While goal setting, tracking, and rewards are the foundations of performance management, there are many other components in the process. To operate an effective performance management cycle, human resource (HR) professionals and leadership teams need to collaborate to create a performance management program, plan the performance management cycle, and educate employees. Here is a complete guide to help you through the process.
It is a well-known fact that employees who are recognized and rewarded are more productive and perform better than those who are not. In fact, employee turnover is 14.9% lower in companies that provide timely feedback and 24% of employees said they would quit their jobs if leaders failed to provide adequate performance feedback or foster growth.
A robust performance management cycle is an effective way of engaging with employees and providing them with timely feedback, appreciation, rewards, and motivation. It helps create a sense of value for each individual’s contribution, thereby instilling loyalty and encouraging retention.
In addition to motivating employees, effective feedback can lead to higher productivity, job satisfaction, and higher retention. Performance management can also create competitive advantage for the organization, which helps them attract and retain top talent.
The performance management cycle is a continuous process that involves setting individual goals and tracking performance while working towards the overall objectives of the organization. It empowers employees to deliver high-quality output effectively and efficiently and provides learning opportunities for further growth and career development.
During a typical performance management cycle, a manager:
An effective performance management cycle helps managers and leaders get the most out of their teams, while enabling individuals to thrive professionally.
An effective performance management cycle model has four stages:
1. Planning: This is typically done at the beginning of the cycle and entails establishing goals and identifying performance measures.
2. Tracking/Monitoring: This involves measuring progress made vis-a-vis set goals.
3. Reviewing: This refers to reviewing employee performance and supporting employees with development programs wherever necessary.
4. Rewarding: This is the phase where employees are graded and rewarded for their performance.
The performance management cycle is a continuous process. Some organizations do this once a year, but it can also be a continuous process. For example, if an employee fails to meet performance targets, training sessions can be planned accordingly even if it isn’t the scheduled, year-end review. Conversely, if an employee exceeds expectations, they can be rewarded or promoted as the need arises instead of waiting for the annual cycle.
Learn More: Top 10 Performance Appraisal Methods to boost Workplace Culture
We now offer a more detailed insight into the four stages mentioned above:
This is the first stage of the performance management cycle. Leaders and managers initiate the process by outlining the organization’s goals and strategies for the year. These are then broken down into smaller goals and objectives for individual employees. The exercise becomes more meaningful when the individual is actively involved in the planning process. This collaborative effort ensures transparency and ensures they are more invested in achieving the goals.
According to Globoforce data, 51% of employees feel annual evaluations are inaccurate, and 53% find them uninspiring. This can be remedied through effective goal planning. The HR team can play a critical role in bridging this gap, educating employees, and building trust in the performance management process by actively including both managers and teams in the planning process.
Organizations can use frameworks like the SMART goal setting process to set effective goals.
SMART is an acronym for:
Co-creating development plans and goals with employees at the beginning of the performance management cycle provides an opportunity to identify areas of training and development that employees may need to improve performance.
Learn More: Alignment is Everything - Are Your Company Goals Cascaded or Delegated?
Monitoring involves continuous observation, measurement of performance, and feedback conversations.
To ensure timely completion of goals, it is important to break down annual goals into smaller subgoals.
Managers then meet with their teams on a monthly or quarterly basis, to check their progress, provide support when needed, solve challenges that might arise, and adjust goals or timelines, if necessary. Regular tracking engages both the manager and the team members to course-correct in case of suboptimal performance or inefficient results.
This is a critical stage of the performance management cycle. At the end of each cycle, employees meet with their managers to review progress and check whether goals were met. These conversations highlight successes and identify areas of development.
The review process helps an organization evaluate its employees’ success in achieving the goals, and make note of any developmental needs. Additionally, reviews are an excellent opportunity to discuss challenges the employee faced during the past year and present them with workable solutions for the future.
Here are some aspects that can be evaluated during the review process:
The fourth stage of the performance management cycle is rewarding high-performing employees.
Employees who don't feel appreciated when they accomplish good work are nearly twice as likely to be looking for different jobs. Furthermore, statistics reveal that 79% of those who left their jobs do so because of a "lack of appreciation." According to a LinkedIn study, 69% of employees say they would work harder if their contributions were better recognized.
There is a lot of evidence that shows how recognizing and rewarding employees also benefits organizations. It engages and motivates employees, which, in turn, leads to higher rates of retention and productivity.
Rewards can include:
Monetary benefits:
Other benefits:
Learn More: 30 best Employee Rewards and Recognition slogans that really work
The benefits of a performance management cycle have been proven time and again. Each stage of the cycle plays a critical role and helps both employees and the organization grow. An effectively planned and executed performance management cycle helps boost employee productivity by ensuring that both the organization's and individual’s goals are met.
Here are a few things to keep in mind while crafting your performance management process so it is effective.
Digital performance management systems are more effective than paper-based ones. They offer benefits such as increased employee productivity, higher employee engagement and rates of retention, reduced human error, increased cost-effectiveness, scope for personalization, etc.
Some of the key benefits of using a digital performance management system:
Darwinbox has a robust performance management platform that enables companies to plan, execute, and monitor performance management cycles. The performance management module offers four sections:
Darwinbox’s Performance Management module has helped 650+ organizations craft a culture of high performance. We have ensured 97% on-time completion of performance cycles with 90% adoption of 360-degree feedback.
Read more about best practices in a performance management system and different reward systems for employees.
Learn More: Find out how Darwinbox can help you create a robust performance management system. Book a demo today!