It’s a truth universally acknowledged: An organisation in possession of a good workforce must be in want of a strong performance management cycle.
A typical performance management cycle tends to cover a year-long performance period, topped off with a formal performance evaluation at the end. But is this really the best timeframe for businesses to conduct their performance management in? Isn’t there a better way than the path well-travelled?
We’ll dive into different performance management cycle lengths and discuss the best way to find the right balance in this article.
What is the performance review cycle?
The performance review cycle, or performance management cycle, is a structured process used by organisations to evaluate and assess employee performance over a specific period. The performance management cycle serves as a framework for promoting accountability, fostering continuous improvement, and aligning individual performance with organisational goals and priorities.
A brief history of the performance management cycle
Traditionally, performance reviews have been carried out annually in formal performance review meetings, which focus more on performance accountability rather than development.
The earliest performance reviews were created by the US military during WWI to identify and dismiss poor performers. The military continued using performance appraisals into WWII, only this time, they shifted from being accountability-focused to development-focused. Where the original performance appraisal was just to identify good-vs-bad performance, the new way became a method of flagging which enlisted soldiers had the potential to progress as officers.
It wasn’t until the 1960s that the performance review process became less of an either/or situation and more the hybrid of accountability and growth discussions that we know today. That isn’t to say that performance reviews haven’t swung between an accountability- and development-based focus in the interim. Historically, performance appraisals have erred on the side of accountability during talent surplus, and on the side of development during talent shortages. (An interesting tidbit we’ll come back to.)
That all leads us to where we are now: Using performance reviews to track accountability while also creating the opportunity for setting and meeting development goals. The best way to marry the two is with capabilities (the mix of skills, knowledge, behaviours, processes, and tools that deliver company objectives), which are connected to business strategy via business capabilities.
The pros and cons of different performance management cycle timeframes
Depending on your business needs, your performance management cycle might be:
- Quarterly
- Annual
- Continuous.
The frequency of performance management cycles (or the length of them) depends on organisational needs, industry norms, and cultural preferences. But this doesn’t mean that certain performance management cycles aren’t without their pros and cons.
Quarterly performance cycles
In quarterly performance management, performance evaluations are carried out every three months. The shorter performance management cycle makes it easier for managers and employees to review and adjust short-term employee goals, but can be rote when mismanaged.
Pros
- Timely feedback: Quarterly reviews offer frequent opportunities for managers to give feedback, enabling employees to course-correct their goals and address performance issues. This supports career development and prevents performance issues from festering over long periods of time before they can be addressed.
- Agile development: The shorter performance period means employee development, goals, priorities, and development plans can be easily adjusted to make real-time improvements to performance development efforts, all of which reduce time to proficiency.
- Continuous learning: Less time between performance reviews promotes a culture of continuous learning and improvement, as there are more chances to discuss future development opportunities and create actionable professional development goals and plans.
Cons
- Administrative burden: Shorter performance management cycle eat up significant administrative effort, and that strains HR and managerial resources.
- Potential for burnout: Quarterly performance management processes can quickly become overwhelming for both managers and employees, especially if not effectively managed (i.e. it’s overly demanding, intrusive, or intense). Not only is this a blow to employee engagement, but it contributes to employee burnout and diminishes the focus on long-term goals, particularly if they aren’t achievable in the timeframe.
- Risk of micromanagement: A frequent performance management cycle may compel managers to provide constant oversight and feedback to employees, which can quickly verge on micromanagement. It’s off-putting, unnecessarily stressful and ultimately, unproductive for everyone.
Annual review cycles
An annual performance appraisal cycle is usually what traditional performance management favours, where the performance period lasts for a year and a formal performance review is conducted at the end of that period.
Pros
- Comprehensive assessment: The year-long approach allows for a thorough evaluation of performance over a longer period. Compared to shorter performance cycles, you get a holistic view of employees’ contributions and achievements.
- Strategic alignment: A yearly performance cycle can be aligned with the traditional fiscal year, making it easier to link performance evaluations to organisational goals and budgeting processes. It means resources can be easily assigned and accounted for, including salaries and pay raises.
