A Simple Guide to Creating a Performance Management Cycle

Performance management is an ongoing workflow process that involves monitoring, improving and maintaining employees’ work performance. Managers use this process to evaluate employee performance and ensure they are actively engaged at work and delivering results. 

A solid performance management cycle helps create a work environment where all employees perform to the best of their ability. It ensures employees understand their roles in the workplace and have all the support they need to do a good job every day. 

This post will serve as a guide to creating an effective and practical performance management cycle. We will also highlight the benefits of implementing a well-structured performance management process for your team. 

Understanding the Performance Management Cycle

The performance management cycle helps managers and employees clarify how their expectations and goals align with the organization’s overall vision. It usually involves written and verbal components tied together in a systematic process that happens throughout the year. 

A typical performance management cycle involves the following:

Continuous Feedback and Coaching

According to a 2022 BetterWorks study, a third of employees only receive feedback twice a year and hardly have regular 1-on-1 meetings with managers. An effective performance management cycle involves continuous feedback and coaching. Once company expectations and goals are set, managers must monitor, coach and offer feedback to employees often. 

Some tasks may have more immediate or built-in feedback than others, like when a software engineer fixes a bug or a customer care representative resolves customer issues. However, HR and managers must still observe and provide external feedback to maintain employees’ success and motivate them to meet expectations. 

Mid-Year Performance Review

A mid-year performance review is a one-on-one evaluation done by a manager with employees twice yearly, typically at the 6 and 12-month mark. During this evaluation, you’ll review your employee’s goals and expectations with them and note which ones have been accomplished. Mid-year performance reviews are vital to the performance management cycle because they provide meaningful feedback to employees and ensure their career goals align with your company’s mission. This review also strengthens the relationship between managers and employees, creating opportunities for candid feedback and alignment.

Ongoing Performance Monitoring

HR and managers must continuously monitor employee performance and provide timely feedback to help them achieve set goals. Regular performance monitoring spots any lapses that could affect productivity so you can address them. These practices help maintain a healthy level of employee engagement and motivation. As a manager, you must be actively aware of each employee’s performance, which can easily be done using performance review software. This software makes it easy to design, run and schedule performance reviews in advance. The entire process is automated, so you don’t have to chase employees for updates or manually compile performance review forms. Now, you can always remain aware and have enough insight into employee performance to inform company decisions. 

Year-End Performance Evaluation

A year-end performance evaluation is an annual review of employees’ performance done by managers at the end of each year. This evaluation is more formal than ongoing performance monitoring and usually sets the tone for the next year. 

Year-end evaluations are important to the performance management cycle because they review employees’ wins, losses, goals and upcoming opportunities for the following year. Although these conversations are not always the easiest, having the right information and structure, such as utilizing a performance review template, can make sessions more productive for you and your employees. 

5 Step Guide to Building a Performance Management Cycle

performance management cycle

Follow this 5-step guide to build a solid performance management cycle for your company. 

1. Identify Organizational Goals and Objectives

Managers and employees must know the organization’s goals and objectives to build a solid performance management cycle. Employees base their career goals on set goals, which you use to assess performance. Here are two ways to identify organizational goals and objectives:

Align individual goals with your company’s mission

Employees should know how their goals and daily tasks contribute to the company’s overall mission. When setting quarterly or yearly goals, managers should collaborate with employees to identify their individual goals and align them with the organization’s mission. 

For example, suppose your company’s quarterly goal is to increase subscriptions by 50%. Each employee would set their unique goals, which could range from improving cold-emailing strategies or increasing engagement on paid ads. As a manager, your task would be to assess each employee’s unique goals and ensure they’re all targeted at increasing subscriptions. Creating a performance management cycle that drives results becomes easy when goals are known and aligned. 

Define SMART goals for (and with) employees

SMART is an acronym that describes a goal-setting philosophy used by companies to ensure their goals are feasible and in line with the overall vision. Setting SMART goals means setting specific, measurable, attainable, relevant and time-bound goals for each job description. SMART goals help create a performance management cycle that can be monitored and measured, easily tracking employee progress towards tangible outcomes that promote organizational success. 

2. Establish a Feedback and Coaching Framework

A feedback and coaching framework strengthens communication between managers and employees and builds a solid performance management cycle. You should have regular feedback and coaching sessions highlighting employees’ expectations, reviewing their current work, and offering feedback and guidance on how they can meet their goals. Here’s how to create a solid feedback and coaching framework:

Encourage regular feedback sessions

A good feedback and coaching framework encourages regular feedback sessions, whether performance is successful or not. For example, when performance is successful, you should have sessions with employees to understand what strategies are working and offer any support or resources to help them continue to succeed. Do the same when performance lags too by offering solutions and new approaches to help get employees back on track. 

