Performance Management Process Steps: 5 Essential Steps and Best Practices for Better Results

The majority of performance issues do not begin with low effort, but rather with the failure of clarity on what is expected from employees.

This pattern has been witnessed repeatedly among many different teams. While employees are supposed to deliver a great performance, managers should conduct an objective evaluation, and business leaders should see better results. Without a well-defined performance management process in place, employees simply lose focus.

Gallup’s data supports this point as well. Only 2% of CHROs of Fortune 500 companies say their performance management system encourages people to develop themselves, and around one out of every five people feel that their performance evaluations are unbiased, transparent, and motivating.

It is for this reason that the steps of the performance management process steps must be well defined and continuous. And that is precisely what this blog post will address today.

What is the performance management process?

The performance management process represents an ongoing method that aims to improve employee productivity. It involves such aspects as goal setting, progress monitoring, providing feedback, reviewing employee performance, and developing employees.

Firstly, this term means that all the people know their roles, understand whether everything goes properly, and how they can improve their performance.

Secondly, the managers obtain an instrument to direct their subordinates not only when there is an annual appraisal of an employee’s job, but also every day.

In case the process runs effectively, several issues should be clarified: what does the employee have to do? What are the criteria of his/her success? Is he/she making progress in accomplishing the objectives? What additional measures must be taken to achieve the objective? And what should be done after the process?

All these things make the performance management process more focused on enhancing performance rather than simply evaluating it.

The 5 essential steps of performance management

The performance management process steps work optimally if it follows a certain process. The following five phases provide an operational sequence for managing performance.

Step 1: Set clear goals and expectations

Effective performance management is all about clarity from the beginning. Employees must understand their responsibilities, reasons why they matter, measures of success, and deadlines for completion. Lack of such clarity makes goals subjective.

These include goal setting, team goals, key performance indicators (KPIs), objectives and key results (OKRs), responsibilities, deadlines, and desired behavior.

However, goal setting should never be imposed by superiors. Employees must be engaged through discussions between managers and employees to help build a consensus on goals.

In this process, employees get to understand not only what they should do but also why they should do it.

For instance, rather than stating, “Enhance performance in sales,” the statement should read, “Increase sales opportunities by 20% in this quarter through improved outreach and follow-ups.”

Step 2: Continuously monitor progress

With goals defined, the next step is to monitor progress continuously. Here is when many organisations stumble. They set goals at the beginning of each quarter or year and don’t monitor their progress frequently enough. By the time they do review their progress, the damage is done.

Continuous progress monitoring will ensure that managers and employees remain aware of which areas move, which areas are stuck, and which areas require help.

It doesn’t mean micromanaging people. Instead, it means providing visibility.

Goal updates, regular check-ins, performance dashboards, and progress reviews are all examples of actions that will help keep teams aligned and ensure blockers are identified in time.

For instance, if a team misses a specific goal, the problem may not be that they are not putting enough effort into achieving the result. It can be many other factors, such as lack of priorities, slow approvals, lack of resources, and so forth.

Step 3: Provide continuous feedback and coaching

When six months elapse between the occurrence of some activity and the moment of feedback, the effect decreases. People will no longer be able to recall all the circumstances of the issue, and the chance for self-improvement will be missed.

This is why continuous feedback is one of the most important performance management process steps. 

In order to be helpful, it should include specific instructions on what the employees are doing right, what needs to be improved, and what actions they should take in the future.

Coaching, in turn, takes this step even further by allowing people to find solutions and build their work routines.

For instance, instead of just saying that an employee should improve his/her presentations, managers should advise him/her how to do it: “The data you provided is good; however, the recommendation should come sooner. Try to formulate the required decision at the very beginning of your presentation and back it up with numbers.”

Here’s the revised section after deleting that paragraph:

Step 4: Conduct performance reviews

A performance review will contain all events that took place during the performance cycle, including goals, progress, feedback, accomplishments, difficulties, behavior, learning opportunities, and future expectations.

However, performance reviews cannot simply serve as a rating tool. Their main objective is to enable managers and employees to gain a full understanding of their experience.

Ideally, such reviews must not come as a surprise. On the contrary, they should sum up previous conversations between the manager and the employee.

