Performance Management Cycle

What a performance management cycle is

The performance management cycle (دورة إدارة الأداء) is the yearly sequence in which an establishment sets out what it expects of each employee, follows the employee’s performance and discusses it with the employee, appraises it, bases its decisions on pay increases, promotion and development on the appraisal, and then starts again. It is wider than appraisal, because appraisal is one stop within it. It is also different from the document written at its end, which is the subject of the annual performance report.

The cycle matters to the human resources officer who designs the yearly performance calendar, and to the manager who runs some of its stages. Its aim is that an employee knows what is required before being held to account, that a manager has something to rest on when deciding, and that the establishment reaches its decisions through steps that can be explained.

Where the cycle begins

It begins by setting goals, not by appraisal. Goals are worded in a frame that makes them possible to judge later, as in SMART goals. They are derived from the goals of the department and the establishment, so that the employee knows which higher goal the work contributes to, a link covered by goal cascading. Written descriptions of what counts as acceptable performance in the job go with them, and these are called performance standards.

The stage produces a written agreement between the employee and the manager on what will be judged at the close of the cycle. An appraisal built on goals that were never written, or that the employee did not accept, turns into a dispute about what was expected and cannot be a judgement of what was achieved.

In Articles 18 to 20 of the model work regulation (النموذج الموحّد), which is Annex 1 of the Implementing Regulation of the Saudi Labor Law (اللائحة التنفيذية لنظام العمل), we found no date for starting the cycle. They do not say whether it runs on a calendar year or on the year in which each worker joined, they do not provide a stage for setting goals, and they do not provide a review at the midpoint. In the sources we reviewed, the organisation of those stages is left to the establishment.

What happens between setting goals and appraisal

Monitoring comes next. In it the manager gives the employee comments close to the event and does not hold them back until the end of the year, which is continuous feedback. In the middle of the cycle there is a scheduled stop at which both sides review what has been achieved and what is late, and adjust the goals if priorities have changed. That stop is the midyear review, and no final rating is issued in it.

This stage reduces surprise at the end. An employee who heard at the midpoint that a goal was behind, and was given time and support, may not be surprised by the final rating, while an employee who heard nothing all year may be surprised by it even if it is fair. We suggest that the manager note briefly what was said at each meeting and its date, and return to those notes at appraisal instead of relying on what memory keeps of the last weeks.

How the cycle closes

At the close of the cycle the manager appraises performance on the form the establishment has set, and the employee may have written an assessment of their own performance beforehand. Before ratings are closed, a session is held at which the appraisers meet to make sure that one grade means the same thing for different managers, which is performance calibration. The report is then approved and the employee is told of it.

This stage carries risks. An appraiser may lean toward the middle grade for everyone appraised, or the last weeks may outweigh the whole year. In Articles 18 to 20 of the model work regulation we found no treatment of these errors, so dealing with them is a matter for the establishment’s own organisation, and calibration is one of its tools.

What the model work regulation provides within the cycle

The model work regulation contains three articles on performance reports. Article 18 of the model work regulation provides that the establishment prepares performance reports periodically, at least once a year for all workers, on the forms it sets, and that the reports include three elements: competence, which is the ability to work and the degree of mastery of it; the worker’s conduct and the extent of cooperation with superiors, colleagues and the establishment’s clients; and regularity. Article 19 of the model work regulation provides that the worker’s performance is rated by grades that the establishment sets, and that a scale of five levels is followed in doing so. Article 20 of the model work regulation provides that the report is prepared by the worker’s direct superior and approved by the person with authority, that the worker is given a copy of it immediately after approval, and that the worker may grieve against the report under the grievance rules in the regulation.

The cycle with all its stops is wider than what these texts require. The texts set the closing stop of the cycle: a report at least once a year, with named elements, a scale of five levels, and a path of three steps, which are preparation by the direct superior, approval, and notice by a copy. The model binds an establishment to the extent that the establishment adopted it in its work regulation. An establishment that adopted the model as it stands is bound by these articles, and one that prepared its own regulation may have worded them differently. The full texts of these articles, and what they leave unsaid, are set out in the term on the annual performance report, so we do not repeat them.

The three articles prescribe no method of appraisal, and the only requirement of Article 19 of the model work regulation is that the scale has five levels. In Articles 18 to 20 of the model work regulation we found no quota for each level, so we do not say that the model imposes a forced distribution or that it prohibits one. Article 18 of the model work regulation refers to all workers. The text excepts no one and does not state the scope of that word, and we take no position on workers who are in a probation period.

