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Explaining the Stages of the Performance Management Cycle

Image showing performance management cycle.

What is a per­for­mance man­age­ment cycle and how has it evolved over time?

When you’re design­ing a per­for­mance man­age­ment sys­tem, you’ll like­ly begin with a con­cept such as the per­for­mance man­age­ment cycle, and build your process­es around it. To do this, you’ll need to under­stand what a per­for­mance man­age­ment cycle is, what the stages of the per­for­mance man­age­ment cycle are and how the per­for­mance man­age­ment cycle has adapt­ed and evolved from a tra­di­tion­al 12-month cycle to a more con­tin­u­ous, flu­id process.

The tra­di­tion­al per­for­mance man­age­ment cycle

While there are many ver­sions of the per­for­mance man­age­ment cycle, the most pop­u­lar is prob­a­bly the one cit­ed by Michael Arm­strong in his Hand­book of Per­for­mance Man­age­ment. Below is our rep­re­sen­ta­tion of this cycle:

The first stage of this per­for­mance man­age­ment cycle is plan­ning’, a phase which was tra­di­tion­al­ly car­ried out only once each year. Dur­ing this plan­ning phase, employ­ees are set SMART objec­tives, which con­tribute to achiev­ing one or more of the company’s goals.

The plan­ning phase also includes the for­ma­tion of a per­son­al devel­op­ment plan (what strengths and skills the employ­ee should devel­op to achieve their goals) and a review of the employee’s job require­ments. The idea is to ensure that the organisation’s goals and val­ues feed into this plan­ning phase, there­by ensur­ing that indi­vid­ual per­for­mance is aligned with the over­all strat­e­gy of the organ­i­sa­tion.

The next stages are Act’ and Track’, which occur through­out the year. Employ­ees aim to achieve their objec­tives and car­ry out their role effec­tive­ly, while line man­agers coach their employ­ees, track progress, and pro­vide feedback.

His­tor­i­cal­ly, com­pa­nies have placed a large empha­sis on the final stage, Review’, often com­bin­ing it with employ­ee per­for­mance rat­ings. The Review’ phase tra­di­tion­al­ly encom­pass­es an annu­al per­for­mance review, a meet­ing where employ­ee and man­ag­er dis­cuss and eval­u­ate goal pro­gres­sion and com­ple­tion, per­for­mance issues, train­ing and devel­op­ment, and oppor­tu­ni­ties for advancement.

This once-a-year meet­ing can be extreme­ly stress­ful for both employ­ee and man­ag­er, and ulti­mate­ly unpro­duc­tive. Attempt­ing to dis­cuss and achieve so much in one meet­ing is sim­ply unfea­si­ble and the review fre­quent­ly becomes a tick-the-box exer­cise with lit­tle mean­ing­ful con­ver­sa­tion. Because of the inad­e­qua­cies of this annu­al process, a more agile per­for­mance man­age­ment cycle has been adopt­ed by com­pa­nies around the world, which we’ll look at below.

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The per­for­mance man­age­ment cycle is shift­ing and evolving

In recent years, it has become wide­ly recog­nised that it is more pro­duc­tive and moti­vat­ing to dis­cuss per­for­mance and give feed­back reg­u­lar­ly, rather than once or twice a year. This mind­set has allowed for the cre­ation of a con­tin­u­ous approach to per­for­mance man­age­ment. This means that instead of one annu­al per­for­mance man­age­ment cycle, many com­pa­nies (includ­ing Adobe and Microsoft) have intro­duced a series of con­sec­u­tive, small­er and more intu­itive cycles, as shown below:

This per­for­mance man­age­ment cycle is an ongo­ing process of devel­op­men­tal per­for­mance dis­cus­sions and feed­back, which allows employ­ers and man­agers to treat per­for­mance man­age­ment as a process that con­nects an organisation’s cul­ture, busi­ness goals and strat­e­gy to indi­vid­ual per­for­mance and con­tri­bu­tion”.

