Performance Management

We explore how to set clear goals for your employees. Benefitting them, and your business

First published on Friday, Oct 16, 2020

Last updated on Thursday, May 25, 2023

As an employer, the performance of your staff is crucial to the growth of your business. So you should track their development against a set of pre-determined goals. This can be done via an employee performance management cycle.

Failure to improve their performance can lead to you losing your best staff and them not reaching their potential.

In this guide, we'll discuss what performance management is, how to ensure you're supporting your employees, and the best practices you should follow.

What is Employee Performance Management?

Employee performance management is the "continuous process of improving performance by setting both individual and strategic goals which are aligned to those of the company". These are achieved by the planning of goals, with continuing and ongoing reviews.

Successful performance management can help aid and accelerate the career development of an employee.

Why is Performance Management Important?

The aim of managing performance is to allow employees to see how they've performed in line with pre-determined goals. The professional and personal development of your employees should be one of your main priorities.

Continuous performance management makes it clear to your employees that they're valued by both you and their manager. It encourages them to believe their work, career development and any issues they have are cared about. This also increases their ability to take constructive criticism and not react in the wrong way.

Performance management is a way to open up regular two-way discussions between the employee and their manager. This helps to provide regular feedback and improve the working relationship between both parties.

Who is Responsible for Performance Management?

Employers, senior managers, and employees all have a responsibility towards performance management. Employers and senior managers should create a workplace culture that encourages discussion regarding goals and to seek improvement.

Employees have a responsibility to put in the effort needed to reach those goals and be willing to communicate if they're struggling to.

A staff member at work using a phone.

What is the Performance Management Process?

The performance management process is the path that a company takes regarding employee performance. In simple terms, it sets out the foundations for employee performance management, and how they're evaluated.

Four Components of the Performance Management Process

There are four components that make up performance management processes. So it's important you understand each of them and why they matter. Let's discuss them in more detail:

  • Culture: How employees are motivated by their surroundings to improve.

  • Open communication: Creating an environment for employees to raise concerns and boost their output.

  • Skilled leadership: How senior managers can lead by example to motivate their employees.

  • Employee skills and interests: Working with employees to find out how they learn and what works for them.

Conducting the above four in your company can go a long way in improving the overall performance of your employees.

What is the Performance Management Cycle?

A performance management cycle is the process of continuous improvement from your employees. It helps to set a clear plan for how you expect your staff to improve over time, working with their managers to do so.

During the cycle, it should be used to:

  • Set appropriate goals.

  • Retain your top talent.

  • Explore all the options to help the employee achieve the goals.

  • Provide all the tools, resources, and support needed to put the goals into action.

  • Continuously review and reward progress against the pre-set goals.

  • Develop your current employees.

Why Should You Use a Performance Management Cycle?

It's important you encourage your managers to use a performance management cycle in your business. It works to ensure all performance-based goals are met.

A performance management cycle helps to improve the overall success of your company. As well as this, there are other benefits:

  • Employee potential can be reached, increasing engagement.

  • Employees are more involved in their professional development.

  • Employee productivity is increased because the goals are achievable and manageable.

Someone typing something on a laptop.

What are the Five Phases of a Performance Management Cycle?

A continuous performance management system is made up of five main phases. In order to understand how the cycle can help you, it's important you understand them.

So, let's discuss each one in more detail:


Performance planning is where goals and objectives are set. It's important you set clear and achievable goals, not doing so won't improve performance. You should work with each employee and set goals that improve individual development. Remember, one employee will work differently to another.

Employees setting their own goals can lead to increased ownership and a greater commitment to achieving them. Make them aware of the key performance indicators and company goals they should work alongside. This'll help to create achievable targets.


The second stage is to monitor employees' performance based on previous goals set. This is undertaken by their managers.

Monitoring is the period of time that the employees are working on their goals as part of their daily tasks. Employees can use this stage to undertake some further training or start their personal development plan.

