What are the Stages in a Performance Management Cycle?

Performance Management Cycle

A performance cycle is a continuous improvement process of planning, monitoring, and measuring an employee’s performance throughout the year. It works in a way that meets the overall goal of performance management: aligning the success of employees with the success of an organization.

It starts with setting up of a performance standard to meet the targeted goal followed by monitoring the performances of the employee toward that goal, identify any issue or blockage in the way, and provide necessary resources and training to overcome the blockage.

  • Performance management cycle helps employees to achieve their potential and have greater involvement in their professional development.

  • Performance management cycle helps to increase productivity by aligning the work targets of each employee with the strategic goals of the company.

Performance management cycle basically help the managers guide and help the employees to improve their efficiency and accomplish company’s goals.

Main Objective of the Performance Management Cycle

The performance management cycle's objective is to establish and implement employee performance plans. These plans assist employees in concentrating their efforts on accomplishing organizational objectives, which helps match employee priorities with the organization's aims.

It is critical to recognize that the performance management cycle's express objective is to improve performance. All of the actions discussed in the performance cycle model are geared around defining objectives and coaching employees to achieve, if not exceed, those goals.

Stages in Performance Management Cycle

Here, we would like to emphasize that performance management may be used to manage both individual employees and teams. The word "employees" may be substituted for "teams" on this page, and the text will function just as effectively as a guide on managing team performance.

An efficient performance management cycle consists of four critical components. Each step builds on the previous one to establish a feasible route to the employee and corporate success. The four stages of performance management are as follows −


Setting and establishing goals is a critical step in the performance management cycle. Here, employee, team, and company objectives are defined and aligned.

To ensure that small-scale goals are aligned with corporate objectives, executives must define business objectives before setting individual goals. Managers and people may develop strategic plans to accomplish individual performance objectives when corporate objectives are defined.


The monitoring stage is used to keep track of progress toward a goal. This phase is crucial in assisting employees in meeting the objectives established during the planning stage.

To keep an eye on employee progress, frequent schedule check-ins and one-on-one meetings to resolve any bottlenecks impeding employee productivity. These dialogues should be ongoing to keep track of progress toward goals and necessary modifications.


The reviewing step involves a thorough appraisal of employees' final output. This is when a performance evaluation is conducted to determine an employee's achievements or potential deficiencies.

This is an excellent chance for management to understand employees' viewpoints better, give constructive comments, explore future growth prospects, and define a future roadmap.


By recognizing your employees' accomplishments, you highlight their overall importance to the business. While this stage is sometimes ignored, it is critical for employee engagement and motivation to remain high. Without incentives, your staff may lose motivation, decreasing future performance.


After the completion of a performance management cycle, a formal discussion takes place between the manager and the employee wherein the performance throughout the year is reviewed verbally, giving an opportunity for both to discuss future goals and upcoming projects, etc.

Employees are most motivated when they feel they participated in the process and understand why their objectives are important to their colleagues and the firm. This also simplifies tracking progress toward targets.