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The manager’s guide to Performance Management

How can you effectively manage employee performance within your business? HR consultant Kate Marchant (ACIPD) explains why good performance management is important and how people managers can get the very best of out of their team.

Performance Management Guide for Managers

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If I could count the number of times I have heard the following in my HR career...

“We need to start performance management with XYZ, they aren’t up to the job.”

Performance management is not something you do to someone when they are not performing. Performance management is what you do consistently for all your employees to ensure the business is performing at its best!

What is performance management and why is it important?

There is no standard definition of performance management, but it is best described as a set of processes focused on performance measurement. It usually involves:

  • Agreeing a business vision, mission, and goals
  • Setting objectives
  • Reviewing individual performance
  • Constructive feedback
  • Improving performance

Performance management is important because it helps an organisation deliver on its vision, goals, and objectives via the contribution of its employees.

At the heart of all performance management processes are people managers. Managers are responsible for managing the performance of their employees by giving constructive feedback, which motivates employees to achieve their goals and improve, whilst also holding them to account for their performance.

It therefore follows that people managers need to be competent in the area of performance management in order to get the very best of out of their team.

The Performance Management Cycle (PMC)

As mentioned earlier, performance management is a set of processes – and all company processes will differ. These processes often form the Performance Management Cycle (PMC) for a particular business, which will usually incorporate the following stages:

  • Planning: setting goals and defining SMART metrics(ensuring goals are Specific, Measurable, Attainable, Relevant, and Time-based)

  • Action: achieving objectives, carrying out role

  • Monitoring: tracking progress and feedback on same

  • Reviewing: Evaluating the process; reviewing achievements, providing feedback, identifying learnings, and agreeing actions

  • Development: offering the opportunity for employees to develop and grow so they can achieve their aspirations

  • Reward: recognising and rewarding good performance

All businesses are different, so it’s important your business establishes the best PMC to fit its own needs. In my opinion, it’s best to keep it simple! Of course, there will be instances of poor performance, so it is essential that the PMC allows for the management of poor performance and for the difficult conversations to take place in a timely manner in order to understand the reasons for the poor performance.

A strategic approach to performance management will link the company’s overall strategy and vision to the individual employees who support the realisation of that vision. Importantly, it also shows that every employee has a critical role to play.

Performance Management Cycle

The 6 stages of a Performance Management Cycle (PMC)

Let’s look at the stages of the PMC in more detail:

1. Planning

There are two ways to do this: the traditional way or a more modern take on the traditional way. The traditional way, which many companies still use, is where employees are set their objectives via an annual appraisal.

It is important to check and ensure any set objectives contribute to the company achieving its goals. This may include the completion of a Personal Development Plan (PDP), which focuses on the strengths and skills an employee needs to develop to achieve their objectives, plus a review of the employee’s role to ensure it is aligned to what the company is trying to achieve. Once this planning phase has been completed, then we move to the next stage where the employee embarks on the journey of fulfilling their objectives.

A more modern approach to managing performance

But before we look at the next stage, let’s explore the more modern approach to planning. In many ways this is not a massive shift, but does reflect the fact that many employers and employees alike recognise that its often more motivating (and manageable) to receive more frequent feedback on performance, rather than leaving it to just once or maybe twice a year. And not only this, but things change and objectives set at the beginning of the PMC cycle may have to be adapted or dropped as appropriate.

However, the main positive to providing more frequent and regular feedback is that it is often less daunting to have short term goals rather than a large number of long-term goals at the start of the PMC. The short-term goals approach allows for dialogue on a regular basis by having more action-based review meetings.

Plus, it’s often seen as a better way to manage and keep track of an employee’s goals and objectives, keeping dialogue fresh and maintaining momentum (something that is often lost with less frequent reviews).

2. Action

Stage 2 is the point at which the employee embarks on their journey of carrying out and fulfilling their objectives. This can be supplemented with regular review meetings to check on progress against timescales and discuss any barriers or specific challenges the employee is facing that impacts on their ability to achieve their goals.

3. Monitoring

Stages 2 and 3 overlap somewhat if you are using a more modern approach to performance management and feedback; in my opinion, the regular and frequent approach is the best one as it enables any issues to be raised in a timely manner. In doing so, the manager can support the employee in overcoming any barriers and challenges, rather than leaving it to a time when it is too late.

It is also useful to encourage the employee to set the dates for any reviews in order for them to be carried out at an optimum time for the employee. From the manager’s perspective, stages 2 and 3 enable them to monitor and review progress and, if there are any glitches, they can feed the same up the chain of command.

4. Reviewing

This stage can be carried out at the end of short-term goals or at the end of the longer-term ones. This is an important part of the process, as it allows both manager and employee to reflect on any learnings and how they might apply them moving forward. Similarly, if there are things that didn’t work so well, then this also a time to agree alternatives and how they might be applied in the future.

