Key Points
  • Performance management and employee engagement are strongly complementary, helping accomplish both individual aspirations as well as overall company goals

  • The high costs of disengaged employees include lowered profitability, efficiency and client metrics

  • With millennials emerging as the largest workforce demographic, performance management systems are undergoing a revamp, driven by the need for better employee engagement

"Of all the things I've done, the most vital is coordinating the talents of those who work for us and pointing them towards a certain goal."

— Walt Disney

Walt Disney’s philosophy points exactly to where performance meets engagement in an organization. If performance management looks at how employees can be dedicated to organizational operations, employee engagement creates the exciting culture that enthuses employees to feel motivated at work. Without a doubt, they are strongly complementary – and encourage an organization’s workforce to accomplish both their individual aspirations and overall company goals.

Key Lever of Talent Engagement

A Gallup survey estimates the annual cost of disengagement to be between USD 960 Billion and USD 1.2 Trillion per year. It is an open secret that companies with highly engaged employees significantly outperform on all scores — including profitability, efficiency, client metrics and lower turnover.

All of this points to a vital truth – however important an organization’s mission, products or services may be, it is the employees who make or break its success. Knowing that talent is the difference between a well-oiled machine and a hot mess, many organizations are investing in multiple avenues to attract and retain the best people.

Let us look at three crucial levers of engagement — connectedness, recognition and performance. Where performance is concerned, employees look for development, feedback and professional growth. The question therefore is this. What drives workforce engagement? What are the effective management styles that leaders can use to create an environment where both engagement and productivity thrive?

Talent engagement can be viewed from cognitive, emotional and behavioral perspectives. The cognitive aspect revolves around the employees' perception and beliefs regarding their organization and culture – including leaders and working conditions. The emotional aspect relates to employees’ attitudes towards the organization and its leaders, and is influenced by the cognitive element. The behavioral aspect fosters people’s willingness to apply discretionary efforts to their work and value-add to the organization.

A relevant performance management framework is thus vital to ensure engagement and retention of the right talent. With talent acquisition and retention becoming tougher in a disruptive business landscape, it is not surprising that performance management systems have been undergoing a renaissance in terms of concept, functionality and business relevance.

Shifts in Performance Management

In the past couple of years, various Fortune 500 companies have moved away from traditional annual performance management processes that were perceived as demotivating, forced and ineffective. The list of companies making this collective shift strides across industries, and is driven by the emergence of the ‘millennials,’ who have become the largest global workforce demographic today.

This calls for robust talent management and performance strategies that align with the diverse needs of a multi-generational talent force. Not to forget the non-conventional workforce categories of an emerging gig economy. Broadly, this boils down to three areas that we need to consider.

Continuous Conversations: Part of a new approach, this has managers, employees and HR practitioners playing active roles in making it effective. As simple and logical as it seems to be, this is what organizations desperately need to get better at. Gallup’s survey shows that close to 44 percent of millennials are more likely to be engaged if their managers hold regular meetings with them, yet only about 21 percent meet with their managers on a weekly basis. More than being millennial, it really is about being human. In our current consumer-driven era, we all expect clear and crisp communication regardless of the generation. Words matter, intent matters and ownership matters.

Performance-Compensation Link: Historically, the annual review has been linked to compensation conversations and has even supported the notion of differentiated compensation. Scores were intended to reward the highest performers. However, a new approach is taking shape – that of separating the compensation conversation from the annual review. As simple as it is powerful, this will shift the spotlight to high performance and high potential talent assessment. The strength of this approach is that it is a natural extension of continuous conversations. It also fosters an evolved thought process for managers and leaders in terms of ongoing focus on talent development.

Impact of Gig Economy: Recent research from McKinsey predicts that 50 percent of all workers will be freelancers by 2025. While gig workers are not bound by full-time employment policies, the elements of performance engagement apply equally to them. Continuous conversations focused on outcomes and development are important to them too — and tying compensation factors other than annual reviews can prove useful.

Performance management is a continuously evolving strategy. Rapid changes from the traditional to the emerging are being driven by newer expectations and newer demands from the workforce. The all-important questions that are at stake for organizations are these – How good are we in motivating our workforce? How inspiring are we in making them feel that we are contributing to their learning and development?

For both these outcomes, performance management must make the leap to performance engagement.

Click here to know more about our real-time performance engagement platform, WNS TalentTurfTM

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