Rather than set­ting an unre­al­is­ti­cal­ly large num­ber of 12-month objec­tives at the start of each year, under this new approach, employ­ees and man­agers reg­u­lar­ly meet and col­lab­o­rate on a small­er num­ber of near-term’ SMART goals. These goals are then peri­od­i­cal­ly reviewed at check-in’ meet­ings, when new near-term goals are also agreed. Meet­ings are an oppor­tu­ni­ty for man­ag­er and employ­ee to engage in future-focused, action-ori­ent­ed discussions.

There are a num­ber of advan­tages to this con­tin­u­ous approach:

  1. Near-term objec­tives tend to be achieved more quick­ly. This helps when it comes to build­ing momen­tum and improves employ­ee motivation.
  2. Near-term objec­tives aren’t as like­ly to become irrel­e­vant over time. Over the course of a year, busi­ness needs can shift and short­er-term goals are bet­ter suit­ed to sup­port­ing changes in priorities.
  3. Cre­at­ing a large num­ber of long-term objec­tives at one point in the year is time-con­sum­ing, labo­ri­ous and actu­al­ly dif­fi­cult to do. Most of us don’t real­ly know what we’ll be need­ing to achieve in 12 months time. Hav­ing a few short­er-term objec­tives on the go at any time and review­ing them reg­u­lar­ly is sig­nif­i­cant­ly eas­i­er and less time consuming.
  4. Check-ins allow man­agers and employ­ees to dis­cuss progress against objec­tives, pri­or­i­ties and per­son­al devel­op­ment and take action to over­come obsta­cles to suc­cess as they arise. They also pro­vide an oppor­tu­ni­ty for man­agers to acknowl­edge and recog­nise out­stand­ing effort or per­for­mance, which makes a huge dif­fer­ence to employ­ee engage­ment.

If it is done right, this con­tin­u­ous per­for­mance man­age­ment cycle is more time effi­cient, and far more productive.

How can per­for­mance man­age­ment soft­ware facil­i­tate the per­for­mance man­age­ment cycle?

To make con­tin­u­ous per­for­mance man­age­ment work in prac­tice, per­for­mance man­age­ment soft­ware is essen­tial — paper or Word forms are not suit­able for cap­tur­ing and shar­ing reg­u­lar updates and feed­back between employ­ees and their man­agers. The lat­est per­for­mance review soft­ware can pro­vide the capac­i­ty for real-time feed­back to be giv­en, it allows check-ins to be sched­uled and action points to be shared, and it allows employ­ees, man­agers and HR to reg­u­lar­ly set and mon­i­tor per­for­mance goals and per­son­al devel­op­ment needs.

What will the per­for­mance man­age­ment cycle look like in the future?

If cur­rent HR trends are any­thing to go by, it is like­ly that the future of per­for­mance man­age­ment will be increas­ing­ly agile and col­lab­o­ra­tive. Auton­o­my will be pri­ori­tised, mean­ing micro-man­age­ment will be a thing of the past and flex­i­ble work­ing is some­thing com­pa­nies will need to incor­po­rate. This will neces­si­tate a shift to a per­for­mance man­age­ment sys­tem that is based on con­tri­bu­tion and impact, rather than an archa­ic focus on hours spent in the office and rigid job descriptions.

In fact, com­pa­nies such as Net­flix have been exper­i­ment­ing with con­cepts such as unlim­it­ed hol­i­days for a while, and employ­ee per­for­mance has remained as high as ever. To keep employ­ees moti­vat­ed and pro­duc­tive, organ­i­sa­tions will need to devel­op trust­ing and flex­i­ble work­ing envi­ron­ments where fre­quent feed­back and reg­u­lar, mean­ing­ful per­for­mance dis­cus­sions are the norm.

Do you want to see Clear Review per­for­mance man­age­ment soft­ware in action? Book a free per­for­mance man­age­ment soft­ware demo today, and we’ll be hap­py to give you a tour.