two woman discussion performance management process

Performance Management Process

Organizations are constantly working hard to get better and to obtain wider goal and mission. To make a successful business, organizations has to work on the tools, departments and the employees. A key part of working on employee is Performance Management Process. The process includes setting proper goals or targets. Followed by constantly reviewing and updating the progress on them. Regularly providing feedback and finally rewarding. Along with organisation growth, performance management process is also important for the personal growth of employees.

There is different way for every department to choose the right performance management. Performance Management is the way to improve the outcome increasing efficiency by employee performance. Let’s learn more about Performance Management Process.

What is Performance Management Process?

Performance management process is the tool or technique that help organization review regular frequent feedback of an employees. Many consider this process wrongly as appraisal process. In reality Performance management process is a continuous & round the year process. Appraisal is a small but the result part of this process. It is used to track the performances of the employee whether it is consistent, improving or degrading. Performance management process is required to make sure that the employees and department are working efficiently towards achieving business goals. It also helps company to identify and reward the worthy employees and plan improvement for bottom performing employees.

Performance Management Process is a year round process with no end.

Performance management process is important as it allows individual to know what is expected from them. So that they can give there best and perform as per the requirement. Organization growth can lead to employee growth too. So, organization and individual employee both the growths are interlinked and both have to work hard to achieve it.


4 Stages in Performance Management Process Cycle

  • Setting Goals
  • Monitor
  • Review
  • Rewards

Setting Goals

Before starting with any new projects or any new task manager will go through the brainstorming session and set goals for the organisation and for the team members. Each team member has to perform according to the roles and responsibilities given to them. Setting goals can help you with long term vision and motivation. To focus on your knowledge and also help you plan and organize your time and resources to reach those goals.



Monitoring is the systematic way of observing and analysis the progress of goals. It can also help the organization with the more evaluation technique to go through the success or the previous faults. Monitoring should be done for all the resources to know the stage of achievement. There can be different way of monitoring in different areas like:

  • Activities
  • Outputs
  • Outcomes
  • Impact


Managers will look after and have discussion with each team member and review employee performance. At this stage, ratings are provided based on the performance. Performance Review is a continuous process. It is the component to find out whether the given task or goals have been finished. There are actually business benefits to be gained from evaluating and reviewing employees on a regular basis. Performance review process is an opportunity for the employee to give there best whole year. And finally, have annual performance appraisals and promotions.


This is the last but very important stage considering employee motivation to work for the organisation. According to the review the employees are rewarded. Those with constant consistent good performer are rewarded with promotions. This might include new roles and responsibility, Incentives, Increments etc.

Steps in Performance Management Process

Step 1: Setting up KRA, Goals and targets for upcoming year

First Managers and the team will have brain storming sessions and decide KRAs goals. KRAs means “Key Result Areas”. In this step, manger will broadly defines job profiles, roles and responsibility for each team member. This further gives clarity to employee and helps to be focussed on their job description. With the clarity they can work smoothly on their roles and give their best.

This is one of the most important part of performance management process. The KRAs need to be aligned to the overall company plan and the role of the team in the organization. Defining KRA also requires to consider to the particular needs and skill of the employee.

There will be different KRA for different department. Like engineering teams, KRAs would be to introduce new business products. And for sales department team KRA could include deliver sales growth. Further, every team member would have different goals depending on what task they perform. And what tasks are assigned to them in the team. The KRA can also include goals such as trainings, learning as per the upskilling requirement for future proof employees.

We also need to define the target and measure of success for each goal. The target which are set in KRA should be realistic, achievable and measurable. We should not put wage statements, like reducing defect.

Step 2: Periodic review and coaching conversations between manager and employees.

Periodic reviews can be done at quarterly or monthly basis as per the requirement. Managers and employee will discuss about the previous period. They discuss how much goal they have achieved, how much percentage of allotted job is completed. How much is remaining and if remained then give proper reason with justifications of incomplete task.

