Discover how to connect goals, performance reviews, feedback, and rewards to boost employee engagement and motivation.
Performance management is critical to organizational success. The management consulting firm McKinsey & Company says how you go about it can make all the difference.
Research suggests plenty of room for improvement. The industry news source Employee Benefit News (EBN) reports that more than 65% of employees are disengaged. Nearly 25% feel burned out.
A top cause of disengagement is not feeling valued or supported at work. Performance management can reverse these feelings. But getting it right is easier said than done.
According to the industry news site HR Dive, only 2% of Fortune 500 chief human resources officers say their performance management practices motivate their employees.
According to McKinsey & Company, consistent, logical, simple principles drive the best performance management. Employees want to understand how their efforts are being measured.
McKinsey recommends connecting performance management to four main areas:
- Goals
- Performance reviews
- Ongoing feedback
- Rewards
Implementing these four areas together is more impactful to employee motivation than applying each one as a separate practice.
Goals
Measurable goals encourage employees to work harder to achieve them. HR Dive reports that setting performance goals enhanced motivation for 72% of employees.
Best practices include combining individual and team goals. Goals should also be connected to company objectives. Rather than dictating goals, managers should involve employees in the conversation. Employees say their input makes the process more fair.
Employees also want managers to work with them to update their goals throughout the year. This practice ensures alignment with team and organizational goals. It enhances agility and adaptability when business needs or market forces change.
Performance reviews
Performance reviews are another crucial component. But research suggests they often miss the mark. HR Dive notes that just 20% of employees say their organization’s performance reviews are fair and transparent.
Part of the problem could be ranking systems. McKinsey & Company found that employee rankings don’t lead to better performance. Employees said conversations about their individual efforts toward performance goals were more motivating than rankings.
When managers are part of the goal-setting process, it leads to better discussions about individual performance toward those metrics. Employees want engaged managers who are ready to lead conversations on performance assessments and improvements. McKinsey emphasized managerial training to drive more value from performance reviews.
Ongoing feedback
While performance reviews provide natural points to discuss goals, challenges and opportunities, they may be too infrequent for lasting motivation. Regular, consistent feedback is essential to improving employee performance.
HR Dive reports that 77% of employees with ongoing feedback outside of performance reviews felt motivated by performance management. This figure compares with 21% for individuals who didn’t receive regular feedback.
Training is crucial here, too. Around 25% of employees said supervisors weren’t skilled in managing performance reviews or feedback. This number increased to 34% at companies with more than 10,000 employees.
McKinsey & Company says feedback should clearly indicate how employees can work toward their goals. In addition to in-person training, generative AI technology can help train managers to collect and provide feedback.
Rewards
Rewards and recognition will also energize your workforce. Money is always motivating, but it isn’t the only incentive that speaks to employees.
EBN reports that small but intentional displays of support and gratitude enhance resilience and well-being. Research shows that thank-you notes from managers can increase employee happiness. Gratitude has also been shown to improve job satisfaction, retention, team performance and individual mental health.
McKinsey found that employees’ motivation and performance increased with a mix of financial and nonfinancial rewards.
Nonmonetary rewards include:
- Managerial praise and appreciation
- Stretch assignments to build skills in new projects
- Professional development opportunities
- Increased autonomy
- Greater workplace flexibility
Nonmonetary rewards should occur more frequently than financial incentives. Both types of rewards should be directly connected to employee behavior and performance.
Review your practices
To review your performance management practices, talk to your benefits adviser. They can provide more information on training programs and resources to optimize your strategies.