Managers should hold monthly check-ins with the employee to monitor progress and discuss any concerns they may have. There are many subjects you can cover during the meeting, such as accomplishments, progress, concerns, and support. Here are some questions that can be asked:

  • What is the employee most proud of over the last month?

  • Does the employee feel they're on track to hit their goals?

  • Is anything getting in the way of the employee hitting their goals?

  • Does the employee need to revise their goals?

  • Is there any help the employee needs to hit their goals?


This stage of the cycle is to use any data found in the monitoring stage to improve the employee's performance. It may involve making changes to an employee's development plan or providing a refresher course if required.

Another option is to provide an assignment or task that helps to improve their skills or knowledge. Ensure any tasks set are manageable and won't increase any workplace stress on the employee.


Managers and employees should meet regularly to discuss how they both feel the employee is performing. These performance reviews should be as honest as possible, as they are an important way to monitor the employee's progress towards the pre-determined set of goals.

Some common questions during a performance review are:

  • Which goals weren't achieved and why?

  • Which goals were achieved?

  • What can be done differently moving forwards?

  • Did the employee feel they got enough support needed to achieve the goals?

Performance appraisal has been the main choice for performance assessment in the past. But, the modern workplace has less focus on past performance, with more on regular reviews maybe twice or even three times a year.

A key part of the review stage is assessing performance and the employer providing instant feedback. Senior management should use this stage to set new goals with the aim of further developing skills.


The fourth stage of the cycle is to reward your employees based on pre-determined goals. It can be used to enhance performance long term.

Rewarding good performance is arguably more important than punishing someone who is struggling, as it's an important part of employee engagement. Employees who feel they're recognised by their employer are more likely to stay with the company for longer.

What are common ways to reward employee performance?

As an employer, there are different ways in which you can reward individual employees for their performance. Such as:

Don't forget how important it is to reward employees when it's deserved

Someone stood in front of a whiteboard.

Performance Management Best Practices

If you're choosing to implement effective performance management into your company, it's important you follow good practice.

Failure to do so can mean your employees don't develop as you'd hoped, slowing the success of your company. Let's discuss what they are in more detail:

Create a Well-Designed Performance Management Strategy

The performance management strategy you create must be well-designed and easy to understand. Your plan needs to clearly explain how, why and when performance will be evaluated.

It should also detail which systems will be used to evaluate performance and how any feedback will be used to develop employees.

The plan should be explained to any new starters, making it clear to them how they can develop their career with you.

Open and Effective Communication

You should hold frequent conversations with your employees to discuss their career goals, development, and overall job happiness. These conversations don't need to be kept on record, but they're beneficial and can grow the working relationship.

Common questions to ask are:

  • How are you finding your current goals?

  • What motivates you?

  • Do you need any further help to achieve your goals?

  • Is there anything else our HR teams can do to support you?

Creating a culture that promotes transparent communication between employees and their managers is important for performance. Managers should be able to clearly explain to the employees what is expected of them and how their goals can be achieved.

Track Employee Progress

For performance management to be successful, you need to track their progress. However, it can be a fine balance. It's important you don't over-monitor your employees' development as this may have a negative effect.

If you see a downward turn in their output or quality of work, you may need to intervene to ensure this pattern doesn't continue.

Make Time for Your Employees

For any performance management cycle to work, you must make time for your employees. This isn't just an informal conversation, you must plan regular check-ins and reviews.

If your employees don't feel like you're making the time to work on their development and goals, they're less likely to work hard to achieve them.

Don't forget, it's important you make an effort to get to know your employees on a personal level. Your employees are people, not just a number on a pay slip.

Focus on Continuous Employee Development

You must focus on continuous development. A performance cycle doesn't end after six months or a year, but it's an ongoing process. You don't want your employees to feel their development has been forgotten about after only their first set of goals are achieved.

Goals can be developed and evolve over time in order to improve employee performance. They can change in line with a new role or new responsibilities the employee may have.

Don't Treat Employee Development as a Box-Ticking Exercise

It's important to make senior managers aware that employee development should never be seen as a box-ticking exercise that "has" to be done.

