As far as perfect pairings go, few are as impactful to the success of your business as the combination of employee engagement and performance management.

When employees are highly engaged, they’re likely to give their all to make your organisation successful. When they see how their contributions have a tangible impact on your business, they’re likely to feel motivated to keep doing their best.

It’s a virtuous cycle that adds up to some big wins when organisations integrate the two effectively. Engaged employees are more productive and innovative. They boost profitability and customer satisfaction. Crucially, they’re more likely to stay at your organisation, positively impacting employee retention.

Understanding and nurturing this relationship is key to building a workforce of highly engaged, high performing employees who are deeply invested in your business's success. In this post, we’ll walk you through four ways that performance management and employee engagement are linked.

1. Goal setting creates buy-in to your organisation’s performance.

Goals are vital to building a highly engaged team. When your employees have something to work toward, they have a clear sense of purpose and feel empowered to do their best work.

However, employee goals are typically connected to business initiatives rather than individual motivation. Psychologically speaking, goals are often motivated by external factors, like hitting revenue targets, rather than internal ones, like solving an interesting challenge.

Driving high performance and employee engagement hinges on setting goals that nurture this internal sense of reward. 

“When employees are involved in setting goals with their manager, they’re almost four times more likely to be engaged than their peers.”

“It’s not always easy for employees to see the clear impact of what they do on your strategic goals,” explained Bonnie Davis, founder, partner and organisational consultant at HuWork. “Managers need to help employees connect the dots to show why their work matters. That starts with helping them understand the baseline goals of their role, and how their contributions roll up to a measurable impact on your business.”

Human Resources teams can maximise this positive relationship by leveraging a collaborative approach. Involving employees in the goal-setting process means they have a say in setting realistic, meaningful, and fair goals that connect to business outcomes.

Plus, according to research by Gallup, when employees are involved in setting goals with their manager, they’re almost four times more likely to be engaged than their peers — meaning they’re more likely to be invested in hitting their performance targets as a result. 

2. Feedback equips employees with the tools to improve performance.

Feedback has a huge impact on our job satisfaction and performance. When it’s developmental, it gives employees concrete action points on their job performance that improve competence long-term.

Organisations with strong feedback cultures are more likely to retain their employees — and employees that receive regular developmental feedback show higher levels of commitment to their organisation.

“The most effective feedback includes specific details that are given in the moment — or as close to it as possible,” Davis said. “You need to make sure that feedback is given while the memory is still fresh for both people, so you can be as specific as possible on the behaviours and actions that took place. If you wait until a meeting at the end of the month, you’re going to lose that context.”

Organisations can foster a healthy feedback culture by creating regular opportunities for dialogue on areas for improvement. One-to-one conversations are an impactful way of addressing emerging issues, while regular performance reviews help employees connect feedback to longer-term goals.

Creating a successful feedback culture relies on equipping managers with the communication and empathy skills to lead thoughtful feedback conversations, added Davis.

“Feedback — both positive and developmental — needs to become a regular habit, rather than a quarterly, or even annual event,” she stated. “People can better absorb it when it’s an expected part of their routine, instead of feeling fearful or uncertain about what may come up less regularly.

“There’s a lot of research in neuroscience that shows we have a negativity bias even just to the word ‘feedback’,” Davis added. “At a biological level, when employees hear it, they’re more likely to feel defensive, and that doesn’t lead to great conversations. It’s really important for managers to approach developmental feedback conversations cognisant of that bias. They need to ask, ‘Is this a conversation we can have now?’ and open a collaborative and problem-solving dialogue on the impact of the behaviour and what they can do to change it. That builds clarity, empathy, and commitment towards improvement.”

3. Recognition and praise boost employee engagement.

In business, praise and recognition are vital components of driving high performance and engagement because they increase our internal sense of competence and confidence, which directly contribute to job satisfaction.

Much like developmental feedback, giving praise effectively is all in the delivery. This is because while being told that we’ve done a great job is nice, it doesn’t give us enough to go on to empower the same behaviour next time.

“There is significant research that focusing on strengths and recognising employees for their contributions leads to higher levels of employee engagement,” Davis noted. “We all want to be appreciated and recognised for our efforts. Delivering meaningful praise means getting to the heart of what your employee did that was special or different. You need to offer a specific example of when they demonstrated the behaviour, and the actions they took. That will help shape behaviour long-term.”

Giving effective praise relies on creating a culture where everyone, no matter their role, feels empowered and safe to give feedback. It also means catering to individual preferences.

Becky Read, VP of People at FocalPoint, believes in a “praise in public” philosophy, but she also recommended that organisations check in on individual preferences before putting employees in the spotlight.

“Public praise can be motivating for everyone,” she noted. “We have a Slack kudos channel so that our employees feel empowered to give a shoutout when a fellow team member has tackled something tricky or performed well. But we also know that recognition isn’t a one-size-fits-all thing. That’s why we recommend that our managers have conversations with each of their team members individually and identify the types of praise that are most meaningful to them.”

4. Regular performance reviews connect employee development to future goals.

When it comes to employee development and performance management, we tend to think of the annual performance appraisal, and how employee performance correlates positively to business outcomes. This might be better for the bottom line, but maximising these metrics for long-term business success hinges on creating opportunities for employee growth.

According to our 2021 career progression survey, 76% of employees said they would be somewhat or very likely to leave a role if there weren’t enough growth opportunities on offer. Meanwhile, almost half of respondents were either actively looking or considering looking for a new role with better growth opportunities.

The bottom line is that if your employees don’t feel that you’re as invested in their career development as they are, they’re likely to go elsewhere. In a candidate-led market for talent, having an effective performance management process in place is your competitive advantage.

Implementing a structured framework and regular cadence for growth conversations is critical. While some organisations incorporate growth conversations as part of an annual performance appraisal process, they’re more likely to miss evolving needs over the course of a year.

“The bottom line is that if your employees don’t feel that you’re as invested in their career development as they are, they’re likely to go elsewhere.”

“For your employees, all that says to them is that you’re going to sum up their entire year’s performance over the course of an hour-long session and a three-page form,” Davis explained. “That presents a one-sided perspective of their performance. Work is dynamic and your employees’ career goals will change from one performance review to the next. If you’re not checking in and having a conversation as their goals evolve, it can become demotivating for them.”

Read believes that creating a more effective performance management process begins with establishing regular touchpoints for communication. She recommended folding casual check-ins into regular one-to-one conversations to surface emerging aspirations, while quarterly or biannual performance evaluations give employees a clear path for their career development.

“What’s most important is that we’re mindful of different growth paths and our employees’ individual aspirations,” she added. “A lot of the time, people feel that the only way to progress is by moving up into a managerial role, but some employees are happier developing their skills and expertise. Having regular conversations means we can help shape what their growth path looks like and provide them with the opportunities that they need to grow in other areas.”

Maximising the ROI of Performance Management and Engagement

Performance management and employee engagement are a powerful duo that, when integrated effectively, are greater than the sum of their parts. But to truly maximise the ROI of both long-term, organisations need to find ways to integrate them.

By monitoring engagement in the context of performance, Lattice empowers teams to track employee sentiment among your highest performers, segment data by location and department, and find out the optimum conditions your top performers need to thrive. Ultimately, you can take proactive steps to identify pockets of disengagement, solve emerging issues, and boost retention.

Leveraging this relationship long-term means you’ll need to develop processes and norms that continually build on your employees’ need for growth, feedback, and praise. To get started, read Performance Management and Engagement: Better Together, an actionable guide that outlines how and why to integrate performance and engagement.