Provide coaching and support for employee development

Coaching sessions allow managers and employees to strategize on how to accomplish set goals. These sessions usually focus on specific aspects of an employee’s performance instead of a total review. For example, you can have coaching sessions with employees to focus on missed deadlines or work that isn’t up to standard. A good coaching session will make the employee feel supported rather than reprimanded. For more guidance on how to give feedback, check out our blog outlining the do’s and don’ts of feedback.

3. Plan a Mid-Year Performance Review

Mid-year performance reviews allow managers to check in with employees and gather information about their workflows and results. It’s a helpful, intentional checkpoint throughout the year to assess your employees’ progress. The information obtained from these reviews is important to the success of your performance management cycle.  You can plan a mid-year performance review in two steps:

Conduct a mid-year progress assessment

At the start of the year, employees set major goals, which are broken into smaller accomplishments and spread out across different deadlines throughout the year. A mid-year progress assessment will show how well an employee is accomplishing the set goals and whether they stick to completion timelines. Planning this progress assessment also helps you support employees to achieve these goals on time.

Address any challenges and offer guidance

Mid-year performance reviews will help you identify and work through any challenges with employees and offer guidance. 

For example, suppose an employee has a goal to complete 200 new sign-ups by December. Conducting a mid-year performance review in June will provide insight into your employee’s progress. If their progress towards reaching their goal is lagging, this mid-year performance review will highlight their challenges and help you offer guidance to your employee while there is still time to correct the course. Mid-year performance assessments will ensure you leave nothing to chance and can address any performance issues before they cause bigger problems. 

4. Implement Ongoing Performance Monitoring Practices

Performance monitoring is a crucial part of the performance management cycle. As a manager, you must consistently monitor employees’ performance based on their individual goals and ensure they’re on track and equipped with the tools, guidance, and support necessary to perform optimally. Further, the information gathered will aid you in providing specific and actionable feedback. Here’s how to implement effective performance monitoring practices: 

Track employee performance throughout the year

You can implement performance monitoring by tracking employee performance year-round. Doing so helps you spot and correct issues before they multiply and cause larger issues. This strategy is necessary for the performance management cycle, especially if employees are on a performance-based payment plan. 

Address performance issues promptly

When you track and monitor employee performance regularly, you will have enough information to address performance issues promptly. 

For example, suppose an employee is not sticking to deadlines or failing to meet set KPIs. A mid-year performance review will help you spot and address this on time and offer solutions. This way, you can avoid bigger problems that the employee’s performance issues would have caused by the end of the year. A performance management cycle works best when issues are addressed on time, which is where regular mid-year performance monitoring practices come into play. 

5. Conduct Year-End Performance Evaluations

Year-end performance evaluations allow managers an opportunity to review and assess a year’s worth of performance. Once evaluated, managers will be better equipped with a holistic view of performance and thus prepared to support and coach employees in the new year. Here’s how to conduct a year-end performance evaluation:

Comprehensive evaluation of employee performance

Take the time to evaluate each employee’s performance thoroughly. This includes their wins, setbacks, and any issues they faced throughout the year. Your evaluation should also include how they received and implemented your feedback and what goals and initiatives they achieved. 

Reward top performers and identify areas for improvement.

As a manager, you should always showcase and reward top-performing employees. This boosts morale, makes them feel appreciated, and motivates employees to remain engaged and high performing. Year-end performance reviews will also highlight different areas where an employee could improve towards the new year. This evaluation will keep employees on the same page performance-wise to set the pace for a successful year ahead.

Key Components for a Successful Performance Management Cycle

Successful performance reviews require a strategic and thoughtful approach to best serve your employees. Let’s take a look at some key components you can incorporate to ensure a successful performance review cycle.

Communication and Transparency

Communication and transparency between managers and employees is vital when building a successful performance management cycle. It ensures no feedback or information is lost in translation and keeps all parties on the same page. 

Clear communication of expectations and goals

Managers must communicate company expectations and goals clearly and regularly to employees. When employees know how their goals tie into the company’s overall mission, it illustrates how their work contributes to the organization’s overall success, driving engagement and providing a deeper meaning and purpose to their role.

Transparent feedback and assessment processes

When employees know you are transparent and impartial with feedback and assessment, they become more open to receiving them. Managers should always remain unbiased and offer only constructive feedback backed by adequate support. 

Employee Development and Training

Sometimes, employee underperformance may be due to a lack of the skills needed to complete certain tasks. This is why development and training are important aspects of an effective performance management cycle. Here’s how to do it:

Identifying opportunities for employee growth

When you monitor and track employee performance regularly, you can spot areas where an employee’s skills aren’t fully utilized. As a manager, you can now assign projects that are aligned with employees’ strengths and promote growth. Further, performance management allows managers to review employee performance and identify areas in need of improvement. These areas are opportunities for growth and development and should be treated and framed as such to employees through additional support and training.

Investing in training and skill development

Regular lapses in skillsets during certain tasks can indicate that an employee lacks the necessary training or guidance. You should support employees by suggesting and coordinating further training, courses and coaching services to help them meet expectations. 