This is also a useful point in time to look at what has been achieved and celebrate success, a really key action to keep the employee motivated and engaged. The manager who adapts a collaborative style with the employee is also likely to get the best results – whilst it is the employee who is actively fulfilling their goals and objectives, if they have a sense that it is a team effort, engagement levels will often soar.

5. Development

An essential aspect of any PMC is the ability to offer employees the chance to develop, grow, and meet their aspirations. Celebrating success and keeping employees motivated will not be enough for everyone, so there needs to be a mechanism within the PMC to enable such discussions around progression within any organisation.

If your business is an SME, there may not be so many opportunities to move up the ladder. However, this does not mean that employees cannot develop – there will be many ways to enrich their current role and perhaps offer them the opportunity to gain the skills for their next step, which may well be an external move.

6. Reward and recognition

Many employers keep reward separate to the PMC; however, it is up to individual employers to determine what works best for them. There is no doubt that linking reward to performance can be a great motivator and may often inspire employees to work harder. Plus, it can help them see in a very tangible way the benefit they bring to the company.

However, some employees do not like the idea of pay being linked to performance as, for some, it creates a highly competitive environment they are not always comfortable with and this can then impact on company culture. This is why it is important for employers to decide whether it is right for their company to make this link.

3 essential aspects of good Performance Management

3 essential aspects of good Performance Management

I mentioned earlier that people managers are at the heart of performance management, as they are responsible for setting objectives, motivating, and reviewing all things employee performance related! Therefore, a key consideration of any PMC is ensuring that the way in which employee’s performance is reviewed and feedback given is consistent.

Here are three important aspects of performance management to consider when you are a people manager:

1. Appraisals

Performance is usually reviewed by way of an appraisal form – this sets the main areas to be reviewed and ensures all employees are reviewed in the same way (although there may be some differences depending on the level of employee). A typical appraisal will include the following sections:

  • Review and reflection on performance over a specified period
  • Identify what went well
  • Identify areas that presented specific challenges
  • Identify opportunities to overcome challenges
  • Review of any training and development
  • Discussion around aspirations, including timescales for next steps
  • Review whether objectives were achieved/carried over and new ones to achieve (ensure they are SMART and define what success looks like)

How to ensure appraisals are effective

Appraisals often get a bad rap as, in some cases, they are viewed as a form completing, tick box exercise which is then sent to HR to be filed away until the next time. The appraisal process often works best when there is input by both employee and line manager – an interactive document that facilitates the discussion between the two parties, as opposed to the manager completing it as if it were a school report.

Appraisals work really well when they are used as a working document and referred to regularly to keep track of objectives and assist the feedback process. It really isn’t a document to be owned by the HR department; rather, it should be owned by both line manager and employee, with HR assisting the process by capturing the learning and development requirements and ensuring these are signed off for delivery as appropriate.

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2. Feedback

The underlying principle around an effective PMC is the ability to give good, constructive feedback. While employers need to ensure their people managers are familiar with all aspects of the PMC, this aspect is perhaps the most critical.

The way in which feedback is delivered can make or break an employee’s motivation and engagement, so it follows that all people managers need to be competent in this area and undertake some training in order to give feedback that gets the best results and is in keeping with the company culture.

There are many models around about giving feedback, but it need not be complex. Timing is key, as is being specific and using real examples of what worked well and not so well. Here is a useful simple structure for giving feedback:

  • Describe the situation
  • Describe the observations of the employee’s behaviour or actions
  • Describe the impact witnessed as a result

The above model helps to get the conversation started and can take the heat out of delivering challenging feedback, as it comes across in an observational and non-judgemental way. Once the discussion is initiated and the employee understands the impact of any behaviour or action, then the focus can be on moving forward and what needs to be done to improve or avoid future occurrences. This also gives the manager opportunity to understand any background from the employee’s perspective.

This model can be used in many situations - during the appraisal process, regular review meetings and other one-off situations.

3. Training

Finally, it cannot be emphasised enough that those responsible for managing people need to be equipped with the skills to do this in the best way possible. So many people are promoted to a managerial position because of their technical ability in a role and, as such, are not often experienced people managers. So, in order to supplement an effective PMC, an employer needs to have an effective training programme running alongside it to ensure their people managers understand the process, the interdependencies, the tools they need, and when best to deploy them.

Good performance management is often the bedrock to the success of a business – it should not be overlooked. Those managing this process need to be properly equipped and employees should be encouraged to be as participative as possible.

Performance Management software for SMEs 

Myhrtoolkit is here to support you through performance management for your small business with flexible performance management tools designed to help you monitor, engage, and develop your employees whilst driving productivity.

To find out more about how myhrtoolkit can help you achieve your business goals, book a demo with one of our advisers today.


The content of this guide does not constitute legal advice. We recommend that you seek professional advice before taking action based on this guide.

The content of this guide has been edited and approved by HR consultant Kate Marchant (ACIPD). Most recent review date March 31, 2022.