- Stability and predictability: It provides a structured framework for evaluating performance and goal setting, with alleviates the administrative burden on the company.
Cons
- Delayed feedback: Waiting until the end of the year to receive feedback on performance limits opportunities for timely course correction and development. Not only does this mean some performance issues may fester and become business problems in that time, but the business will have lost productivity while employees repeat bad practices.
- Recency bias: Long performance periods open managers to recency bias. Depending on what the employee’s most recent performance has been like, this can skew their performance evaluation so it’s disproportionately negative or positive.
- Limited agility: Less frequent reviews (and therefore less frequent and relevant training due to development needs not being captured) hinder your organisation’s ability to adapt quickly to risks, challenges, and changing business conditions because employees won’t be equipped with the right capabilities to perform their roles properly, let alone respond to challenges.
Continuous feedback models
A continuous performance management cycle entails giving frequent feedback throughout the performance period, rather than waiting until the “end”. Formal performance evaluations are still important (particularly in larger companies), but there’s a bigger emphasis on giving feedback and support as an ongoing process. Feedback can be given via regular check-ins with managers or through formal and informal coaching.
Continuous feedback models are the method that make the hybrid approach to performance management easiest to do, because they move away from performance management as a reactive activity, and towards performance management as a proactive activity.
Pros
- Timely and relevant feedback: Continuous performance management gives employees feedback when it’s most relevant to them, so they can immediately address issues and make improvements. It also means that managers can recognise and reward employees in the moment to reinforce positive behaviours and boost employee engagement.
- Impactful employee development: Frequent feedback fosters a culture of continuous learning and improvement, which supports personal and professional growth in employees and helps to create the incremental changes that underpin organisational transformation.
- Flexibility and agility: A continuous feedback model allows for quick adjustments to goals, priorities, and performance expectations, enabling organisations (and employees) to adapt more effectively to changing business conditions. Plus, issues that get addressed quickly don’t turn into larger problems for the business.
Cons
- Resource intensive: Continuous feedback requires a significant investment of time and resources from both managers and HR staff. In larger organisations where managers have multiple direct reports, frequent check-ins may also strain managerial capacity, leading to less relevant feedback and support.
- Potential to overwhelm: Frequent feedback and check-ins may overwhelm employees, especially if they perceive them as intrusive or redundant. And, if feedback isn’t effectively handled, employees and managers might get feedback fatigue, which reduces the effectiveness of feedback over time.
- Need for emotional intelligence: Managers need to be skilled communicators and coaches to effectively facilitate frequent and meaningful feedback. Managers who lack the training and capabilities to do this may struggle to deliver constructive feedback, and that can lead to misunderstandings and resentment among employees.
How to find the right balance in your process
To reiterate: The right performance management cycle for your business depends on your business needs, industry norms, and cultural preferences.
Let’s say you have a large organisation, where managers look after multiple direct reports at any given time. A short performance review cycle that requires managers to perform frequent performance appraisals over a short period could burn them out and overwhelm employees, whereas longer cycles give managers more time to assess and deliver in-depth feedback and insights.
There are four strategies you can use to find the balance between organisational goals and your employees:
- Assess organisational needs
- Focus on outcomes
- Embrace flexibility
- Continuously evaluate and adjust.
Assess organisational culture and needs
It’s easier said than done: Determine what level of feedback frequency aligns with your organisation’s values, goals, and resources.
If one of your company’s core values is “communication” or “transparency”, an annual performance management cycle is probably not going to cut it. A lot of employees already feel like performance management is biased and meaningless, and waiting until the end of the performance period to share feedback is only going to exacerbate that sentiment.
And while we’re talking about goals and performance management, we’d be remiss not to mention capabilities. Capabilities are what will drive business success, simply because they’re so intertwined with your company’s objectives and strategy. They support employee development by outlining what it is that employees need to know in order to perform their roles and drive organisational uplift.
So, whatever your specific business and role-based capabilities are will influence performance and development goals as well as employee development plans. For example, jobs that require more autonomy, creativity, or collaboration may benefit from more frequent feedback.
