Impact of Performance Management on Your Employee Engagement

The Impact of Performance Management on Employee Engagement

December 22, 2021
The Impact of Performance Management on Employee Engagement

Navigating performance management isn’t always easy. It’s a dynamic process that’s influenced by changing trends and new developments in the field. When done poorly, performance management can severely impact the productivity, motivation and engagement of employees while causing potential disruptions and problems for managers. Unfortunately, many businesses don’t prioritize employee performance management and therefore, aren’t experiencing the rich benefits and positive impact they have on the company as a whole. In an effort to increase awareness of these benefits, here’s an overview of how performance management impacts employee engagement.

What is Employee Performance Management?

Employee performance management is an often-misconstrued term. People assume that it only encompasses the mid-year or year-end review. However, these are only some components of employee performance management and aren’t the most effective way to track daily progress towards a goal. Comprehensive employee performance management involves the continuous process of improving operations by creating both individual and team goals that are aligned to the strategic objectives of the organization.1 The achievement of said goals are structured through planning, progress assessment and improvement plans. Employee performance management is more than simply evaluating individuals. It’s a way to integrate company culture, HR activities, and learning and development into a high-performance work system.2 Employee performance management benefits the entire team and can make or break a business.

Here’s a breakdown of the primary elements of a more comprehensive approach to employee performance management:

Elements of Employee Performance Management

Employee performance management includes three basic principles: planning and goal setting, performance review, and improvement. Each principle requires a strategic approach from leadership teams based on unique characteristics of employees. They should be devised based on individual strengths geared toward a common vision that helps to improve inner-organizational teamwork and success.

Planning and Goal Setting

The first element in performance management is goal setting. This is the criteria that an employee will work toward and is necessary for baseline evaluation. To help propel a business forward, individual goals should—in some way—be aligned with organizational goals. During yearly or quarterly reviews, goals should be clearly identified across different categories. However, to confirm that these goals are focused on end results, they should be limited to no more than five to seven. It’s common for employees to have basic job description goals, goals for project completion, personal development goals, culture related goals, and stretch goals. In doing this, leadership provides opportunities for individuals to excel in more ways than one. When curating these goals, know that tasks are most appropriate in the action plan supporting each goal, not in the goal itself.

By creating goals across different categories, you give employees more options for development and success. Since accomplishing one task can create a domino effect in productivity, setting small, attainable goals can be helpful to reaching larger, stretch goals.

Goals should be attainable but challenging. They should be specific and understandable but flexible in nature. Most importantly, goals need to be clear, measurable and relevant. To ensure that your employees are experiencing beneficial performance management, managers should be directly involved in goal development and documentation. This is especially true in regard to ongoing reviews and adjustments. Communication between employees and managers during goal setting and review helps forge a stronger understanding of expectations.

Performance Review

The next element involves conducting a performance review, which is an assessment of an employee’s work performance that pinpoints strengths and weaknesses, provides feedback and establishes goals for future performance. While performance reviews are historically associated with either positive or negative feedback in the form of praise or discipline, a shift towards an ongoing approach that incorporates regular feedback offers far more positive outcomes. Analysis-based performance reviews are more focused on the overall performance rather than strictly looking at whether or not a goal was met. Not only does this benefit the individual’s overall outlook and motivation, but this type of approach also provides ongoing opportunities for open communication and feedback to facilitate a better understanding of expectations. In general, there should be no surprises in a performance review; it should encapsulate items that have already been communicated to the employee via ongoing feedback given throughout the year. This helps to get employees closer to their goals. The performance management process should go beyond the actual performance review to include real-time feedback and ongoing communication. This helps lead to increased understanding into performance and progress for the employee and the manager.

During the performance review it’s essential that managers avoid bias or favoritism amongst their employees. Employees should be treated and evaluated as individuals based on their overall performance instead of using one event to hyper focus on continuous progress. This, of course, may be unavoidable if a specific event is sufficiently egregious, such as theft or harassment. Even so, there are several errors that may occur in performance management that can quickly create environments that hinder productivity and growth while severely diminishing employee morale.

Improvement Plans

Arguably, the most important part of employee performance management is the conversation that occurs about development opportunities. Development opportunities provide an outlet for managers to work with their employees and devise ways to overcome obstacles while capitalizing on individual strengths and creativity. When done correctly, growth development plans can remove the stigma often associated with negative feedback on performance reviews while encouraging employees to find resourceful ways to achieve their goals. Each employee’s development plan should be different and tailored to their individual performance review.

