It is without a doubt that employees perform better and are more productive when they are rewarded and recognized for their efforts. In fact, companies face 14.9% lower employee turnover when they provide timely feedback. Additionally, 24% of employees would rather quit their jobs when their leaders fail to foster growth or provide adequate performance feedback.
So, what’s the solution? An effective performance management cycle. It is a great method of keeping the employees engaged while supporting them with motivation, rewards, appreciation, and feedback. A good performance management cycle encourages retention and instils loyalty by creating a sense of value in each employee and their contributions.
Besides that, it is a great tool for facilitating feedback, leading to high retention, job satisfaction, and productivity. Performance management also provides the organization with a competitive advantage which helps in retaining and attracting top talent.
What is the Performance Management Cycle?
Simply put, the performance management cycle is an employee evaluation phenomenon that occurs every year. Starting from entry-level associates to C-level executives, everyone goes through this process. It has four stages, namely, goal-setting, monitoring and developing, reviewing and rating, and lastly, rewarding.
The goal is straightforward: to create and implement an employee performance plan. This helps the organization to focus on aligning employee priorities as per the bigger goals of the organization. However, it is important to understand that the ultimate goal of the cycle is to explicitly improve employee performance. Therefore, all activities are aimed at coaching employees and setting their goals to help them achieve and even overachieve the set goals.
Additionally, the performance management cycle can be used for both individual employees and teams to set, align, and track their performance.
Stages of Performance Management Cycle: the four pillars
Most people make the mistake of confusing the performance management cycle with a one-time annual review. In reality, it is a months-long process which consists of everything starting from goal-setting to recognition and promotion.
To help you understand better, here is a breakdown of the four stages.
Stage 1: Set Goals 🎯
As the name suggests, the first step is to set goals for the employees. Managers need to do so to ensure the performance expectations of employees are aligned with the company’s objectives and goals. Employees can weigh in and use frameworks like OKRs (Objectives and Key Results) and SMART goals to define their goals and measure their success.
Managers have to define the KPIs at this stage to ensure employees clearly understand the criteria against which they will be evaluated at performance reviews. The KPIs can be average call time or quarterly revenue generated by the customer service or the sales team, respectively.
Employees learn how these cascading goals are directly tied to the goals of the company and impact the overall success of the organization. This shows the employees how meaningful their work is and boosts their engagement.
At this stage, employees must also set personal goals such as taking project ownership, developing new competencies, and learning new skills. Such an approach helps employees get closer to long-term career goals.
By establishing these goals initially, managers would know the best way to coach and motivate their employees throughout the cycle.
Also Check: How to Perform OKR periodic check-ins 🎯
Stage 2: Monitor and Develop 🚀
The real work starts when the performance expectations are in place. At this stage, employees have to work every day to meet or surpass their goals. However, they are not alone, their managers should support them at every step.
Weekly one-on-ones are a great method for managers for monitoring and developing their team members. These activities allow both the manager and the employee to stay updated on different aspects like discussing progress, exchanging real-time feedback, resolving obstacles, and identifying challenges.
Regular check-ins develop an ongoing feedback loop which ensures the steady progress of employees towards their goals. Additionally, it provides managers with the opportunity to readjust expectations and update targets as needed.
This can be further explained with an example. Managers can create new and more ambitious sales targets for an employee if they achieve their quarterly target in just a month. This keeps the employee productive and motivated throughout the review cycle. On the other hand, through one-on-ones, managers can immediately notice when an employee is falling behind and work with them to either create PIP (Performance Improvement Plan) or boost their performance.
Nevertheless, managers should not only discuss to-do list items or performance goals in one-on-one conversations. They should also cover other aspects like professional growth, individual development plans, and the well-being of the employees. Motivating employees, coaching the whole team, and sharing constructive feedback is the right way to go at this stage.
Stage 3: Review and Rate⭐
Here the organization has to formally evaluate the performance of the employee as per the last quarter, half-year, or the whole last year. To avoid any surprises at this stage, managers should regularly meet their team members throughout the previous stage.
Nevertheless, performance reviews are crucial and valuable as it brings the employee and their manager on the same page regarding which performance areas require improvement and which dont. But the best thing is, this stage allows the organization to recognize standout talents and accordingly reward them for their efforts.
At the same time, we cannot forget that performance reviews can be accompanied by bias, especially when only one person (manager) has been given the responsibility to determine the overall performance rating of an employee. Therefore to avoid such bias and incorporate a fair employee appraisal process, organizations incorporate 360-degree feedback, peer-reviews, and self-reviews to include a diverse perspective on the review process.
Stage 4: Rewards🏆
Organizations can boost employee loyalty, productivity, and motivation when they recognize and reward their employees properly. This builds an effective recognition culture where employees know that their accomplishments and efforts have been noticed by their leaders.
Rewards can be in the form of:
Additional paid time-off
Offer a bonus
Increase in salary
This is an important stage and managers should ensure to incorporate it in the performance management cycle to celebrate the hard work that their employees have done throughout the year.
A successful performance management cycle makes it easier for the employees and the managers to recognize hard work, share feedback, and track goals. It helps in avoiding lengthy paperwork and convoluted processes which prevents the employees from taking career conversations and feedback seriously.
Luckily, with the wrky.ai performance management tool, organizations can effortlessly enable everyone to track and reward their employees’ hard work while working on any gaps that exist.