Blog Performance

What’s the link between employee engagement and performance?

Performance management and employee engagement are often treated as two very different HR practices. Understandable as they feel like almost polar opposites, particularly if you have a traditional mindset. But highly engaged employees consistently outperform their lesser engaged colleagues in all measures, including productivity. So the link between employee engagement and performance is worth looking into.

Employee engagement affects just about every aspect of your organisation: profitability, revenue, customer experience, employee turnover, and wellbeing. It creates better processes and enables better management, so your people are happier and more productive. This leads to better morale, more satisfied customers, higher quality products, less employee turnover, and higher profits for organisations.

With a clear positive link between them, it makes sense that a successful approach to performance management should be one that takes employee engagement into account. So, let's take a look at employee engagement and productivity, and why they go together like cheese on toast.

Engagement is critical for high performance

Ipsos Mori identify five key characteristics that you’ll find in engaged employees:

  • Give discretionary effort when needed
  • Have a high level of job satisfaction
  • Take great pride in their work
  • Actively advocate, helping profits and recruitment
  • Feel valued by their employer

On top of that, highly engaged staff are also more likely to share their opinions. They're also more likely to respectfully disagree, offering thoughtful alternatives, not be afraid to ask for help, always strive to do better and improve, and provide mentorship.

Most of all, engaged employees have a broader vision of how their contributions connect to a larger mission and are more motivated to work harder to pursue that mission.

Think about your colleagues. How many are obviously engaged?

Disengaged employees feel frustrated by unclear (or unrealistic) expectations. They’re fed up with a lack of resources and worry that their input and strengths aren’t taken seriously. Some feel undervalued and underpaid, believing that their hard work goes unrecognised. In 2020, 68% of the global workforce felt disengaged or actively disengaged at work. This should worry us all.

Why are performance management and engagement treated differently?

Performance management: The goal of performance management is to improve individual performance and overall productivity. This traditionally takes the form of an assessment that highlights ways that the employee can improve, and ideally, their personal strengths too.

Employee engagement: Engagement is the employee’s sense of commitment and attachment to their job, their colleagues, and the business as a whole, including its goals. Employee engagement uses ongoing, two-way feedback that emphasises the needs and motivations of employees, rather than just their output. While performance management is about making employees be more productive, a by-product of high engagement is the actual motivation for employees to strive for better performance.

But, despite their differences performance management and employee engagement are arguably two sides of the same coin. A Harvard Business Review study found over 90% of business leaders agreed that engaged employees generally performed better, and that engagement is critical to business success, with 75% agreeing strongly. 69% agreed that, without improving employee engagement, it would be difficult to improve overall performance.

So, now that's out of the way, let's break down the link between employee engagement and performance.

How does engagement affect performance

Outdated methods like annual performance reviews are still something of a business bogeyman. This means that, conceptually, performance management suffers from a major image problem. That's because 80% of employees and 68% of managers don’t believe in the effectiveness of your typical performance review.

The term Performance Management often injects fear of uncomfortable meetings and evaluations where employees are told they're not up to scratch. But when done right, performance conversations form a key part of any effective employee policy. It just requires a shift in approach, from being purely assessment based, to being more feedback-driven.

Vibe surveyed organisations across 157 countries, and found that 83% of employees appreciate feedback, whether it’s positive or negative. 96% believe that getting regular feedback is a good thing. But roughly a third have to wait over three months to get feedback from a manager.

Your people don't hate performance reviews. They hate how they're done

It’s not performance management that employees hate. In fact, challenges and opportunities to learn actively support engagement. What employees dislike is unwarranted criticism. Especially from managers who may be biased or don't see the whole picture. A common problem with annual performance reviews is that managers may only recall recent events, meaning they could fail to take past accomplishments into account.

Performance management should be just as much about highlighting personal strengths and achievements, just as much as it’s about finding ways to improve. 63% of employees in Vibe’s study reported not getting enough praise from their manager. Over 70% received praised less than once a week, despite recognition programs being so beneficial for engagement that they reduce voluntary turnover by almost a third.

The key is changing the way we talk about and manage performance

We don’t want the negativity typically associated with poor performance processes influencing your positive engagement activities (often known as the halo effect.)

We need to refresh the thinking and language surrounding performance. After all it isn’t just about fixing the wrongs but also modelling the right. Performance management needs to hold up the great work your people are already doing by saying this is brilliant, everyone take a look.

How to combine engagement and performance management

Check in with employees regularly

The most important aspect of regular communication is consistency. Employee check-ins don’t need to take much time at all, and can enable you to exchange feedback and respond to problems in a much timelier manner. Plus, by having an ongoing feedback process, both you and the employee will have a much more solid idea of what to expect from performance review meetings, which helps make them a lot less daunting.

Use recognition and 360° feedback

The fact that so many employees in Vine’s study weren’t getting enough praise is quite telling about the link between employee engagement and performance. But another finding of theirs that we found particularly interesting is that almost two thirds of employees want more feedback from their colleagues. Implementing 360° feedback and recognition platforms gives employees the tools to help manage their performance together, and praise each other’s hard work. This helps to build social bonds that play a key role in engagement.

Discuss personal growth and career goals

Frame weaknesses as opportunities for growth, rather than flaws to be corrected. That's because, if you simply shower someone with negative criticism, they'll most likely dig their heels in and ignore you.

Showing employees that their career development matters to you is a great way of inspiring loyalty and cutting turnover. If they want to advance in the company, you can establish a shared understanding of the skills they need to get there, and how they can obtain them.

Support workplace education

Workplace education initiatives are extremely useful, whether they’re training courses, employee mentorships or anything else. It’s one thing to be able to help your employees set practical goals for personal development. It’s another entirely if you can directly help them to achieve those goals.

Take a strengths-based approach

Engagement increases when strengths are recognised and put to good use. It makes you feel valuable, which helps you form an attachment to your organisation. A good way to cut out the punitive feeling of some performance review methods is to focus on developing our employee’s strongest areas.

Uniting performance and engagement

It’s important to remember that employee engagement and performance management are two sides of the same coin. Effective performance management is part of a wider holistic approach to business success and should be seen in the same positive light that employee engagement is.

Companies with highly engaged employees outperform companies with disengaged employees on all accounts, including higher profitability, productivity, customer metrics and decreased turnover.  Similarly, high-performing teams are often some of the top scorers when it comes to engagement.

Those are just some of the ways you can turn performance management and employee engagement into a united front. Ultimately, employee engagement’s biggest strength is its people-centric approach, based around support and understanding. By contrast, performance management’s biggest flaw is that it can sometimes focus on results at the cost of the individual.

Engagement’s positive impact on things like productivity shows that performance management initiatives stand to be more successful if they take a leaf from the employee engagement playbook, and support people as individuals with their own goals and needs.

This excerpt is from our latest best practice guide: Employee Engagement in a Remote Working World. Download your copy using the form below.