Key Performance Indicators

A common tool used in performance management, key performance indicators are specific measurements that support goals or larger business initiatives, and can be created at an individual, team, or even company level. A strong performance management strategy may involve individual KPIs that ladder up to team-level goals, which then fit under broader business targets. This allows employees, managers, and business units to develop actionable business strategies that/which reinforce each other and ensure a strong foundation for growth.

Key performance indicators may evolve over time as the company’s vision develops; this is a natural part of the performance management cycle. Different events can cause a shift in directives, such as enabling new technologies, which then require individuals and teams to focus their efforts on supporting the business-led goal of implementation. By maintaining open communication and regular performance appraisals, the company can maintain course through the whirlwind of change, providing clarity for positions working remotely or in-office. Consider frequent employee performance discussions and reviews as an opportunity to promote engagement and raise overall satisfaction, especially for those employees working remotely.

The Relationship Between Performance Management and Employee Engagement

Employee engagement is an important factor in overall company success. Disassociation from the organization leads to high turnover rates, decreased productivity, hampered employee satisfaction and, therefore, lower profits. In turn, employees who feel strongly connected to an organization through ongoing performance management tend to be more fully engaged.

Some benefits of employee engagement include:

Stronger Communication

Effective performance management systems boost ongoing communication between the individual and leadership teams. It allows for trusted sources of conversation to be established, therefore giving employees an opportunity to express concern, discuss obstacles and brainstorm ways to improve. This is different from the dynamic of traditional performance reviews in that it allows for two-way conversations instead of a one-way dictation of duties. When employees feel heard, they tend to be more engaged and are in turn, more successful.

More Growth and Development

Another benefit of employee engagement is stronger growth and development within your organization. The communication creates more opportunities for employees and managers to work together to establish a personalized development plan that can help individuals achieve their goals. This motivates employees to take on more innovative approaches while substantially boosting creativity levels. When growth and development is discussed outside of the cookie cutter expectations, employees are more involved and tend to have a stronger appreciation for the business. According to Linked In’s 2021 Workforce Learning Report, employees at companies with internal mobility stay almost two times longer (5.4 years vs. 2.9 years).

Better Recognition and Employee Appreciation

By providing ongoing feedback throughout the year, you’ll recognize more of your employee’s strengths and wins. This will boost employee recognition, which helps improve overall engagement and a commitment to organizational goals. For performance management to be impactful, managers should work on creating a balance of positive and constructive feedback. By doing this on a continual basis, you’ll help portray teamwork and leadership, which propels successful businesses forward. Not only is employee appreciation and wellbeing good for reaching goals, it can actually make your company more attractive to new talent and improve retention efforts.

Improved Employee Trust

While performance management tends to focus on achieving goals and improving productivity, it also has a residual effect on employee trust and company loyalty. By being transparent about the overall organizational goals, your employees will have a stronger understanding of the big picture. This opens up doors for employee suggestions on goal setting and implementation to help you achieve your objectives as well as their own. Employees who do not trust their business or don’t feel valued are more likely to do the bare minimum and avoid putting in extra effort to help the business succeed.

Overall, these performance management b can positively impact employee retention, but only if done right. While rethinking traditional performance management processes represents a substantial shift in the HR world, it has the ability to integrate employees more than ever.

How to Boost Your Employee Engagement Through Effective Performance Management

Rather than relying on reviews that occur once or twice a year, effective performance management should be a continual process. This is the best way to boost employee engagement, inspire creativity, provide realistic feedback on progress and create plans for improvement along the way. According to Harvard Business Review many leading organizations like Microsoft, Adobe, IBM, General Electric, Accenture and others utilize the practice of continuous performance management and have seen tremendous improvements in employee productivity and retention. With this type of performance management approach, employees are more likely to feel valued and therefore, engagement levels can increase substantially.

Implementing effective employee performance management techniques can be difficult without the right tools. To help you capture real-time feedback throughout the year, TriNet offers an effective performance management system called TriNet Perform. TriNet Perform is a cloud-based performance management software that provides the framework for setting realistic goals and expectations while giving your employees increased visibility into their performance and progress. Rather than traditional methods, TriNet Perform allows you to transform your performance management process from drudgery into useful activity. Learn how TriNet’s comprehensive HR solutions can help your business today.

Consider performance management technology

There’s much to consider in the world of performance management, and organization is key to managing the many different facets successfully. The right tech can help with many common HR problems, including time management and resource constraints. These different obstacles have the potential to slow down business growth and development and dramatically impact employee engagement. If your business has a lean HR team, the right technology could make all the difference in achieving your goals.

1 Handbook of Performance Management by Michael Armstrong (Page 9).
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