Performance Management in 2025: Why It's Time to Level Up

Performance management has never been more important for Australian employers than it is in 2025. With rising operational costs, declining productivity, and major changes to employment law, the stakes have never been higher.

Businesses that fail to implement a structured, responsive, and real-time performance management system are not only at risk of lost productivity and disengagement, but also of costly legal claims.

In this article, we distil insights from our recent webinar on the future of performance management and outline actionable strategies to help employers lead, manage, and retain their people more effectively.

Performance Management is minute-by-minute, day-by-day.

The New Performance Mandate

Today, performance management is not just a process; it’s a leadership style.

Informal feedback loops, real-time coaching, and daily accountability are no longer nice-to-haves... They’re essential. With Unions now having broader rights to intervene in the workplace (even without current members), informal performance conversations take on greater strategic value, reducing the risk of third-party interference.

Furthermore, employers can no longer rely solely on rigid, outdated review systems. The traditional six- or twelve-monthly performance reviews have proven ineffective and even counterproductive. Waiting too long to raise issues leads to surprise, disengagement, and conflict.

Instead, high-performing companies now focus on continual conversations, proactive support, and real-time corrections.

Defining Informal vs Formal Performance Management

Informal performance management is an everyday leadership behaviour: feedback given in real time, mentoring through questions, and supporting people to step into space and learn.

When leaders engage in this style, they build trust, reduce risk, and create more adaptable teams.

Formal performance management, on the other hand, occurs any time an instruction to improve is given. It doesn’t require a disciplinary meeting or written warning to be formal; a verbal directive, documented by the manager via email or file note, is enough.

Without this paper trail, businesses expose themselves to unnecessary risk, particularly in termination decisions.

The Critical First Six Months

The first six months of employment represent a golden window of opportunity. Employers must move beyond vague probation periods and implement structured monthly check-ins that evolve over time.

The model we recommend starts with a focus on onboarding and comfort in month one, team integration and goal-setting in month two, and culminates in a deeper performance assessment from month three onward.

By month six, both the employee and employer should have a clear picture of long-term suitability.

Without this structure, employers risk losing good people early or being stuck with underperformers long after they should have exited.

Worse still, under Fair Work rules, even casual or early-stage employees can pursue general protections claims if performance conversations are poorly handled.

Managing for Behaviours, Not Just Tasks

Most managers are confident in performance managing tasks, but behaviours are more difficult. To overcome this, businesses should embed expected attitudes into position descriptions.

By articulating qualities like accountability, respect, and timeliness as part of the role, they become measurable and enforceable. These behaviour-based standards then become fair game for performance improvement plans and corrective conversations.

The Fastest Way to Lift Team Performance

To make rapid gains in productivity and morale, employers should identify and focus on the bottom 10% of performers. Using a simple four-point matrix (scoring trust, reliability, current performance, and potential), managers can quickly pinpoint who needs coaching or intervention.

Then, through clear documentation, follow-ups, and improvement plans, they either lift these individuals or manage their exit, both outcomes drive performance.

Equally important: don’t overlook the cultural cost of high-performing but toxic team members. If an individual delivers results while undermining team trust, they must be addressed. Culture is non-negotiable.

A New System for Whole-Team Alignment

Finally, businesses must rethink their entire performance cycle.

Our preferred model integrates three key elements:

1. Strategy: A clear 12-month plan, broken into quarterly priorities.

2. Survey: Annual employee input to identify the top four engagement drivers.

3. Conversation Model: Monthly 15-minute catchups alternating between strategy-focused and employee-focused conversations.

This rhythm ensures employees feel heard, aligned, and supported. It balances company priorities with employee voice, all while creating a flexible and agile performance system.

Conclusion

Performance management in 2025 is a leadership imperative. It requires structured systems, everyday feedback, and documentation discipline. But more than that, it demands a shift in mindset: from reactive correction to proactive coaching.

When done well, it strengthens culture, protects the business, and sets the foundation for sustainable growth.

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