Let’s look at a graphic designer for a moment. They probably wouldn’t appreciate being told in an annual review that they’ve been designing graphics for the company website outside of branding guidelines, especially when the graphics produced in that year-long performance period are now up on the business website for all to see. This is a situation where continuous feedback is useful so that they can ensure their work fits company branding from the get-go.
Focus on outcomes
Again, capabilities are key here. Capabilities describe a desired outcome, like “quality service” or “increased customer feedback“. The great thing about capabilities is that they come in ready-made levels of competence, which measure whether employee performance is below, meeting or exceeding expectations. That provides guidelines for the development aspect of performance management.
The other aspect of performance management is the actual evaluation process. Too often, traditional performance management systems will just give a performance evaluation but won’t follow through with learning—or the performance cycle is so long that by the time the evaluation identifies development opportunities, the relevant learning is actually no longer relevant at all. Businesses need to prioritise having with employees—”meaningful” in this case being conversations that actually help to drive results. This is much more impactful for employees than rigidly trying to adhere to a specific review cycle timeframe.
Embrace flexibility
Yes, we know we said the best performance management cycle depends on your business needs. But that doesn’t mean that any one performance management cycle is a perfect fit for your company. Sometimes, a hybrid approach that combines elements of different review cycles is more effective at helping an organisation meet the diverse needs of its employees and managers.
Large organisations can definitely benefit from continuous performance management, but they may still need to conduct formal annual reviews to sync up on business and performance goals. On the other hand, an annual performance period would be too long and may require too much infrastructure for a small start-up, so a combination of continuous feedback and quarterly performance cycles to align goals and strategy could be more useful.
Of course, once you start mixing-and-matching performance management cycles then things can get confusing. Even without combining approaches, keeping tracking of performance reviews and career progression and performance can be difficult.
A performance learning management system (PLMS) can help in storing all that information in one place. It can record, manage and track how employee performance goals are progressing, as well as assign relevant learning content that will improve performance.
A workflow builder like Momentum is also a must-have when it comes to effective performance management. Organisations can centralise goal-setting and employee performance plans, streamlining the process of tracking performance improvement. It helps to alleviate some of the administrative burden from HR and frees time for more important and complex tasks.
Continuously evaluate and adjust
This probably seems like a no-brainer. After all, your business is affected by changes to the industry, processes, and standards, and you have to adapt if they want to continue seeing business success. But we’ll say it anyway: Your performance management cycle needs to be continuously evaluated and adjusted to make sure it still works for your company.
Whether it’s due to talent surplus or deficits (as history has shown us), new standards favouring a hybrid performance management method, or your business scaling (what works for a company as a start-up won’t work as they grow), you need to assess whether you’re still using the most optimal performance management cycle for your needs.
Consider:
- What is your ROI? Performance management is useless without effective learning to actually drive performance improvement. So, if your business has a low training ROI then performance management isn’t doing its job to assign the right development plans.
- What do managers and employees think? Gather input from employees on their preferences for the review cycle and format. You might think your shorter performance cycle is perfect for realigning employee performance plans with strategy throughout the year, but if your employees are getting overwhelmed or stressed by the frequency of their evaluations, then you’re not going to encourage employees to engage with the process or their work (and that potentially increases employee turnover).
- Have your capability gaps closed? Assess what your capability gaps are as part of the performance evaluation process, and then again after training has been conducted with a capability gap analysis. You can find the right training programs to close those gaps with a training needs analysis—but if those identified gaps haven’t improved, then you need to make changes.
Key takeaways
The most effective performance management cycle for your organisation depends on the needs of your business and individual employees, but regardless of the performance period, the emphasis needs to be on creating meaningful interactions. Performance reviews on their own don’t actually do enough to improve business performance—that outcome is only possible if performance management and learning are linked together.
In short: assigning and providing the right development is what makes performance management meaningful to employees and impactful for business.
You can balance your performance management cycle with four strategies:
- Assessing organisational needs
- Focusing on outcomes
- Embracing flexibility
- Continuously evaluating and adjusting processes.
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