# What is performance management? A five-stage cycle What performance management is, how it differs from the yearly review and which stages it has: a short guide for small companies and how I run it. A short guide to the cycle that helps an organisation and each person understand goals, get feedback, be reviewed and grow. ## In short Performance management is a continuous cycle in which the organisation and each person share an understanding of the goals, do the work, give and receive feedback, are reviewed and develop. The yearly review is one step in that cycle, not the whole of it. ## Which tool belongs where Tools serve the cycle; they do not replace it. - OKR — Used at the goal-setting stage. - KPI — Used to track the health of an operation that is already running. - One-to-ones — Used for feedback and coaching, at the rhythm you choose. - Periodic review — Sums up the results and the way the work was done in a period, as the basis for recognition and development. ## Performance management and the yearly review The yearly review is an event; performance management is a cycle that runs all year. | Criterion | Performance management | Yearly review | | --- | --- | --- | | Scope | All year, cycle by cycle | Once a year | | Purpose | Continuous improvement | Looking back and summing up | | Based on | Data recorded during the period | Memory and the most recent impression | ## The five stages of the cycle 1. Set goals — Each person knows what they need to reach, and why it matters to the organisation. 2. Track progress — Look at the data regularly so blockers surface early, not at the end of the cycle. 3. Give feedback and coach — Regular one-to-ones about what is working and what needs to change. 4. Review — Look at both the results and the way the work was done, based on recorded data. 5. Recognise and develop — Recognise the contribution and choose the skills to learn for the next cycle. ## Common mistakes - Reviewing only once a year — Feedback arrives too late to change anything. - Measuring only results — Ignoring how the work gets done pushes people to hit the numbers at any cost. - Using scores to rank people — A score should show the distance to the goal, not set one person against another. - Missing data — Without data, review falls back on opinion and the most recent impression. ## How I see it I run things with five moves: simplify, standardise, automate, digitalise and optimise. For performance management, that order means making the measurement simple first, then standardising it, then putting it into a system. [See Ferry VN](/du-an/ferry-vn/) ## Common questions ### What is performance management? It is a continuous cycle of setting goals, tracking progress, giving feedback and coaching, reviewing, and recognising and developing people. The point is that the organisation and each person understand the goals and improve together. ### How is performance management different from the yearly employee review? The yearly review is a single event that looks back. Performance management runs all year, and the review is one step inside it, alongside goals, feedback and development. ### Which steps does the performance management cycle have? Five stages: set goals, track progress, give feedback and coach, review, then recognise and develop. Each organisation may name them differently, but the sequence is much the same. ### How do performance management and OKR relate? OKR is a goal-setting tool, at the first stage of the cycle. Performance management is wider, because it also covers feedback, review and people's development. ### Where should a small company start? Start with a clear goal for each person and a regular one-to-one. Once that rhythm works, add periodic review and tracking tools. ## Want to set up a performance management cycle? Tell me the size of your team and how you currently set goals and give feedback. We start with one conversation. [Consulting & speaking](/tu-van-dien-gia/) [Contact](/lien-he/) [What is OKR?](/blog/chuyen-muc/okr/) [What is company culture?](/blog/chuyen-muc/van-hoa-doanh-nghiep/) Source: