Performance management: what it is, how the cycle works and how to do it

Performance management is the ongoing process of defining what is expected of people, tracking what they deliver, assessing results and behaviors and developing those who need to grow, always tied to the company’s objectives. It is only complete when each person’s growth shows up in the results of the area where they work.

Whoever runs this process, whether in HR, in the People team or leading a team, usually reaches the end of each cycle with the same question: what changed in the area’s results? To answer it, you need to understand what performance management includes, where it differs from performance review and how each step of the cycle connects to the next.

What is performance management and what is it for

Performance management is the set of practices that aligns each person’s work with the company’s strategy, measuring what is delivered and developing what needs to improve. A reference definition in the field, by researcher Herman Aguinis (2009), describes performance management as an ongoing process of identifying, measuring and developing the performance of individuals and teams and of aligning that performance with the organization’s strategic objectives.

Performance management serves three decisions. The first is to make clear what the company expects from each employee. The second is to see, throughout the period, whether those expectations are being met. The third is to decide based on evidence, and not on impressions, who to develop, who to recognize and where the area needs reinforcement.

At Siteware, this work is treated as performance and development managementopens in a new tab tied to the area’s results, and not as a routine isolated in HR.

What are the two dimensions of performance

A person’s performance has two dimensions. The first is results, which answers what the person delivered. The second is behavior, which answers how they got to that delivery.

1. Behaviors

This dimension refers to how employees carry out their tasks and interact with colleagues, clients and managers. The focus is on behavioral competencies (soft skills) and on attitudes in the work environment.

Behavioral assessment matters because it directly influences organizational culture and climate.

By identifying and developing positive behaviors, it is possible to improve individual performance and strengthen team dynamics, promoting a more productive and harmonious work environment.

Some aspects of this dimension include:

• collaboration and teamwork;
• initiative and proactivity;
• adaptability and flexibility;
• ethics, integrity and cultural fit;
• communication.

2. Results (Outcomes)

This dimension focuses on the “what” that is achieved. It covers the objectives, goals and final results that employees manage to reach. In performance management, assessing results is essential to measure the effectiveness and efficiency with which tasks and responsibilities are carried out.

For leaders and HR professionals, understanding this dimension helps align expectations, set clear and measurable goals and, finally, assess individual and collective success against the company’s strategic objectives.

Some aspects of this dimension include:

• goal attainment;
• quality of work;
• productivity;
• contribution to team or company objectives;
• innovation and problem solving.

Assessing only results misses how the delivery was built, and a goal hit at the expense of the team is still a problem for the company. Assessing only behavior loses the link with the business. That is why the performance management cycle treats both dimensions together and defines what is expected of each before the period begins.

What is the difference between performance management and performance review

A performance reviewopens in a new tab is one moment in the process, the one in which what was delivered in a period is measured and recorded. Performance management is the whole process, which begins before the review, with the definition of expectations, and continues after it, with feedback and the development plan.

A company can run reviews every year and still not have performance management, if the score does not become a conversation, a plan and follow-up. Tools such as the 9 Box Matrixopens in a new tab help read the review results, but they remain part of the process, and not the process itself.

How the performance management cycle works

The performance management cycle has six steps that repeat every period and connect to one another, so that the end of one cycle feeds the start of the next.

1. Setting expectations and goals. The company, manager and employee agree on what is expected in results and in behavior.
2. Continuous follow-up. One-on-one meetings, feedback and the review of priorities throughout the period correct course before the review.
3. Performance review. Records results and behaviors with the criteria defined at the start of the cycle.
4. Calibration. Managers and HR compare reviews so that the same criteria apply across different areas.
5. Feedback conversation. A structured conversation between leader and team member about what the review showed, and it helps to have a script for giving feedback on the review.
6. Individual Development Plan. The IDP defines the development priorities, which become the expectations of the next cycle.

The sixth step is what separates management from simple review. The IDP only fulfills its role when it comes from a gap that affects the area’s results and when the person’s progress is measured again in the next cycle.

How to define performance expectations with indicators and goals? Example

A clear performance expectation has four layers. The activity says what the person does, the indicator measures that activity, the goal sets the expected level and the project covers what does not fit in a recurring indicator. The further the expectation moves from activity to goal, the less room is left for manager and employee to understand different things. It is worth knowing the difference between goals and indicators and the format of SMART goalsopens in a new tab to write each layer.

The following example is illustrative, with hypothetical values, and shows the four layers for a production supervisor in a factory, who is responsible for running a manufacturing line.

If, at the end of the cycle, the goal was not reached, the review points to the gap, for example mastery of a root cause analysis technique, and the IDP turns that gap into an action with a deadline.

What is the best length for the performance management cycle

There is no single length, because each cycle supports a type of decision. The annual cycle fits people decisions that call for broad comparison, such as promotion and compensation. Quarterly or semiannual cycles fit development decisions, which lose value when the conversation happens months after the fact.

