What is performance management process?

The performance management process is a collaborative, communication-based process in which employees and management work together to plan, monitor and review employee objectives, long-term goals, career path, and the overall contribution to the company.

This process is ongoing, with regular sessions where both management and staff have the opportunity to give and receive feedback.

According to the Gallup State of the American Workplace study, only 22% of employees are committed and thriving. Engaged and thriving employees are more likely to maintain strong work performance, even during challenging times. This also means that 78% of the workforce can do a better job if their organization has the right kind of management process in place.

Some of the reasons cited in this study for lack of motivation are seeing less deserving employees receive promotions, lack of actionable feedback, and management not including employees in setting goals. All of these things combined show the importance of the performance management process, and why each part of it must be done well for the process as a whole to be successful.

When the performance management process is done correctly, is designed to fix those problems in the workplace, setting employees up for success in achieving both their goals and overall company objectives.

Performance management process steps

There are many steps in the performance management process, that can be broken down into four broad categories: Planning, coaching, reviewing and rewarding. And each step is equally important, and together form the backbone of a company’s performance management process.

1- Planning


Planning is the first step of the performance management process.

  • The defining stage

The performance management process starts with the planning stage.

HR and management need to define the job itself, including a comprehensive description, long- and short-term goals, identify key goals and establish a clear metric of how those goals and objectives will be evaluated.

Goals and objectives must be clear, be made in the form of SMART (Specific, Measurable, Achievable, Relevant and Time-Based) and clear performance standards must be set.

  • The feedback stage

Once management has completed the identification phase, employees should have the opportunity to provide input on these materials. They are the people who do their job and will have a key insight into the skills, competencies and goals that will best help the company to achieve organizational goals.

  • The approval stage

Both management and employees agree to the definition of the role, goals and objectives.

By making this first step of the performance management process collaborative, management sets the stage for the process as a whole to be collaborative, and the employee feels involved in setting goals—which is important, as evidenced by the Gallup study.

2- Coaching


  • Organize meetings on a timely, regular basis

Once the job criteria and goals for the future are defined, the next step in the performance management process begins.

The coaching process is very important and should be done on a regular basis. Meetings should be at least quarterly, although monthly meetings are ideal.

  • Provide necessary training, coaching and solutions

These meetings we mentioned before should focus on solutions and coaching opportunities, rather than punitive measures for lackluster performance.

If accountability is turned negative, employees will avoid it rather than be honest about where they are struggling.

In some cases, management training in this area can be very beneficial to an organization.

  • Solicit feedback on both sides

Management must be able to give – and receive – honest feedback and work with employees rather than adopting a combative attitude. The ability to give practical feedback is important here.

  • Revisit objectives as necessary

As the performance management process continues, management must reconsider the objectives to see if adjustments should be made, as well as pay attention to career development opportunities for its employees.

This step includes a review of the employee’s overall performance, how well the process itself works, and also includes the reward – which is a very important part of the overall process.

3 – Reviewing


  • Reviewing employee performance

At the end of the annual performance management cycle, there should be an employee review, which is sometimes also called a performance appraisal. Usually, it is held once a year, to look at how well an employee has performed during that time period.

It should be there a clear record of previous check-ins to show the employee’s progress throughout the year. Monthly check-ins are intended to help the employee solve problems, adjust goals, and other forward-looking tasks. This performance review is the only step that looks back to assess the behavior of the past year.

  • Reviewing the performance management process

At this point, it is important for both management and employees to look at the previous year and see how well the performance management process worked.

The questions that can be asked are:

  • Were the personal and organizational goals achieved? If not, then why?
  • What challenges did the employee face?
  • What training will help the employee perform better?
  • How did management feedback help? If not, why?
  • How can the process be improved?
  • Is the time spent in this process effective?
  • Reviewing overall goal completion

Of course, one of the main questions that must be answered is “Has the employee reached his goals?” To what extent did the employee succeed in the tasks assigned to him throughout the year?

It is important to look at both smaller and larger objectives, as this can give an indication of problem areas where training or interventions can be applied.

  • Giving actionable feedback

An essential part of reviewing is giving and receiving feedback.

Management should provide actionable feedback to the employee so that he knows the areas in which they can improve performance in the future.

The employee should also be invited to provide their feedback on the process, and how management could do better from its end.

4- Action


The final step in the performance management process is Action.

  • Reward and recognition

The final step in the performance management process is the reward and recognition.

This step is absolutely key-employees will not remain motivated if they are not given a reason for it. This does not have to be cash necessarily, although it will likely include monetary compensation. Other rewards may be new projects, company-wide recognition, vacation, or leadership opportunities.

  • Setting the stage for next year’s performance management cycle

The end of the performance management cycle gives management and staff a final opportunity to provide feedback on the process as a whole and solicit ideas and feedback for the planning phase of the next year’s cycle.

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