask anyone who has been tasked with judging a talent show or scoring a diving competition. Because there is a vast amount of subjectivity in what constitutes good performance, employees are naturally wary of biases, and this leads to distrust.

Leaders need to carefully identify and manage these potential biases in order to build confidence in their performance goal setting process:

  • Recent/Dramatic Events Bias: anchoring to behavior and events that readily come to mind due to recency or because they stand out.
  • Representativeness Bias: resorting to stereotypes to explain performance issues.
  • Anchoring Bias: focusing too much on early results rather than considering the data’s impact over a reasonable time period.
  • Confirmation Bias: seeing only the data that agrees with preconceived viewpoints.
  • Halo/Horn Bias: focusing on a single trait that appears to drive everything.
  • Fundamental Attribution Error: affording greater weight to a person’s characteristics rather than seeing how each situation and external factors impact the outcome.   
  • Central Tendency Bias: when we avoid polarizing feedback and rate everyone in the middle.

Tip #4: Use Multi-Rater Feedback to Evaluate Whether Performance is Improving

Setting and achieving goals depends on our ability to measure whether improvement has occurred. Of the myriad of options available to measure performance, employees prefer multi-rater feedback in evaluating performance gains.[3] A standard multi-rater feedback program solicits feedback and evaluative information from a variety of sources that surround the focal person (i.e., the participant). Feedback is solicited from one’s supervisor, from one’s peers and direct reports, and from other applicable categories.

Because multiple raters are involved, the process is sounder as it relies on a variety of observations instead of just one or two. Employees also appreciate the fact that feedback is not contingent on just one or two people. Evaluations are received from a variety of sources including peers and others that might even have a rooting interest in the employee’s favor. Finally, a multi-rater system, by its nature, means evaluation criteria remain consistent from one rater set to another.

Tip #5: Know the Context

When establishing performance goals, ask yourself what the context is for what you are trying to accomplish. My business partner, Christian Nielson, teaches that every manager has an obligation to help their employees find a purpose, a path, and a place. Purpose is about helping employees reach success, see their impact, and find meaning in their contributions. Path is about developing a shared vision of how an employee can grow and improve within the organization. Place is about developing a sense of belonging, care, connection, and community.

Performance goals should help an employee in each of these three areas. Identify together which area the goal touches upon and ensure that the goals are distributed among these areas so that an appropriate balance is maintained.

Tip #6: Awareness, Action, and Accountability

Over the years, we have found this simple phrase, awareness, action, and accountability, encapsulates much of what we are trying to accomplish with performance goals. Goals can be organized to help employees learn (awareness), do things (take action), and return and report (accountability). We recommend this simple structure as you focus on improving the performance goal process.


Performance is the intersection of people and results. At the end of the day, organizations succeed when people do great work in an environment (the employee experience) that invites them to grow and bring their best selves to the journey.  It is not enough to just develop our people; we need to help them deliver the results that let them know their work matters. 

[1] https://www.amazon.com/Primed-Perform-Performing-Cultures-Motivation/dp/0062373986/ref=sr_1_1?dchild=1&keywords=primed+to+perform&qid=1624976461&sr=8-1

[2] https://hbr.org/2018/03/people-dont-want-to-be-compared-with-others-in-performance-reviews-they-want-to-be-compared-with-themselves

[3] R. Wayne Dean Mondy, Chapter 8, Performance Management and Appraisal, Human Resource Management, 12th Edition, P. 244, Pearson, 2012.

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