What an establishment’s decisions rest on after appraisal

The model work regulation links the periodic report to two decisions. Article 21 of the model work regulation permits the establishment to grant workers annual increases, and makes a worker eligible for entitlement when the worker’s periodic report reaches at least an average level, after a full year from joining work or from the previous increase. The place of the annual increase in pay is covered under annual increment. Article 22 of the model work regulation requires, for promotion to a higher job, among other conditions, at least an above average level in the last periodic report.

Eligibility is not entitlement. Article 21 of the model work regulation makes the grant of increases a permission and creates no obligation, and under Article 22 of the model work regulation the condition on the report is one of several conditions for promotion. For this reason decisions come in the cycle after appraisal, and they are taken according to what the establishment decides. A development decision is linked to them, and it is set out in the individual development plan.

If appraisal reveals performance below what is required, the establishment may respond with a written document that defines the gap, what is expected, in what period and with what support, which is the performance improvement plan (PIP). In Articles 18 to 20 of the model work regulation we found no link between the report and a disciplinary penalty. We also found nothing on what follows for the establishment if it does not prepare the report, or on the effect of that on the condition for an increase or promotion.

What an employee can do on objecting to the report

Article 20 of the model work regulation refers to the grievance rules in the regulation, and those rules are in Article 71 of the model work regulation. Under it the worker submits the grievance in writing to the competent body in the establishment within 30 days, excluding official holidays, from the date of being told of the decision, procedure or penalty complained of. The worker is told the result within a period not exceeding 15 days, excluding official holidays, from the date of submitting it. If the grievance is rejected, or no decision is made on it within the period, the worker may object before the labour courts within 30 days, excluding official holidays, from the date of rejection or from the end of the period set for deciding, whichever is earlier. The internal route is covered under grievance.

The effect on the cycle is practical. Both sides need to know the date on which the report was notified, because Article 71 of the model work regulation counts the period from the date the worker is told of the decision or procedure complained of. Treating the report as a matter covered by Article 71 of the model work regulation is our reading, because Article 20 of the model work regulation refers to the grievance rules. We suggest that the date of approval and the date of notice be written in the employee’s file, and that the employee sign for receipt of the copy.

How much of the manager’s time a cycle takes

Take a manager with eight employees, using hypothetical figures to show the structure. For each employee there is a meeting to set goals of one hour, two quarterly meetings of half an hour each, which is one hour, a midyear review of one hour, a discussion of the final appraisal of an hour and a half, and writing the report in one hour. The total for each employee is 1 + 1 + 1 + 1.5 + 1 = 5.5 hours, and for the eight it is 44 hours. A calibration session of 3 hours is added, so the total is 47 hours a year, which is 47 ÷ 8 = 5.9 hours for each employee, roughly. If the manager’s working hours are taken as 2,000 hours a year, the share is 47 ÷ 2,000 = 2.35%.

This is time spent on the whole cycle, and cutting it is not an improvement in itself. If the meetings are dropped and the final appraisal stays, then in our estimation the monitoring that may make the appraisal acceptable to the employee is lost.

How distributions of ratings are examined

Take 40 employees appraised on a scale of five levels. The names are hypothetical because the model leaves the naming of levels to the establishment: weak 2, below average 6, average 20, above average 9, and excellent 3, which totals 40. Half of the employees, 20 ÷ 40 = 50%, are at the middle level. Those at average or above number 20 + 9 + 3 = 32, which is 80%, and on the report condition alone these have reached the minimum for eligibility for an increase under Article 21 of the model work regulation, and the full year still has to pass. Those at above average or higher number 9 + 3 = 12, which is 30%, and these have reached the report condition for promotion in Article 22 of the model work regulation alone, with its other conditions still to be met.

If a team of eight employees were all at the middle level, its share would be 100% against 50% in the establishment. That does not prove that its manager erred, because the team may in fact be so. It does call for the question to be put in the calibration session.

How an establishment organises its cycle

We suggest that the cycle be written on a calendar announced at its start, with the date of each stage, who runs it and what document comes out of it. We also suggest that the establishment’s regulation define what each of the five levels means, which of them is average and which is above average, so that it is not decided afresh in each cycle, and that the midyear review be kept apart from the pay decision, so that it is not taken as the start of a decision. These are practical recommendations and not requirements in the model.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.