Performance Recognition and Rewards

Performance recognition and rewards is an important component of any performance management cycle. Employees should always be recognized and rewarded for their hard work as it boosts productivity and loyalty. 

Acknowledging and rewarding high-performing employees

Regularly monitoring employee contributions to the company will give you a clear sense of who to acknowledge and reward. This is a high point of the performance management cycle as it indicates employees are engaged, satisfied, and performing optimally. Acknowledgment and rewards go a long way in engaging employees and helping promote a culture of positivity and encouragement.

Providing incentives for continuous improvement

Incentives keep employees motivated to work hard. Managers must always offer incentives to employees for a job well done. These could range from recognition to additional opportunities to bonuses or promotions.  

Documenting Performance and Progress

Your performance management cycle requires clear and consistent documentation for record-keeping and legal requirements. 

Maintaining detailed performance records

Maintaining detailed performance records of employees becomes easy when you monitor and offer feedback regularly. Ensure these records are as detailed as possible, outlining performance lapses, improvements, and support offered. Doing so will become particularly useful in future performance reviews, as you will be equipped with a roadmap of previous performance and training efforts.

Documenting feedback and improvement plans

When you offer employees feedback and improvement ideas, ensure you document them. This serves as a reference point for future performance reviews and helps log the improvement journey. Further, Performance Improvement Plans (PIP) are useful for building trust, engagement, and legal protection.

Overcoming Common Challenges in the Performance Management Cycle

Managing employees is not always easy, so a typical performance management cycle will have some setbacks. Many companies hope to reach the absolute performance standard; however, it isn’t without its challenges.

Here are some tips to overcome common challenges in the performance management cycle. 

Addressing Biases and Subjectivity

Managers must aim to be fair and unbiased at all times. However, biases can creep up and affect performance records despite your best efforts. Addressing biases and subjectivity is vital to maintaining a transparent and effective performance management cycle. Here’s how you can do this:

Implementing fair and objective evaluation criteria

Ensure that your evaluation criteria are fair and objective across the board. For example, the criteria used to evaluate the performance of a senior software engineer would differ from that used to evaluate a junior-level engineer. Both employees should not be evaluated based on the same metrics. 

Providing training to reduce bias in assessments

Biases can be prevalent during mid or end-year performance reviews, affecting managers and employees. To avoid this, you can invest in adequate training, perform regular check-ins, and use the 360-degree feedback approach to gather more objective insights. 

Handling Difficult Conversations

Difficult conversations are a huge part of the performance management cycle. While it may not be the most enjoyable, you must be able to have these difficult conversations with employees to address areas of improvement adequately. 

Strategies for constructive feedback sessions

Creating go-to strategies for feedback sessions to offer constructive criticism can provide a much-needed game plan to help you navigate these conversations. For example, suppose an employee keeps coming into work an hour late, affecting overall daily output. A constructive feedback session would involve calmly asking why the employee is repeatedly late and highlighting how it affects the rest of the team, followed by steps to put a plan in place to support them better and ensure they are on time. Having a set formula of documentation, and a calm conversation, followed by working together to reach a solution, can bring structure to the process and help create positive outcomes.

Creating a supportive environment for open discussions

In a supportive environment, employees are comfortable enough to approach managers with issues and trust that they will receive support and solutions. Offering unbiased and open support with a growth mindset helps employees achieve psychological safety and will provide managers with deeper insight into their teams’ challenges. 

Maintaining Employee Engagement

Maintaining healthy employee engagement levels is a common challenge managers face when building a performance management cycle. Here’s how you can maintain employee engagement:

Keeping employees motivated and engaged throughout the cycle

Performance management cycles can be difficult for both managers and employees. However, it is important to keep employees motivated throughout. You can do this by empowering them to share their opinions without fear, creating team-building activities, rewarding high-performers, and keeping feedback constructive. Make them feel valued by the company and highlight how these feedback sessions are for their benefit, while illustrating how their hard work directly contributes to the success of the organization.

Incorporating employee feedback to improve the process

As a manager, you’re often on the outside looking in regarding employees and how they navigate the workplace. Ensure you ask for their feedback on your performance management cycle and use the information to improve the process. When employees feel heard, they become more motivated and engaged in the exercise. 

Integrating Technology in Performance Management

performance management cycle

Leveraging technology can improve the effectiveness and overall efficiency of your performance management process. The data obtained from performance management tools provide deep insight into performance patterns that traditional manual methods cannot provide. 

Further, performance management tools save valuable time from the time-consuming manual aspects of performance management, such as sending out routine communications or tracking performance review completion. When paired with a solid performance management strategy, HR teams and managers can easily achieve high-performing and engaged teams. 

To learn more about how you can leverage automation to improve your performance management cycle, book a demo with our team today!

Not ready to dive into automation? Download Omni’s free Total Performance Review Kit for a guided journey of best practices, easy-to-use templates, and expert tips for an engaging and well rounded performance review cycle.

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