The importance of an engaged workforce cannot be overstated. Employee engagement leads to higher productivity, reduced turnover, and an overall improvement in performance—all of which contribute positively to your organization’s bottom line. 

Disengaged employees, on the other hand, have lower productivity, are absent, and have a negative attitude which can affect your company’s culture. 

According to Gallup, disengaged employees cost the world $8.8 trillion in lost productivity, equal to 9% of the global GDP. In short, it is better to have engaged employees than disengaged ones. 

One way to improve employee engagement in your workplace is with performance management. It is a process that involves continuously giving clear direction, feedback, and support to employees. As a result, they are successful in their roles and can contribute to the organization’s success. 

This article will define performance management, its cycle, and how it can improve employee engagement in your company. We will also share a few tips for improving the performance management process. 

Let’s begin.

What is performance management?

Performance management is a continuous process that managers use to evaluate and improve employee performance. The process involves setting goals, measuring progress, and giving employees feedback. With performance management, managers can align employee goals with the organization’s objectives, ensuring employees contribute to the overall business success. 

Over the years, the belief was that performance management involved only the yearly performance review, which many employees dreaded. But this isn’t the case. Performance review is only one component of the comprehensive performance management process. 

Besides, many companies are scrapping this outdated evaluation method and rethinking their whole employee feedback process. 

According to J. Lee Whittington, a professor of management, in his book Enhancing Employee Engagement: An Evidence-Based Approach, an intentional, well-planned performance management program can impact high employee engagement. 

As such, an effective performance management process should involve different integrated activities to form an ongoing cycle, which we explain below. 

The performance management cycle

Performance management isn’t a once-and-done activity like the annual review. It is a continuous process that goes on throughout the year. The cycle consists of four steps: planning, monitoring and coaching, reviewing and rating, and action. 

We expand on each below:

1. Planning

An effective performance management process begins with planning. The manager defines the job’s responsibility, sets clear and specific goals, and establishes acceptable performance standards. However, the goals must be realistic so employees can follow through and succeed. 

Therefore, employing the SMART (specific, measurable, attainable, relevant, time-based) goals framework is essential. It is also important to encourage employee input at this stage. When you involve employees in the planning phase, they feel a sense of ownership and become more motivated to accomplish set goals. 

2. Monitoring and coaching

The next phase is monitoring and coaching. Managers schedule monthly or quarterly meetings with employees to provide guidance, support, and relevant training. 

The goal is to provide solutions, offer constructive feedback, and help employees improve their performance. 

For example, if an employee struggles for productivity in call center, the manager can observe their performance metrics, such as call volume and average handling time. Afterward, they work with that employee to find strategies to improve their productivity. 

Managers are responsible for creating an environment where employees feel comfortable giving and receiving feedback. 

3. Reviewing and rating

It is time to evaluate an employee’s performance over a given period. There should be no surprises if the manager and the employee have met regularly during the monitoring and coaching period. 

This review considers the employee’s progress towards accomplishing set goals, the challenges, and the effectiveness of the whole process. 

Sticking with our call center example, the review will examine the agent’s progress toward meeting their call target or customer satisfaction rating. The review also identifies the challenges preventing the agent from meeting their goals.  

Note that the manager isn’t the only one providing feedback and suggestions in this phase. The employee also share their opinion on the process and suggest areas for improvement. 

4. Rewarding

This is the final step in the performance management cycle. It is also important because recognizing and rewarding employees for their work can boost morale and reinforce positive behavior. 

Rewards can be a salary increase, paid time off, promotion, or new projects. For example, if that agent improves their productivity, they could be rewarded with a salary increase. 

In addition, make employee recognition a continuous practice, not just during performance reviews.  

How performance management can improve employee engagement

Performance management and employee engagement are interlinked. Engaged employees perform at their best and achieve their goals. Similarly, an effective performance management program helps improve engagement. Here’s how:

Provides clarity and purpose

Lack of role clarity is when employees aren’t clear on their roles, responsibilities, or the company’s expectations. This usually happens when they don’t receive the right information or things keep changing. 

For example, when new hires aren’t given adequate information about their job description during onboarding, they may struggle to understand their roles within the company. That’s why you need the right tools, such as a recruiter CRM, to ensure new employees receive the necessary information to succeed. 

Performance management helps employees understand what is expected from them in the short and long term. Employees feel engaged and motivated when they understand what they are working towards and how their work contributes to the bigger picture. 

Performance management also helps define achievable goals and align them with organizational objectives. As a result, employees have a sense of purpose. 

Opportunities for growth and development

Performance management isn’t just about assessing employee performance—it is also about recognizing potential. It allows managers to identify individual strengths and interests to create personalized development plans that can help team members grow. 

Let’s say call center agents aren’t hitting their KPIs, but you see potential for improvement. So, rather than take the easy route of call center outsourcing, you invest in their training and development. This shows investment in employees and helps them envision a future within the company. 

When there are opportunities for growth and development, employees are empowered to take ownership of their actions and contribute more effectively. 

Recognition and appreciation

Employee recognition, no matter how little, goes a long way in motivating employees and reinforcing positive behaviors. The stats back this assertion, too. According to research by Nectar:

  • 83.6% of employee say recognition impacts their motivation to succeed at work
  • 77.9% of employees will have higher productivity if they are recognized more frequently
  • 81.9% of employees agree that recognition for their contribution improves their engagement

Performance management provides a structured framework for celebrating successes and demonstrating appreciation, boosting morale and engagement. Since it is a continuous process, managers provide ongoing feedback throughout the year. As a result, they can recognize more of employees’ strengths and wins. 

Apart from recognition, performance management results in fair and transparent evaluation. When employees feel evaluations are fair, they feel respected and valued. This fosters trust and encourages them to put their best foot forward. 

Facilitates trust and open communication

While performance management is typically goal-oriented, it also has a knock-on effect on employee trust and company loyalty. 

When you are transparent about the company’s goals, employees will have a better understanding of the big picture. This way, they can offer suggestions on how to accomplish organizational and individual goals. 

On the other hand, employees who don’t trust the company will do the bare minimum and be less invested in the business’s success. 

Continuous improvement

Performance management isn’t a one-time event. It is a continuous process that involves ongoing feedback, coaching, and development. Building a continuous learning culture engages your workforce more efficiently and empowers them with skills that benefit you both. 

For example, by investing in call center agent training, you equip them with the relevant skills to improve customer satisfaction. Happy customers mean repeat business and positive word-of-mouth, leading to increased company revenue. 

However, this is impossible without the right tools and resources. Investing in AI in the workplace is a good place to start. For example, AI-powered platforms can recommend personalized learning and development opportunities based on individual employee performance data. 

AI can also forecast future performance trends and identify potential areas of concern. This allows managers to proactively address issues before they impact employee engagement. 

Efficient performance management is the key to an engaged workforce

Performance management goes beyond the annual employee assessment. When executed well, it is an opportunity to engage employees. 

Performance management helps you detect the cause of poor performance, offer feedback, and develop an action plan to improve employees’ performance. This way, you show employees that you care about their growth and development, helping them to become more productive team members. 

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