Performance Management is all about developing a foundation where employees can deliver the highest performance. It is a system of strategies, policies, information management and continuous improvement. Highest performance can be achieved only through a holistic system approach to management where everything is organized and streamlined to work on achieving the overall goals of the organization. Given the complexity of organizations the executives must use effective management models which take a simplified approach to performance management.

The 5-Step Cycle of Performance Management

The following model takes a simple 5-step process to developing new performance systems and improving existing management systems.

The 5 steps are as follows:

1. Setting Goals and Targets

2. Developing the Support System: Incentives and Training

3. Data Collection and Management System

4. Converting Data into Actionable Information

5. Continuous Improvement

Step 1: Setting Goals and Targets

The process of developing and designing successful performance management systems starts with the end goal in mind. It is the first step where the goals and objectives must be defined. In order to develop clear goals the overall strategy and plan of the organization has to be converted into specific and measurable goals and objectives by using clear targets which everyone in the organization can understand.

Step 2: Developing the Support System: Incentives and Training

In order to expect something from your employees you have to make sure they are able and willing to perform at the highest level. You need an efficient support system which will help employees get the skills they need and motivate them to perform at the required level. Training employees on an ongoing basis gives them the skills they need. Next, incentives motivate employees to give their best and align their individual goals with the goals and targets of the company.

Step 3: Data Collection and Management System

In order to measure performance it is required to have an organized system for gathering and collecting data and continuously manage the data. The data management can be organized in many different ways and certainly you’ll try to do it in the most efficient way and develop an ongoing system, however the overall goal here is the have the data available for evaluating the organizational performance as well as performance at the team / department level and individual performance. Performance management system that uses an effective and overall strategic management approach will require data from various sources some of which can be gathered automatically while others will require less sophisticated data gathering techniques.

Step 4: Converting Data into Actionable Information (Performance Metrics and KPIs)

The data collected in any organization can be viewed, analyzed and reported in many different ways. There is no limit to the number of alternatives how the data can be used in reports, presentations, meetings, performance evaluations and various projects. This is where it is very important and critical for the success of the performance system – to identify and develop the most appropriate metrics and key performance indicators (KPIs) which will give clear understanding of the current performance and compare it with the targets assigned in the first step of the process. KPIs and metrics should be always in line with the organizational and local targets. Only by using effective KPIs a performance management system can be effective and deliver the required results and highest performance.

Step 5: Continuous Improvement

By having organized both the required targets on one side and the actual metrics on the other side it is simple for management to perform gap analysis and identify areas for improvement. The current performance always reveal where performance is short of expectations, where performance is beyond the targets and where management needs to focus its attention to improve both in short-term and long-term.

Related Resources:

Excel Dashboard Templates for Performance Management

The Top Benefits of Performance Management

Developing Employee Performance Appraisal System