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The value of performance management

How does performance management ultimately benefit the company?

1. An engaged workforce

2. Feedback that leads to lasting improvements

3. Better manager-employee relations

4. The ultimate benefit of performance management

An engaged workforce

Effective employee performance management should naturally lead to good employee engagement. Employee engagement is both a quantitative and qualitative measure of the relationship between employer and employee. The engaged one is likely enthusiastic and eager to learn on the job. She contributes to the team. A disengaged employee may be detached from sharing ideas and meets the bare minimum of tasks. She may be frustrated because she feels unsupported.

High employee engagement increases productivity and raises the overall morale of the organization. When an employee is excited about something, she wants to take action, do more. She’s allowed to innovate. Adrenaline rushes don’t last, but that innate motivation is ever present because she knows the direction she’s headed in her role.

If an employee is engaged, she understands how to contribute to the organization. Her position is defined. She isn’t lost about her responsibilities, what goals to reach, who to check-in with about progress on a project. She’s been managed wellandshe’s managing well.

Feedback that leads to lasting improvements

When you give candid, thorough feedback, your employee is made aware of specifics that she can improve on, and she invests this knowledge back into the company. Without this direct feedback, through an ongoing manager-employee relationship, she does not have the tools to expand her skills.

Dick Grote, the president of Grote Consulting, still keeps with him his first performance evaluation from when he was 22 years old, just out of school. He received a subpar review, with specific thoughts from his boss, Ray.

“Nobody had told this young kid that I was then, that he wasn’t doing a very good job,” says Grote. “And I wasn’t. And Ray had the courage to tell me that, and as a result of Ray’s courage, getting that feedback straight between the eyes that I wasn’t performing well, immediately I got to work. And I ended up having a wonderful career.”

You provide structure for what’s working and what’s not, information that otherwise wouldn’t be transparent. This also complies with your company’s legal protection because if you need to fire someone, you have documentation to fill in the gaps.

Employees crave real-time feedback. 72% want more feedback than they currently get. Providing more feedback can help increase engagement.

Better manager-employee relations

As the saying goes, “People leave managers, not companies.” If you’re managing well, your employee is engaged and will be less likely to leave. According to Gallup polls, a full 50% of employees who quit cite their manager as the reason.

How comfortable is your employee approaching you with any type of question?An employee should be allowed the room to grow and do better. If your relationship is tenuous, why would an employee choose to invest?

Having one-on-ones with your employee throughout the year leads to a manager-employee relationship that is ongoing and transparent. Allow employees to share their feelings with you and show that you genuinely care. This in turn helps further their own investment into the company. In these meetings, establish goals and points that can be worked upon. This helps clarify any issues before they become major problems.

When you set goals with your employee, you’re also keeping the company aligned. Individual performance is connected back to company performance. Goals also become a measuring stick for progress, as they’re intertwined with the company’s mission.

The ultimate benefit of performance management

An employee wants to stick around longer because she knows what she’s contributing and what’s expected of her. She has someone invested in her performance, which is especially important for younger employees who have less experience behind them. 

Something that’s easy to overlook: When employee turnover is high, the price you pay for it is also high. Often, people don’t think about employee retention seriously because they don’t know how to measure the impact. The cost of losing an employee can range from tens of thousands of dollars to 1.5–2.0x the employee’s annual salary, says Josh Bersin of Deloitte.

So: invest in performance management. It's good for your employee, and your company. And when your company’s best interests and employee’s best interests intertwine, you’ve got a winning combination.