Last updated: 26.05.21

What is the Performance Management Cycle?

Performance management is a key buzzword in business nowadays. It keeps companies moving forward, provides opportunities for employee growth and leads to greater overall satisfaction and accomplishment.

The performance management cycle is one of many models used to facilitate performance management, focusing on several key areas to set goals, review progress and provide an incentive for success. Whether you’re a manager in charge of employee development or a member of staff about to undertake a review session at work, understanding the purpose of this cycle and what it involves can be very beneficial.

What is Performance Management?

Performance management is the process of communicating, measuring and reflecting on the progress and performance of employees within an organisation in line with overall business goals. The majority of companies have systems in place to track performance management as a whole and provide all employees with the feedback and support necessary to ensure everyone is working to their full potential.

As a manager, you may be in charge of regularly checking in with your employees and reviewing their performance to identify areas that require improvement. Alternately, if you’re an employee at a company then you will likely have your performance tracked and measured in some way as part of a system that facilitates performance management. 

Stages of the Performance Management Cycle

There are various iterations of the performance management cycle out there, usually with between three and five stages summarising the process. Each version of the cycle has the same objectives however, just with slightly different titles for the different stages.

Each of these stages is completed by an employee and a more senior member of staff who is in charge of managing employee progress and performance.


The unanimous first stage of all performance management models is the planning stage. This is where the groundwork is laid for employees to succeed and ensures that their personal development goals align with overall business objectives.

It is useful for the staff member guiding the planning session to have a clear idea of what business goals are going to require work from employees, and also to have spent some time thinking of general areas to suggest where the employee should set their goals.

Employees should also come to these planning sessions with some rough ideas for goals in mind, even if they just know what kind of skills they would like to develop or which areas of their role they feel they would like to improve.

The planning stage of the performance management cycle should be a collaborative process between the employee and their manager. This is because you’re much likely to be motivated to work towards goals that you have set yourself and are genuinely interested in.

The best kind of targets to set at this stage of the cycle are SMART targets, which include metrics that make them more trackable and achievable.

S - Specific

Ensure that each of the personal goals that you set is specific. You need to know exactly what it is that you are aiming for with each, as this means that you are more likely to achieve it.

As well as a good overview of what each goal is, you can also include how well the job must be done for the goal to be reached, and why you are setting it in the first place. Having the motivation behind a goal listed alongside your plan to accomplish it will remind you of what you are aiming for and add an emotional drive to the goal.

M - Measurable

A key part of setting successful goals is establishing how you’ll know when you’ve achieved them. Celebrating accomplishment is a great motivator, but you can’t do this if the endpoint of the goals you set is unclear.

Instead of setting vague goals as part of your performance management objectives, such as ‘I want to get faster at writing reports’, come up with a measurable target like ‘In three months I will be able to write 10 reports in a week’. As time goes on you can adjust these values if necessary, but you should add an estimated measure of success at the start to give you something specific to aim for.

A - Attainable

Whilst having high aspirations and being resilient is a good thing, setting yourself totally unattainable goals is only going to lead to disappointment. Make sure that the goals you set in the planning stage push you out of your comfort zone but are still realistic, and edit any that don’t feel attainable.

Admitting that a goal is a little too difficult to achieve is not something to be ashamed of. Instead, it shows good self-awareness and can be a good opportunity to decide on a simpler step towards a similar endpoint.

R - Relevant

The purpose of performance management is to keep employee goals aligned with overall business goals so that everyone in your company moves forward and pushes business growth along with them. Ensure that the goals that are planned at this stage are relevant to these overarching aims and edit or delete any that aren’t going to serve this purpose.

T - Time-bound

The final stage of setting SMART targets involves making each of them time-sensitive. This will provide a more rigid framework to work with and help to keep you on track for meeting each of your goals instead of putting off tasks until later.

Depending on how frequently planning sessions are held as part of the performance management cycle, the time frame for these goals may be within three months, six months or a year. 


In order to reflect on the progression of employee goals and performance as a whole, the next stage of the cycle is to monitor growth and progress on an individual and company level.

