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Performance Management

The complete guide to performance management cycles

People in a meeting about performance management cycles

Are you tired of lacklustre performance and high employee turnover? Have you struggled to set clear expectations, measure progress, and provide feedback to your team?

Well, without a well-designed performance management system, it's an uphill battle. 

Fortunately, in this comprehensive guide, we'll explore the ins and outs of performance management cycles. Specifically how the right one can drive employee productivity and help your organisation achieve its goals.

By the end of the post, you’ll understand all the nuances of a performance management cycle, and how to create one yourself. 

Let’s get into it…

Performance management cycle meaning / definition

The performance management cycle is a continuous process that helps organisations align their employees' goals, competencies, and development plans with the overall business objectives. 

It involves different stages that are connected to each other:

  1. Goal setting

  2. Monitoring progress

  3. Feedback provision

  4. Acknowledging achievements 

  5. Making goal adjustments

This systematic approach ensures that employee performance contributes to the achievement of organisational goals while fostering individual growth and satisfaction.

We’ll dive into the specifics of these stages later in the article, for now let’s look at an example.

Performance management cycle example (Google's OKR system)

Google's Objectives and Key Results (OKRs) is a well-known example of an effective performance management cycle. 

The system focuses on setting ambitious objectives aligned with the company's mission, along with measurable key results that track progress towards those objectives. 

  • Establish Performance Goals: OKRs are created on the organisational, team and individual level.

  • Monitor Progress: Progress towards key results is tracked regularly throughout the year.

  • Provide Feedback: Managers and peers review individual OKRs, offering constructive feedback for improvement or alignment with team objectives.

  • Achievements Recognition:The achievement of both personal and team-based OKRs contributes to Google’s success as a whole; thus recognition comes from contributing positively to company growth.

Eletive’s suite of performance management features can be used to support your performance management cycle. Book a demo and we’ll show you how!

How to develop a performance management cycle

1. Establish performance goals

A crucial first step in an effective performance management cycle is to establish clear and measurable performance goals for each employee. 

These objectives should be aligned with the overall organisational strategy, ensuring that individual efforts contribute to the company's success.

Setting well-defined performance goals involves:

  • Understanding job roles: Clearly define each employee's responsibilities and expectations within their role. This can be achieved by reviewing job descriptions or discussing tasks with team members.

  • Collaboration: Work together with employees to set achievable targets based on their skills, experience, and potential for growth. Involving them in this process fosters a sense of ownership over their goals.

  • S.M.A.R.T criteria: Ensure that all objectives are Specific, Measurable, Achievable, Relevant, and Time-bound (S.M.A.R.T).

  • Prioritisation: Help employees prioritise their objectives according to importance or urgency so they can focus on what matters most at any given time.

Creating objectives is an indispensable element of any successful performance management system, as it outlines the expectations and aspirations for each individual.

2. Monitor progress

Regular monitoring helps HR managers and team leaders identify areas where employees excel or need improvement, allowing for timely interventions to support growth and development.

A. Set clear milestones

To successfully track progress, it's crucial to break down larger objectives into smaller, achievable milestones. These milestones should be specific, measurable, attainable, relevant, and time-bound (SMART). By setting clear milestones for each goal, you can easily assess whether an employee is on track or falling behind in their responsibilities.

B. Use performance management tools

Eletive simplifies and automates the process of tracking employee performance metrics efficiently. The platform provides real-time insights into individual achievements and overall team productivity while reducing manual workload for team leaders and HR managers.

C. Schedule regular check-ins

Rather than waiting until annual reviews to discuss performance with employees, schedule regular check-ins throughout the year ideally once a month or quarter depending on your organisation's size and structure. To review progress towards established goals actively.

  • One-on-one meetings: Provide opportunities for open communication between managers and employees about ongoing projects or tasks related to set goals.

  • Status reports: Encourage employees to submit periodic updates detailing their accomplishments since the last check-in session as well as any challenges they've encountered along the way.

  • OKRs: Use OKRs to measure employee performance against predefined targets, ensuring a data-driven approach to progress monitoring.

D. Encourage employee self-assessment

Empower employees by encouraging them to assess their own performance regularly. This practice fosters self-awareness and personal growth while also providing valuable insights for managers during check-ins or formal reviews. By comparing employee self-assessments with manager evaluations, you can identify discrepancies and address any potential misunderstandings in expectations or goal-setting.

Self-assessments are an integral part of Eletive's 360 feedback surveys.

3. Provide feedback

The importance of regular feedback

Regular feedback plays a vital role in keeping employees engaged and motivated towards achieving their objectives. A study by Gallup found that employees who received regular feedback were more likely to be engaged at work than those who did not. Moreover, it can help prevent misunderstandings or misalignments between employee expectations and actual performance.

Tips for providing effective feedback

  • Be specific: When giving feedback, focus on specific actions or behaviours rather than generalising about the employee's overall performance. 

  • Maintain a balance: While it's essential to address areas where an employee may need development, don't forget also to recognize and appreciate their accomplishments so far.

  • Promote open communication: This will create a more collaborative environment where everyone feels comfortable discussing potential challenges or opportunities for growth.

  • Actionable suggestions: Create actionable steps that your team members can take based on your observations from monitoring progress.

4. Recognise achievements

By celebrating achievements, you not only boost employee morale but also encourage them to continue striving for excellence in their work.

Acknowledge accomplishments

This can be done during team meetings, company-wide announcements, or even on the organisation's intranet site. Sharing success stories with the entire team fosters a sense of pride and motivates others to achieve similar results.

