Performance management process & cycles: A guide

performance management

Performance management is no easy task. Especially across an entire company, you need to be able to manage performance management processes, cycles, techniques and a whole host of other considerations that spring up along the way.

How do you do it? In this article, we dive into all things performance management. We detail the processes and how to truly build a winning performance management cycle for your organisation. Find the full breakdown by scrolling below.

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What is performance management?

Performance management is a set of processes and standards that seek to manage, evaluate and guide an employee's performance at an organisation. This could include helping employees improve in their day-to-day work, work on their key skills, recover from a low point or continuously develop in a meaningful way.

What is the performance management process?

The performance management process includes planning, monitoring, developing, rating and rewarding employees. This is done both on a continuous basis and as part of a cyclical process. This is called a performance management cycle.

Four components of the performance management process

All four components of the performance management process are interconnected. And, in a best-case scenario, they can even boost one another. They include:

Key ComponentWhy It Matters
CultureThe way employees are motivated by their surroundings to improve.
Open CommunicationTransparency as a method for boosting performance.
Skilled LeadershipLeading by example and motivation through appreciation.
Employee Skills & InterestsCoordinating both so employees improve and like what they see in themselves.

What is a performance management cycle?

A performance management cycle is a process for planning, checking and measuring employee performance. It works in a way that meets the overall goal of performance management: aligning the success of employees with the success of an organisation.

What happens during a performance cycle?

During a performance cycle, a manager works with each employee to set appropriate goals, explore how the employee can achieve those goals, provide the resources and support to make them a reality and review and reward performance accordingly.

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Do you need to run performance management cycles?

Yes, because performance cycles improve a company’s overall success. They work in two unique ways: to help boost engagement by enabling employees to reach their potential, and increasing productivity by aligning work goals with strategic business goals.

A close collaboration between employee and line manager, plenty of feedback, opportunities for growth and recognition for good work are central attributes of any great performance management cycle.

And, all are shown to have a positive impact on employee engagement. Therefore, it helps to think of a performance management cycle as part of an overall performance management framework for your organisation.

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The four phases of a performance management cycle

4Phases PerformanceManagementCycle

Although there are plenty of variations to the process, most companies use a performance management cycle consisting of four distinct phases.

These steps may have different names, but they generally follow the same logic flow of phases:


Key Component


Organisational and employee goal setting.


Hosting check-ins and keeping on top of KPIs.


Measuring progress on a yearly or biannual timeframe.


Salary increases and other rewards to retain top talent.

Phase one: Planning

Let’s consider planning as an overarching concept. That’s because this phase actually has several distinct steps:

  • Organisational goal setting

  • Employee goal setting

  • Creating a development plan

  • Job description review

1. Organisational goal setting

First and foremost, the organisational leadership team needs to establish the goals and objectives for the organisation for the period covering a performance management cycle. This usually involves a year or half-year.

This is an absolutely crucial step. That’s because all team and employee goals are then tied to this, on top of adding an overall vision and goal to the timeframe ahead.

It is this alignment that enables companies to perform at their best. To use an analogy, a boat moves fastest when all the rowers are pulling in the same direction.

2. Employee goal setting

Next, the employee and manager work together to set the employee’s individual performance goals for the period. Most businesses follow the SMART goal-setting framework (specific, measurable, achievable, realistic, timely) to do this.

Goals should allow employees to improve existing skills and develop new ones. Remember that the company’s objectives are feeding into this process, so every goal should clearly demonstrate how it is contributing to at least one of these objectives.

3. Creating a development plan

Now that the goals are established, the employee and manager can create a personal development plan for the period. This includes skills, knowledge and behaviours an employee needs to grow in order to be able to achieve the overall goals.

If, for example, one goal is to create a detailed analysis of sales performance for the previous year, the employee may need training in an analytical tool.

Or, if a goal is to improve communication gaps between the employee and another stakeholder, the employee may need to commit to ways to do this.

A development plan also includes plans for future growth. Of course, this also needs to take into account the employee’s own career goals.

4. Job description review

Now that the goals are established, the employee and manager can create a personal development plan for the period. This includes skills, knowledge and behaviours an employee needs to grow in order to be able to achieve the overall goals.

Phase two: Monitoring

Some businesses prefer to call this phase "Acting” or “Performing.” That is because it is essentially the period in which employees are actively working on their goals as part of their day-to-day tasks.

During this phase of the performance management cycle, an employee also takes on some kind of training. Or, they undergo other parts of the development plan for the period.

Part of the manager’s role, then, is to ensure that support and resources are available. This is to enable the employee to carry out the work according to the plan.

An equally important management responsibility here is to do regular check-ins with the employee – ideally monthly — to monitor progress.

This isn’t micromanaging but ensuring that the goal can be achieved within the targeted time frame. In addition, identifying potential problems before it is too late.

What Should You Cover During A Progress Check-In?

Here are some topics and prompts that you can cover during a performance check-in:


Prompt Question


What are you most proud of over this time period?


Are we on track to hit our goals? Why or why not?


What is getting in the way of hitting our goals?


Do we need to revise our goals based on roadblocks?


How can I help you hit these goals or shoot past them?


How would you say your performance compares to this time previous?

Phase three: Reviewing

Reviewing is usually done once or twice a year.

Whereas monitoring consists of short, focused check-in meetings on goal progression, reviewing takes a step back and measures progress on the employee’s overall development plan for the period.

It looks not just at the status of the goals in the plan, but also at overall performance, key learnings, and career development.

A key part of a review is performance assessment and feedback. In addition to a self-assessment, employees may want to consider doing a 360° feedback process, which includes input from their peers and manager.

This collective feedback provides the basis for a constructive review, which should be a two-way discussion. The employee should evaluate his or her own performance as well as give and receive feedback on the team and the manager.

Some common discussion questions for a review are:

  • Were the goals achieved? If not, why?

  • How well did the employee perform the tasks?

  • What should be done differently / the same going forward?

  • Did the employee get the support or resources needed to achieve the goals?

The review is also the time to talk about the employee’s future development opportunities. It is not simply a critique of what happened, but what was accomplished, what challenges occurred, and what the roadmap should be for the future.

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Phase four: Rewarding

Good work should be recognised. That’s what this step is about.

It’s important to tie rewards directly to performance, ideally within the period of the performance management cycle. That’s because employee motivation turns heavily on being rewarded.

One global study found that engagement jumps over 40% when employees are recognised for their work. If companies want to establish performance management cycles as part of their strategy successfully, this final step has to be there, and recognition needs to be meaningful.

What are the most common ways to reward employees?

The most common ways to reward an employee include:

  • Salary increases

  • Bonuses

  • Public recognition (e.g., awards, privileges)

  • Extra vacation time

  • Being able to take part in a special programme or project

  • Promotions

Performance management cycles: Best practices

Setting up the process for performance management cycles at your company is a huge effort. So, you want to make sure it’s effective. What are some performance management best practices you can implement along the way?

Best PracticeHow To Do It
Make TimePlanning, check-ins, reviews, etc. are time-consuming. Support for this process has to start at the top.
Tie Coaching InManagers should see themselves as coaches for their employees, and act accordingly.
Continuous DevelopmentA cycle is a never-ending process and has no clear beginning or end for a reason.

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