It is important that review of KRA goals is done as frequently as possible. Ideally having a coaching conversation with immediate manager is recommended to be done every quarter. This gives both employee and manager to discuss, how the tasks are being performed. Where we stand on each goal. If roadblocks are present for achieving the goal. How better a task can be performed.

Every periodic review has to be done so that manager re-adjust, if he has to add some new goal. Or if there is some policy shift occur then he has to again realign the goals etc. It is very important to update and document any changes in the goals, KRA. Also, it is important to document all the discussions, progress of all the goals.

Conducting periodic conversation with employees also helps the managers and employee to save from shocks and surprises at the end of the year. It helps the managers to be on the same page with the employee on every project. And have set proper expectations with employees. Managers can advise employees where they need to put more focus on. Also employees can raise any concerns about any goals, project, roadblocks, requirements, etc.

This can ensure, proper progress is made on achieving the goals defined instead of waiting till the end of the year.

Step 3: Year end review of goals, achievements, ratings and rewarding.

At the end of year, managers will have a final review and employees about all the goals and targets. The employees can update the final progress on each of the goals. It is very important for employees to highlight and showcase all the good work they have done during the year. And also update the progress on each goal in the KRA.

Managers should further review goals of each employee. Also provide their own feedback for each goal for all their staff. Managers will send year-end report and reviews about the all-team employee to the senior Manager. And he will further make Bell curve to see if employee have better achieved their goals and task. Based on this manager and management team will assign each employee their performance ratings.

They can rate performance of each employee as per ratings decided by leadership team. And according to the employee rating, the management can further decide how to reward each employee. Management also decides how much percentage of “PERFORMANCE LINKED COMPENSATION” + “NEXT YEAR APPRAISAL” is to be given to each employee.


PERFORMANCE IMPROVEMENT PLAN (PIP) is a plan that is defined for employee who achieves less ratings. The employee is shifted to PIP to understand what is the problem with the employee. Why is the performance below expectation. PIP team will try to re-council and reskill and try to boost the employee’s energy and performance.

On the other hand, employees who constantly remain at the top of bell curve and get extra ordinary ratings, are chosen for extra responsibilities, increments, promotions.

This performance linked benefit motivates all the employees to perform best to their abilities. They keep pushing themselves to achieve more. This in turn helps better performance for the team and overall company.

Elements of Performance Management Process

  • Goal Setting
  • Honest feedback
  • Employee Development

Goal Setting

Goal Setting is the important part of business planning and it is important for individual and the organization. Managers and team do a brain storming sessions and work on the roles and responsibility of each one. They set the goal or the target for each and every employee that they have to complete at given deadlines. Goal settings are important to keep track on the employee performance and is used during annual performance appraisal.

Honest feedback

It is very important that the managers and the seniors are provided with the honest feedback about the employees. Employee performance appraisals and next year promotions, increments etc all rely on the feedback and the reviews. So it is very important that the Managers should be bias and give honest feedback.


Employee Development

As discussed above employee development is based on the feedback and the reviews provided by the seniors. Positive performance ratings will lead good energy in the employee. They will be happy and satisfied with the appraisals and they will give their best for the company. Employees can also be promoted to new projects. They can learn new skills through trainings and grow their knowledge.


Performance management is the much broader and complicated function in the organization. This is related with the activities like learning about goal settings, continuous progressive reviews, feedback and implementation of employee development programmes and rewarding achievements. Performance management process sets the platform for rewarding excellence as per individual performance and ratings of fulfilling the goals of the organizations.

We can conclude performance management is the active system of managing employee performance. This has dual benefit of their own personal growth and the growth of the organization. Performance management is not only related with annual performance meetings but it is a continuous process of planning, coaching and reviewing employee performance. “THE EFFECTIVE WAY OF SUCCESS IS THROUGH PERFORMANCE MANAGEMENT PROCESS”

Recommended Books for performance management

Article Credit

This article is contributed by Ms. Pragya Delhiwala. Experienced as a quality engineer after completing her education: 2nd rank BE in Electronics & Communications; 1st rank MBA in TQM. She is passionate about management, writing and painting.

More articles from Ms. Pragya Delhiwala:

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