Improving Engagement Is the True X Factor of Performance Management

By James Tehrani

In 1960, Douglas McGregor, an MIT Sloan School of Management professor, published his theory on management and motivation for employees.

He split companies’ management styles into two camps: Theory X and Theory Y.

Theory X was the belief that employees need to be strictly controlled because they are inclined not to do any work if left to their own devices, and Theory Y held that employees should be trusted and empowered.

Today, Theory Y is pretty obviously the winner, but at the time it was a big departure from previous managerial theories going back to the Industrial Revolution. 

Annual Reviews

For generations, Performance Management meant getting together with workers once a year and going over their annual performance review to see where they meet or exceed expectations and where there is room for improvement. While annual reviews are still used ubiquitously for merit increases and sometimes action plans, the idea that an employee should have to wait a year to get feedback on their performance is becoming rarer than a Ploughshare tortoise sighting. 

General Electric Co.’s Jack Welch, for one, took a unique approach to the annual performance review. Under his “vitality curve,” employees were ranked against their peers with the top 20% considered the most productive people, the next 70% adequate workers and the bottom 10% deemed low performers who should be looking for their next position elsewhere.

On the other hand, according to Gallup’s State of the Global Workplace: 2022 Report, business units with engaged employees saw 23% higher profits than those with disengaged workers. Frankly speaking, making employees wait 365 days to hear how they performed over the course of the year was never a great way to encourage people and set them up for success. 

“Losing your best people means losing your reliable winners, your constant innovators and your most effective problem solvers,” Gallup wrote.

True enough; that’s why Performance Management and regular communication is so important.

5 Ways to Improve Engagement Through Performance Management

  1. Set Clear Expectations: There’s an episode of Seinfeld called “The Bottle Deposit” where George Costanza (Jason Alexander) is talking to his boss from the New York Yankees, Mr. Wilhem (Richard Herd). Mr. Wilhelm lectures George about being better about paying attention, so Mr. Wilhelm doesn’t have to repeat himself. He then mentions a special project he has for George, but walks into the bathroom before finishing his thought. Respecting Mr. Wilhelm’s privacy, George doesn’t follow him into the lavatory at first, but then finally does decide to enter after waiting a while. He enters the bathroom and finds out Mr. Wilhelm, assuming George had followed him in, never stopped talking about the project and what it entailed. Fearing Mr. Wilhelm would be angry if George asked him to repeat the project, George simply says he will make the project his top priority—even though he has no clue what the project is.

    This might be an extreme example, but it shows how clear communication and setting expectations can help ensure success for the employee and, ultimately, the organization.
  2. Practice Positive Reinforcement: Back in 1982, Dr. Aubrey Daniels wrote a textbook on Performance Management. What he said then still holds true today, “Positive reinforcement is the most powerful leadership tool.” Another way to push positive reinforcement is through spot bonuses, extra paid time off, offering flexible work options, and praise and acknowledgement among other things, according to C-Level Strategy. In other words, we’re positive that being positive will help boost morale and help you retain top talent.
  3. Deliver Regular Feedback: Imagine taking a class and not knowing how well or how poor you’re doing until your final grade comes out. That would be stressful because it’s too late to make any changes when all is said and done. As we mentioned, waiting for the annual review to provide feedback simply doesn’t work in today’s workforce. People need regular feedback to improve and grow in the organization and in their careers. We’re not saying every small issue needs to be addressed immediately, but if it’s something that’s important to fix and/or discuss, then why wait?

    Weekly check-ins can go a long way toward setting people up for success. Forty-three percent of highly engaged employees say they receive weekly feedback, so we say the more the merrier. Today, organizations are more inclined to offer continual feedback rather than waiting for the proverbial “next year” to help them retain top talent, especially since it can cost three times an employees’ salary to fill a role in “hard” costs and “soft” costs related to lost productivity, according to Society for Human Resource Management (SHRM) research.
  4. Be Open to Questions/Concerns: Leaders need to listen. It’s as simple as that. A person doing a job day in and day out probably has more insight into everyday issues, so it’s important to hear employees out when issues arise. Not feeling heard can lead to feelings of apathy and can hurt retention. Women and minorities in particular have historically not always had their voices heard in the workforce. Creating a culture where everyone feels heard is essential to building a more inclusive workplace. As Regina Borsellino wrote for The Muse, “Even when people don’t consciously try to exclude members of minority groups, they are more likely to include colleagues most similar to themselves.” Having your concerns heard and having an organization take action if warranted is empowering for any employee and helps improve morale. That all starts with actively listening to your employees.
  5. Provide Training & Development Opportunities: Things move fast in today’s competitive business landscape. Most people’s jobs evolve as time goes on, and sometimes the work moves into new areas that the employee hasn’t been properly trained on. Think of this as an opportunity. Whether it’s an online course, two-day summit or something else, employees appreciate the opportunity to learn. It benefits them as much as it benefits the company. A LinkedIn survey from a few years ago found that 94% of employees said they would stay at a company longer if the organization were invested in their careers. 

Those are the true X factors of Performance Management.

As Jacinda Ardern, the former prime minister of New Zealand, said in her farewell address: Leaders can be “sensitive” and “kind.” These are words that hold true for world leaders and managers. Additionally, Steve Jobs is credited as saying, “Management is about persuading people to do things they do not want to do while leadership is about inspiring people to do things they never thought they could.”

We agree.

To learn more about how Performance Management can help your organization excel in recruiting and retention, please watch our latest webinar with Michele Lindsay, PrismHR’s director of talent management solutions.

James Tehrani is PrismHR’s digital content marketing manager. He is an award-winning writer and editor based in the Chicago area.