One way to meet both needs is to keep an annual cycle for decisions and, within it, short cycles for follow-up and IDPs. The cost of the process also weighs on the choice, because formal steps such as calibration are hard to repeat every quarter.

How to link performance management to the area’s results

Performance management is linked to the area’s results when each individual goal comes from an area goal and each IDP comes from a gap that stands in the way of that goal. Without this link, the process produces scores and development plans, but cannot say whether the area delivers more because of them.

The path has four moves.

1. Cascade. Start from the company objective down to the area goal and the individual goal, in what is called goal deployment.
2. Measure the gap. The review shows which competency or behavior is getting in the way of the goal.
3. Develop with purpose. The IDP defines actions and deadlines tied to that gap, and not to a generic list of courses.
4. Return to the area indicator. In the next cycle, compare the person’s progress with the indicator of the area they affect.

A control question sums up the method. For each IDP, which area indicator should it move, and when will the company look at that indicator? This chain does not guarantee the number, but it makes it possible to see and prove whether development reached the result.

Luiz Torres, CHRO at Siteware, arrives at the same idea in Siteware’s Panorama Nacional da Remuneração Variável 2026 (National Variable Compensation Overview). For him, when goals and indicators are connected to the business strategy, are clear to everyone and are tracked throughout the cycle, and not only at the moment of payment, variable compensation “stops being merely a payment mechanism and starts acting as a tool for alignment and performance management, connecting and making visible the objectives of each area to the strategic guidelines and, in some cases, even to individual objectives.”

How to implement performance management in the company

Before opening the first cycle, the company needs to decide five things: the process owner, the review criteria, the length of the cycle, the history record and the preparation of leaders.

1. Process owner. HR designs the method and keeps consistency across areas, while the manager runs the day to day.
2. Review criteria. Expected results and behaviors, written before the period and known to everyone.
3. Cycle length. Defined by the decision each cycle supports, as seen above.
4. History record. Reviews, feedback conversations and IDPs stored so that one cycle can be compared with the next.
5. Preparing leaders. The manager needs to know how to set expectations, give feedback and run the feedback conversation, because they are the ones who sustain the process day to day.

Spreadsheet or performance management platform?

A spreadsheet works while the process is small and decisions do not depend on history. A platform becomes necessary when the company needs to compare cycles, connect the review to the area’s goals and follow many people at the same time.

Four signs show that the spreadsheet has reached its limit.

• The history of one cycle cannot be compared with the previous cycle.
• The area’s goals sit in one file and individual goals in another, with no link between them.
• Manual consolidation consumes the time that should go to conversations with people.
• No one can say, in minutes, how many IDPs had an action completed.

Stratwsopens in a new tab, the AI platform for strategic and performance management created by Siteware, brings together performance reviews, IDPs, the 9 Box Matrix and individual goals aligned with the company’s objectives, in the same environment where the company tracks its strategic indicators. Sofia, the Stratws AI, supports the reading of review results and the structuring of the IDP, and Siteware Academy offers AI learning paths to develop the competencies the IDP points to.

Performance management is the complete cycle of setting expectations, following up, reviewing, calibrating, giving feedback and developing, and it is only complete when people’s progress shows up in the area’s results. To see how this cycle works in practice, talk to an expertopens in a new tab at Siteware.

Frequently asked questions about performance management

Are "gestão de desempenho" and "gestão de performance" the same thing?+−

Yes. In Brazilian companies, "gestão de desempenho" and "gestão de performance" describe the same process: tracking, reviewing and developing people's performance against the company's objectives. "Performance" is the English word for desempenho and is widely used in the Brazilian corporate world.

Who runs performance management, HR or the manager?+−

HR designs the process, defines the criteria and keeps consistency across areas. The manager runs the day to day, with expectations, follow-up, feedback and the feedback conversation. The employee takes part with a self-review and the IDP, and senior leadership sponsors the process and uses the results in decisions.

How often should performance reviews be done?+−

It depends on the decision the review supports. For promotion and compensation, an annual cycle works. For development, semiannual or quarterly cycles, with follow-up conversations in between, keep feedback from arriving late.

Which indicators should be used to measure performance?+−

Indicators follow the two dimensions. For results, use those of each role, such as goal attainment and quality of delivery. For behavior, the competency criteria defined at the start of the cycle. For the process, track the percentage of IDPs completed and the time between review and feedback conversation.

What is calibration in performance reviews?+−

Calibration is the step in which managers and HR compare reviews from different areas so that the same criteria apply to all of them. It reduces the gap between stricter and more generous managers and brings consistency to promotion and compensation decisions.

How can bias in performance reviews be reduced?+−

Define the criteria before the period, record evidence throughout the cycle, use more than one source of assessment, as in the 360-degree model, and calibrate across managers. Preparing leaders for the feedback conversation also reduces subjective readings of the talk.

How do I know if performance management is working?+−

The main sign is people's progress showing up in the indicator of the area where they work. As support, track participation in cycles, the percentage of IDPs with a completed action and the interval between review and feedback conversation. The average score on its own does not answer this question.