Reward employees appropriately

In addition to verbal recognition, it's essential to provide tangible rewards that reflect the value of an employee's contributions. These rewards can take various forms such as:

  • Bonuses tied directly to goal achievement

  • Promotions based on consistent high performance

  • Additional paid time off as a reward for exceptional work

  • Career development opportunities like training programs or workshops

  • Tailored incentives that cater specifically to individual preferences (e.g., gym memberships, gift cards)

Research has shown that recognising and rewarding employees can significantly boost morale. 

Create a culture of recognition within your organisation

To make recognition an integral part of your company culture, consider implementing regular practices like:

  1. Establishing a peer recognition program, where employees can nominate their colleagues for outstanding performance

  2. Creating an "Employee of the Month" or similar award to spotlight exceptional work on a regular basis

  3. Incorporating employee achievements into company newsletters and social media posts

A strong culture of recognition will help ensure that your employees feel valued and appreciated for their hard work. Consequently, motivating and activating personnel across the organisation can be enhanced through this process.

5. Adjust goals

Performance management is an ongoing process, and it's essential to make adjustments to goals as needed based on performance and feedback. This ensures that employees are always working towards realistic targets that align with their skills, abilities, and the company's overall objectives.

Why goal adjustment is important

  • Maintaining motivation: If a goal becomes unattainable or too easy due to changes in circumstances or employee capabilities, adjusting the goal can help maintain motivation by keeping it challenging yet achievable.

  • Fostering growth: As employees develop new skills or take on additional responsibilities, updating their goals can encourage continued professional development and ensure they're contributing in the most effective way

  • Avoiding stagnation: ensures employees are consistently striving for improvement rather than resting on past achievements.

Tips for effective goal adjustment

  1. Gather input from multiple sources: In addition to your own observations of an employee's performance, consider soliciting 360° feedback from colleagues who work closely with them. This will provide a more comprehensive understanding of their strengths and areas for improvement when adjusting goals.

  2. Analyse data-driven insights: Eletive provides valuable tools and insights that enable HR managers to measure employee engagement levels through surveys which helps identify trends in individual performances.

  3. Communicate changes clearly: When adjusting goals, it's important to have an open dialogue with employees to ensure they understand the rationale behind the changes and how they align with their personal development plans. This fosters buy-in and commitment to achieving the updated objectives.

Making regular adjustments to employee goals is a critical component of effective performance management cycles. By keeping goals relevant, challenging, and aligned with both individual capabilities and organisational needs, HR managers can foster continuous improvement in employee performance while maintaining high levels of motivation and engagement.

An enterprise performance management life cycle is slightly different. So let’s look at that now. 

Enterprise performance management life cycles

In this ever-changing business climate, firms must be flexible and adjust to remain competitive. One way they can achieve this is by implementing an enterprise performance management (EPM) life cycle

EPM life cycles are designed to help businesses align their strategic objectives with their operational processes, ensuring that all aspects of the organisation work together efficiently and effectively.

An EPM life cycle typically consists of several stages:

  1. Strategy formulation: In this stage, top-level executives define the company's overall vision, mission, and goals. This includes identifying key performance indicators (KPIs) that will be used to measure success. McKinsey & Company highlights the importance of a well-defined strategy in driving organisational growth.

  2. Budgeting and planning: Based on the defined strategy, managers create detailed budgets and plans for each department or business unit. These plans outline how resources will be allocated across various initiatives throughout the year.

  3. Data collection and analysis: As operations unfold according to plan, data is collected from various sources within the organisation. This data helps decision-makers monitor progress towards KPIs and identify areas where adjustments may be needed.

  4. Actionable insights generation: Using advanced analytics tools like those offered by Eletive, companies can gain valuable insights into employee engagement levels as well as other factors affecting productivity. These insights inform corrective actions aimed at improving performance across different departments.

  5. Performance review and adjustment: Regular performance reviews help managers assess employee progress towards their goals, provide feedback, and make any necessary adjustments to plans or objectives. This iterative process ensures that the organisation remains agile and responsive to changing market conditions.

Implementing an EPM life cycle can lead to numerous benefits for organisations, including improved financial performance, increased employee engagement, better decision-making capabilities, and enhanced overall business agility. 

How are performance management cycles changing?

Today, performance management cycles are transitioning to accommodate the changing demands of organisations and employees by embracing continuous improvement, employee engagement, and real-time feedback. 

The traditional annual review process is increasingly being replaced by more frequent and agile approaches. 

Let's explore some key trends shaping the future of performance cycles management:

1. Continuous feedback

Rather than waiting for an annual review, many companies are now implementing continuous feedback systems, where managers provide regular input on their team members' work throughout the year. This approach allows employees to make adjustments in real-time based on constructive criticism from their supervisors. Regular 1:1 meetings are an important forum for this approach.

2. Team alignment

Organisations are placing greater emphasis on setting clear goals at both individual and team levels. By aligning these objectives with overall company strategy, businesses can ensure that everyone is working towards a common purpose while also tracking progress against specific targets.

3. Personal development plans (PDPs)

PDPs are becoming increasingly popular as a way to help employees identify their strengths and weaknesses, set personal goals, and outline steps for achieving them. 

4. Use of technology

Technology is playing an ever-increasing role in performance management cycles by streamlining processes, facilitating communication between managers and employees, and providing real-time data on performance metrics. 

Tools like Eletive can help HR managers measure employee engagement levels while also offering insights into areas where improvements may be needed. 

Book a demo to discover how we can help you. 

Conclusion

Ultimately, it is essential to acknowledge that performance management cycles are a key factor in any prosperous organisation. 

By following our guides you can ensure your employees have clear goals and expectations for success. Then with consistent monitoring and feedback, you can maximise employee engagement and productivity. 

The best part?

The end result is a more positive work environment overall. Everyone’s happy.

Take control of your employee performance today with Eletive's suite of performance management features. 

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