New research shows that, when integrated, these two people programs ‘fuel organizational success.’

 

Who finds the traditional annual performance review valuable? Not many, according to a new study by Harvard Business Review Analytic Services and sponsored by Glint. 

Two-thirds of business leaders characterized performance management as a “check the box” activity. In other words, performance management as we’ve come to know it helps organizations with compliance but not much else. 

The study, called Peak Performance: How Combining Employee Engagement and Performance Management Fuels Organizational Success, surveyed 717 business leaders from around the world who work in industries ranging from technology to manufacturing, financial services, health care, and more.

But there’s good news, too: Best-in-class organizations have reinvented their performance management by integrating it with employee engagement, and they’re outperforming other organizations on a variety of business metrics, including revenue growth, quality, customer satisfaction, productivity, and more.

There’s a hunger among business leaders to “get more value using performance management as a tool to engage and develop people rather than just to assess them,” the report says.“The landscape of performance management is changing dramatically.”

Let’s explore the study’s key findings on the challenges, opportunities, and path forward for organizations looking to integrate their performance management and employee engagement programs. 

Business leaders are on board  

A vast majority of organizational leaders see the crucial connections among employee engagement, performance management, and business success. More than 90% believe that not only do engaged employees perform better, but also employee engagement is critical to their business success.

“When people are engaged, performance increases,” one respondent said. “When companies help people to develop their skills and recognize them for great performance, engagement increases.” 

Indeed three-quarters of business leaders surveyed strongly agree that engaged employees tend to be higher performers. And nearly as many—close to 70%—strongly agree that it is difficult to improve performance without improving employee engagement.

In short, business leaders recognize that their people are vital to their organization’s success. And to best support their people, they see that their organizations have to reinvent how they use employee engagement and performance management. 

Organizations need to overcome the status quo 

Despite business leaders acknowledging the need to combine employee engagement and performance management to fuel organizational success, very few are doing it. Only 23% of surveyed business leaders said their organization has a single place where managers can access information on their teams’ engagement and performance.

What is keeping organizations from implementing this formula for success?

While every organization has different challenges, one survey respondent identified the biggest obstacle simply as inertia.

“The data is there,” the respondent said. “We have all sorts of systems that record everything, and getting a simple correlation on the data is quite easy. The biggest challenge is to get people to buy into it.

A combined approach drives business results

In spite of the hurdles many organizations are facing, there is a best-in-class group that has emerged. These organizations have integrated employee engagement and performance management, and they’re seeing results. Generally speaking, they have: 

  • Senior leaders who are committed to the approach
  • More regular and frequent manager check-ins to give and get feedback, discuss goals, and map out development opportunities
  • Leadership development for managers—both to increase their own engagement and teach them how to improve engagement among their teams
  • Software and systems that bring together all the relevant data and help managers gain new insights

These organizations outperformed the rest of the respondents on business metrics ranging from revenue growth to quality, customer satisfaction, productivity, profitability, and more. You can take these results one step further—as we did—to conclude that organizations that execute both employee engagement and performance management well have a 50% higher likelihood of improving employee retention, productivity, and customer satisfaction.

The path forward? Reevaluate your priorities

According to Josh Bersin, an industry analyst quoted in Peak Performance, half of the work of integrating employee engagement and performance management is shifting mindsets.

“Higher performing companies are crystal clear on the philosophy and the approach they want to use,” he said.

Organizations looking to combine employee engagement and performance management can emulate other practices that best-in-class organizations are doing. Compared to other survey respondents, these leading organizations are: 

  • Three times as likely to have performance-management processes that are transparent and fair
  • Twice as likely to share employee engagement survey results more openly across the organization

The best-in-class also recognize the importance of managers in using employee engagement and performance management together. These organizations overwhelmingly teach managers how to build trust with their employees, communicate clear expectations, and effectively coach people. 

You’ll hear more from us on all of the valuable insights from Peak Performance, but in the meantime, download the full report here