If the employee knows his/her position, the review becomes much more transparent and constructive.

Step 5: Reward and develop your team

In the final stage, you will take actions based on the performance information. In case an individual has demonstrated good performance, you will reward him or her. In case someone requires assistance, you will help to improve his or her performance. If anyone is ready for higher levels of responsibility, then you will assist that person to grow.

Thus, the process of performance management and motivation will coincide with the employee development process.

Rewards do not necessarily involve money; they may also include recognition, career advancement, assignments, learning initiatives, promotions, incentives, or higher ownership rights.

The same is true regarding development. Employees will need direction about how they should proceed in order to make their work better and develop their skills.

Why Performance Management Matters: Key Benefits

With proper design, performance management adds value to an organization at all levels.

1. Clarity of expectations for employees

With well-set goals and feedback, employees are aware of what is expected of them, hence they are able to concentrate on productivity instead of guessing their roles.

2. More effective decision-making by managers

Through constant monitoring of the performance of employees, managers become aware of the full performance details of each employee when making decisions during performance appraisals.

3. Alignment within teams

Linking individual goals to those of the team and the entire organization creates common ground.

4. Problems relating to performance are identified early on

Performance management assists organizations in recognizing problems associated with performance early on. This is because managers are in a position to provide assistance in such cases.

5. Employees are motivated

In situations where employees receive feedback and engage in development activities, the notion that performance management is meant to assess employee performance changes. In other words, employees view performance management as something designed to improve themselves.

6. Business activities are executed effectively

The importance of performance management in the organization emanates from its relevance when it comes to the execution of activities. Strategic initiatives can only be realized when individuals know what to do and how to measure success.

Best practices for performance management implementation

Knowing the performance management process steps is important, but implementing them well is where the real work begins. Consider these best practices that can help you implement the process successfully.

Obtain leadership buy-in

Performance management must never be considered as an HR-only process.

Unless there is genuine commitment from the top leadership, managers and employees will never view the process as something important.

Leaders should explain why performance management is significant to the organisation and how it is aligned with its objectives.

With proper leadership involvement, performance management will become a business process, not merely a compliance activity.

Train managers to become performance coaches

Managers are the key element within the performance management system.

The whole performance management system may fall apart if managers do not understand how to set goals, give feedback, conduct appraisals, and facilitate development.

This is precisely why it is necessary to invest in manager training.

Managers need to learn how to hold better one-to-one meetings, provide constructive feedback, conduct tough conversations, eliminate roadblocks, and coach employees to improve their work.

The difference is that the good manager does not simply ask, “Why was this not done?” 

The good manager will ask, “What is standing in the way, and what can we do about it?”

Make use of technology to leverage scale

As an organization grows, performance management becomes increasingly difficult to manage by manual processes alone.

Spreadsheet-based methods, disconnected documentation, and delayed reporting may hinder the effectiveness of the whole process. The proper utilization of technology enables performance management to be organized, transparent, and streamlined.

A properly chosen platform will facilitate goal setting, progress tracking, feedback gathering, review process, and performance-related insights.

However, technology should not turn performance management into a mechanical process. Technology should make it easier for all involved in the process to communicate effectively.

Developing Employees

If performance management is based only on evaluating people, it will lose credibility in time. People want to know that the process helps them develop.

This means that each appraisal needs to result in a real discussion of development topics. Which competencies does the person need? What support could be helpful? Which steps could get the person prepared for the next step up?

Once development is included in performance management, employees perceive the process differently. Instead of rating, they now see the growth process.

Conclusion

The performance management process steps are fairly straightforward. Where things get difficult is ensuring the consistent application of the steps.

Goal setting is first followed by monitoring, feedback, evaluation, and balanced recognition and development.

By working together, the steps mentioned can turn the performance management process into a means for achieving clarity, accountability, growth, and business execution.

We at JOP do not view performance management as an activity that takes place once a year. Rather, it should be a process where the performance of the team members is monitored, reviewed, and developed continuously.

This is why at JOP, we help organisations bring the goal-setting, monitoring, feedback, review, and development processes together into one cohesive performance management cycle so that they are able to develop their performance and not just monitor it.