Mental health informed performance management: A guide for HR

Performance is not just about productivity and bottom lines.

Mental health has increasingly been recognized as a significant factor in workplace performance in recent years, especially post-pandemic. That is why adding a mental health component to performance management, through a compassionate, evidence-based framework, should be prioritized, as it benefits both employees and organizations.

What is Performance Management?

It is not a one-time evaluation but a continuous feedback and alignment process.

Performance Management is an ongoing and dynamic process that aims to align overall business goals with individual objectives through feedback loops, evaluation, open communication, and support. It helps keep team members motivated and focused, facilitates continuous learning and development, and identifies potential challenges early.

Performance management often includes annual and continuous performance reviews, OKRs (objectives and key results), and KPIs (key performance indicators) to set clear and measurable goals, as well as project-based reviews focused on specific deliverables and milestones.

Performance and Wellbeing

Performance management is traditionally focused on output and metrics. Still, today, forward-thinking organizations recognize that employee mental health directly determines sustainable performance and organizational growth.

Growing evidence shows that poor mental health correlates directly with lower productivity, higher turnover, and reduced customer satisfaction.

When we measure mental health and wellbeing (via satisfaction, engagement, stress levels) alongside traditional productivity metrics (task completion, output rate), we note that these factors impact the bottom line and other performance metrics. Indeed, employee low satisfaction and wellbeing scores correlate with productivity loss and increased turnover. Even customer loyalty has been seen to be impacted by employees' wellbeing.

Similarly, integrated wellbeing programs have been linked to a reduction of absenteeism by up to 0.7 days per week and improved retention by 1.6.

How to Include Mental Health In Performance Management?

Including mental health in performance management involves blending wellbeing support with employee performance goals, using empathetic leadership, flexible processes, and psychologically safe communication. The aim is to build a system that values sustainable performance rather than output at all costs.

For employees, this approach enhances engagement, psychological safety, and long-term resilience. For organizations, it reduces absenteeism, strengthens loyalty, and boosts productivity through improved focus and morale.

To operationalize this framework, HR can embed wellbeing into each core step of the performance process:

• Wellbeing-focused goal setting
  When setting objectives, ensure they are challenging yet realistic and consider workload balance. Objectives that consider personal capacity and stress levels help prevent burnout and improve motivation.
• Regular 1-to-1 check-ins
  Frequent meetings allow managers to gauge stress, emotional wellbeing, and workload distribution. These discussions help identify early signs of overwhelm and provide an opportunity to adjust goals or redistribute work.

• Mental health training for managers
  Provide training to equip line managers to recognize common mental health issues, hold supportive conversations, and make appropriate workplace adjustments or referrals to EAP or HR support.
• Psychological safety during appraisals
  Performance reviews should encourage open dialogue about pressures affecting performance. Employees need to feel that discussing mental wellbeing will not jeopardize career progress or evaluations.
• Reasonable workload adjustments
  Allow flexibility, such as deadline extensions, role adjustments, or reduced targets during recovery from mental health difficulties. This supports sustainable performance improvement rather than punitive management.
• Integrate wellbeing metrics
  Some organizations combine wellbeing indicators (burnout risk, engagement score, absence rate) into performance dashboards alongside KPIs, promoting a more rounded picture of employee contribution.

What To Track Exactly?

Measurable indicators for tracking mental wellbeing alongside performance typically include both quantitative and qualitative metrics.

Quantitative Indicators

• Employee Absenteeism: Track sick leave related to mental health issues.
• Employee Turnover and Retention Rates.
• Presenteeism Levels: Assess how often employees are at work but not fully productive due to mental health concerns.
• Engagement Scores: Collected via employee surveys, these reflect employees' emotional connection to the workplace.
• Use of Mental Health Resources: Tracks utilization rates of support channels like counseling or mental health apps.

Qualitative Indicators

• Employee Self-Reported Wellbeing: Using scales like the Warwick-Edinburgh Mental Wellbeing Scale (WEMWBS), capturing feelings, functioning, and levels of optimism or resilience.
• Survey-Based Perceptions: Employee perceptions on workplace stressors, perceived support, and psychological safety collected through structured questionnaires.
• Manager and Peer Feedback: Regular check-ins and 360-degree feedback on team dynamics, workload, and supportiveness.

Tips for Supportive Implementation

1. Clarify performance expectations and areas for improvement, being specific but compassionate.
2. Allow the employee to lead the sharing, listen without interruption, and validate their experience.
3. Offer reasonable adjustments, provide information about available resources, and confirm willingness to help.
4. Normalize help-seeking, share relevant experiences as appropriate, and reassure confidentiality. Maintain an open channel for feedback and further discussion, adapting the plan as necessary.
5. Conclude with a plan for review and further check-ins to adjust support as needed. Document agreed actions and monitor progress with regular, supportive follow-up meetings.

Embedding mental health into performance systems builds workplaces where people and results thrive together.

Go further

Check out our pieces and guides:

• Comprehensive Mental Health Strategy for HR
• 8 ways to build a holistic mental health plan
• 5 ways to ensure psychological safety for employees
• Workplace mental health training for managers

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