When undertaking performance management tasks such as performance reviews, managers shouldn't just go through the motions. If employees get wind of this, they may feel like it isn't a serious exercise and not concentrate on the task as they need to.

What Happens if You Don't Manage Employee Performance?

Not managing employee performance can lead to negative effects on your business. Monitoring and tracking how your employees are performing should be one of your main priorities when running your business.

Some of these that you need to be aware of are:

  • A decrease in employee engagement or happiness.

  • Being unable to keep your best employees.

  • Employees not reaching their full potential.

  • Employees and managers not having as strong a relationship as possible.

  • Employees not feeling valued in your company.

What is a Performance Management System?

Performance management systems are used to track the performance of employees in a consistent manner. A successful system allows employers to manage employee performance using technologies and methods in line with the company's goals.

So, it's important to know what to look for when deciding on the best system for your company.

Someone writing something down on a notepad.

What to Look for in an Effective Performance Management System

In the modern workplace, there's a performance management revolution taking place. Employers are looking for new and innovative ways to track and manage employee performance, whilst providing continuous feedback. With employees expecting regular performance discussions with their line managers.

However, some systems may be more useful for one company than for others. you should choose yours correctly. It's important you select the right performance management system for your company.

Dynamic Goal Setting

You should set goals that are fully aligned with the goals of the company. These goals should be manageable and achievable for the employee. You should hold conversations with your employees to discuss their goals and what they think is achievable.

Setting achievable employee goals play a key part in the overall performance of your employees. Leading to the continual growth of your business.

Transparent Communication

An effective system should allow for quick and transparent communication between employers, managers, and employees. It should have a feature in place that allows you to communicate with your employees easily, at any time.

Having a quick conversation with your staff can keep the communication lines transparent and effortless. As well as your employees feeling valued and respected.

Shift Scheduling Tools

The system you choose should include a feature for employees to complete tasks, plan meetings and work with other team members.

It can also help to find cover for employees who may be in a review meeting with their manager. A shift scheduling tool allows you to keep all your employees happy and ensure regular review meetings are held when required.

Performance Evaluation

Performance management programs are a great way to monitor the performance of your employees on a monthly, quarterly, and annual basis. Ongoing reviews can give a senior manager a clear view of how employees perceive their performance and the performance of the company.

The system should allow you to create automated self-assessments or questionnaires to send to your employees. This gives you a quick way to establish employee performance and happiness.

Recognition Tool

You should use performance management tools to provide your employees with regular feedback and recognition. Making an employee aware they're performing positively is arguably more important than if they're struggling.

So, choosing a system that allows you to recognise employee performance is important. There are a range of ways you can give recognition to your employees, such as:

  • Later start or an early finish.

  • Offering an additional day of annual leave.

  • Lunches or sweet treats.

Praising employee performance can have a positive impact on your business. For example, improving employee happiness, retention, and workplace culture.

360-degree Feedback

If you're choosing to conduct monthly, quarterly, or annual reviews in your company - 360-degree feedback is a great way to see how an employee performs on a day-to-day basis.

This type of feedback removes any bias that can occur if just one person is reviewing an employee's performance. The system should be able to offer you the option of feedback from team members, peers and managers.

Automated Reminders

The system you choose should have a feature for you to send reminders to managers and employees to remind them of review deadlines. As well as notifications of progress, and updates to processes.

A gentle reminder can go a long way for your senior managers to keep on top of upcoming employee review meetings. Ensuring the performance management cycle keeps moving.

Performance Comparison

An effective performance management system should allow your managers to track the performance of their employees against others. This can be used on a current project, or previous ones.

The system you choose should have a feature that allows you to produce and generate reports to help with the comparison.

Get Advice on Performance Management with BrightHR

When running a business, how your employees perform can be crucial to the growth of your company. So it's vitally important you know how to set and track goals with them, improving performance.

Failure to do so can lead to you losing your best employees, their development being halted, or your employees not feeling valued.

If you need any advice when employees resign, we are on hand to help. Our BrightAdvice helpline. Give our friendly and helpful team a call on 0800 470 2432.

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