By following the above guidelines for setting goals, it should be easy to identify what metrics need to be tracked to monitor and measure progress. Employees can track this themselves or a member of the management team can periodically gather the data.

When a business sets out to implement a performance management model, it should decide how regularly it is going to monitor progress within the company. This kind of tracking is more effective if it is done frequently instead of just once or twice a year, as the spread of data is better and goals are more likely to be reached with regular check-ins.

Most businesses have some kind of regular review or appraisal process for their employees, and the monitoring stage of the cycle should fit into this. How these meetings are structured will depend on the company, the employee and the system used to facilitate staff development.


The reviewing stage of the performance improvement cycle is quite similar to the monitoring stage, and in some examples of this cycle, the two are combined. It involves reflecting and giving feedback on the progress made towards achieving personal goals and adjusting or adding to these goals depending on what is discussed.

A review section can be implemented into the regular monitoring meetings or can be a separate element of performance management. Many companies use a yearly review session to update their employee’s goals and reflect on how well they have done in their role over the last 12 months.

This should be an opportunity for professional highlights to be brought up, along with any areas of the role that an employee might be finding hard. The review stage can be used as a way to check whether additional support or training might be needed to help an employee reach their goals or advance in their career, and to share advice on how the employee can be or continue to be more successful in the future.


After goals have been set and then monitored and reviewed, the next stage to keep driving business growth and employee progress forward is to focus on development. This stage of the performance management cycle looks ahead to eventual goals and decides what needs to be done to get there.

Unlike the previous three sections, the development stage is more of an ongoing process that informs the other parts of the cycle. Each time performance goals are reviewed and renewed, this should be with overall development in mind.

The main performance management objective of this stage of the cycle is to help employees and the company to increase the capacity to perform. As staff grow more skilled and internal processes become more efficient, everybody benefits.

Key ways in which to drive development include increasing responsibility, introducing new skills and implementing new systems with the help and feedback of employees.


The final stage of the performance management cycle model is rewarding, which is what drives the other stages forward. Whether the reward is a tangible thing or merely a sense of achievement, it is what motivates employees to work towards their goals and spend time and effort on the steps needed to get there.

By rewarding employees for meeting their goals, a company ensures that its workforce will continue to work hard and drive the business forward. Seeing other employees getting rewarded for their efforts is also a good motivator, particularly if the reward itself is something of high value.

The reward system used as part of this cycle varies from company to company and for the type of goal that has been achieved. In some cases, recognition and circulation of an employee’s achievement may be enough of a reward for smaller goals. In other cases, additional benefits, a bonus, promotion or extra support or resources may be offered as incentives.


What is a performance management system?

A performance management system is a process or mechanism that tracks the performance and development of employees. The data that is collected is standardised and measurable and allows for conclusions to be drawn about departmental performance, growth and efficiency. 

What is the main goal of a performance management system?

The primary goal of a performance management system is to ensure that employees are working at their full potential in a way that maximises benefits for the business. It also aims to ensure that the business is providing all the necessary support and assistance for employees to develop and advance in their careers to tackle skills shortages and industry advancements.

What are the different types of performance management systems?

There are lots of different approaches to performance management out there, all focusing on different metrics and rewards. The range of performance management systems available combine these different approaches to suit different business types and goals, and include feedback systems, mentorship schemes, productivity analysis and target tracking.


Using the performance management cycle as a guide for a performance growth system is the best way that a business can align employee goals with business development and provide guidance and support that allows for individual development as well. Companies that provide these growth opportunities will have more satisfied and motivated employees which will increase their desirability as a place of work and generate more interest from talented potential employees.

Greater job satisfaction and employee retention save business time and resources, which in turn leads to better performance overall. Following the steps outlined above will also generate plenty of useful data to help streamline internal processes, target potential areas of innovation and create a more harmonized atmosphere with all members of a company working towards the same goals.

If you’d like to find out more about performance management, we offer an online ‘Performance Management’ course as part of our new Leadership and Management resource collection that covers how best to review, inspire and facilitate exceptional team performance.