Designing Your Annual Performance Review Cycle

Setting The Scene for A Performance Review Cycle

In this article, we are going to look at designing a performance review cycle. Specifically, to look at whether it’s a good idea to spread the main activities in your performance management process over the year rather than complete ‘everything’ in one go during the annual appraisal.

We are not suggesting that you do everything in an annual appraisal. Your process should still have regular 121 meetings. What we’re discussing here are the big-ticket items:

1. Reviewing past performance to gauge both individual and overall performance.
2. Setting new objectives that align employee goals with company goals for the new review period.
3. Creating and reviewing a development plan aimed at achieving these objectives and enhancing employee engagement.

Annual performance reviews are a cornerstone in the modern workplace, serving as an essential touchpoint between employers and employees. They offer a structured opportunity to reflect on individual performance, set goals for future growth, and align team members with the broader objectives of the organisation. We touched on how to create your appraisal template in our past article – How to Create an Appraisal Template – With Examples.

However, even as many companies have embraced performance management systems to streamline this practice, there’s still debate on one critical issue: timing. Specifically, when should the main activities in the annual review process be conducted?

In essence, you’re faced with two primary options in designing your performance review cycle. The first is to conduct all these activities in one go, usually around the time one review period ends and the next begins. The second approach advises spreading these activities over a more extended timeframe. Of course, neither of these approaches is a one-size-fits-all answer. You might consider a hybrid approach, but we think that is quite a rare requirement.

Each method has its merits and drawbacks, but which is the best approach to your performance appraisal cycle? Read on to see how we came to out answer that we reveal in the conclusion.

Outlining The Two Performance Review Cycle Approaches

Approach 1: All at Once

This approach concentrates the performance review process into a single, focused performance appraisal. Managers and employees come together to review the past year, set new objectives, and outline a development plan all in one go.

Approach 2: Spread Over Time

Alternatively, you can spread the tasks over the year. You could review past performance at the end of the review cycle and set new objectives a month or two later. Then work on a development plan even halfway through the year. Managers often cite this approach as a way to ease the managerial workload, especially when overseeing a large team.

The Manager’s Perspective

From a managerial viewpoint, the performance management process is far from a trivial exercise. It is an integral part of the long-term performance management cycle that influences not just individual achievements, but also overall team synergy and alignment with company strategies.

Managers often advocate for spreading the activities over time. Mainly because they feel that having a single all-encompassing review takes up too much time. This is particularly true for managers with large teams. Spreading activities takes up a smaller block of time at each stage. They also argue that it offers them the leeway to provide more focused attention to each step, especially in giving performance appraisals and setting new targets.

Are large teams really an issue though? Here are some stats from PerformanceHub. It takes into account 1000s of users over 100s of organisations.

You might be surprised by this chart, we certainly were. Here are some take-outs on team sizes.

1. The most popular team size was 1. Yes, that’s right. It sounds odd, but nearly 24% of all teams have just 1 member
2. 85% of teams have up to 6 members, after which the numbers start to fall quickly
3. 5% of teams have over 10 members
4. 1% of teams have 19 or more members (and yes, it really does go up to 32 team members!)

Arguments for Approach 1: All at Once

Alignment with Organisational Objectives

One compelling reason for conducting all activities at the same time is the alignment of employee objectives with the broader organisation’s goals. Most organisations establish their key objectives at the beginning of a new review period. They often fall out of the business planning activities conducted at the senior level. Therefore, it’s practical for employees to set their objectives during the same timeframe. This is particularly true if your organisation advocates cascading objectives.

This synchronisation ensures that everyone is rowing in the same direction from day one. In other words – why wait to set employee objectives when the business already knows what they should be working towards?

With features like cascading objectives, PerformanceHub makes it effortless to align individual goals with broader company aspirations.

Interconnection of Activities

You should think about how all the activities in the annual review process connect. Base a development plan on at least two things: Past Performance (including constructive feedback from others) and Future Deliverables.

The development plan should include development targets that are based on any identified performance issues from the past and what skills are required to deliver future work. Given the appraisal meeting will be discussing both, this would be the perfect time to also create a development plan.

Features like personal development plans are purpose-built to reflect this dynamic interplay.

Efficiency and Consistency

Contrary to popular belief, completing all activities at once is often more efficient. While it may initially appear as a significant time investment, this approach actually minimises disruptions. Each time you return to the performance review cycle, there’s a ‘warm-up’ period to get up to speed again. Tackling all aspects at once saves time and mental energy that you would otherwise spend on multiple ‘start-up’ phases.

121 meetings can be used to check development goal progress and make any micro-adjustments that are required to stay on course.

Arguments for Approach 2: Spread Over Time

Workload Management

The key argument for spreading activities over time is, without a doubt, workload management. Managers, particularly those overseeing large teams, often find it challenging to juggle regular duties with in-depth performance appraisals. This approach offers them the opportunity to give each activity the focus and time it deserves, enhancing the long-term performance management cycle.

But is manager workload really a big issue? If you expect managers to complete appraisals over a period of 4 weeks and they conduct only 1 per week, then 68% of managers would complete all appraisals for their teams based on the team sizes above. If they did 2 per week, then over 90% would complete the appraisals. At 3 per week, you get to 97% and at 4 per week, you get to 99%.

I think that once you have to do more than 3 a week, the questions should really be – is the team too big rather than Is the appraisal workload too much.

Focused Attention

The segmented approach allows for a more concentrated focus on each aspect of performance management. This could potentially lead to more detailed feedback and a better understanding of how individual performance ties into overall performance. However, the downside is that this piecemeal attention could dilute the interdependencies between past reviews, future objectives, and developmental plans.

Side by Side Comparison

The Cogendo Recommendation for your Performance Review Cycle

At Cogendo, we advocate for the first approach: conducting all activities at once. Here’s why we think the performance appraisal should be all-encompassing:

1. The performance appraisal cycle should be linked to the business planning cycle
2. You will need the output of the past performance review as input to planning promotions and pay awards
3. You will need the output of the business plan to set employee objectives
4. You will need the output of the past performance review and the new objectives as input to the personal development plan
5. Manager workload is not as big an issue as *some* managers make out.

Our stance is rooted not only in the seamless integration of PerformanceHub features like 121 meetings and configurable performance reviews, but also in a holistic understanding of performance management systems. We believe that setting the stage for both individual and organisational success starts with a cohesive and efficient annual review process.