How Active Performance Management Translates into Employee Retention

Driving employee retention remains a top priority for HR teams as the Great Resignation and hiring challenges continue. There are millions of open positions, and employees continue to quit by the million, too. One in five workers still says they’re likely to switch jobs in the next year.

Gallup recently reported on the steady dip in employee engagement that’s undoubtedly driving some of this employee turnover. Over the past two years, engagement among U.S. employees dropped from 36% in early 2020 to 34% in 2021 to 32% today. Fortunately, the Gallup poll offers some insight into what’s causing the decline:

• Fewer employees agree that they know what’s expected of them at work
• More employees feel a lack of connection to their company's mission
• Fewer employees feel they have opportunities for development
• Fewer employees report having been recently recognized at work

So how can your HR team use this knowledge to drive better employee retention strategies? By using an active performance management strategy. Performance management and employee engagement strategies are complementary — changes to one will affect the other. Find out how an active approach to managing performance can help you retain more employees.

What is Active Performance Management?

Active performance management simply means taking an active, rather than passive, role in managing performance. A company actively managing performance has processes for reviews, employee goal-setting, giving feedback and praise, and improving performance — and communicates them to employees. Active performance management processes also include professional development and advancement opportunities.

Traits of an active performance management plan include:

• Setting SMART goals
• Giving feedback early and often
• Clear criteria for assessing performance
• A predictable review schedule
• Fair, transparent, structured performance reviews

In contrast, characteristics of a passive approach include a lack of clarity around performance appraisals, vague goals or none at all, and unhelpful or infrequent feedback. Employees may not be recognized for good work or receive guidance on improving performance. Passive performance management also might include inconsistent, unproductive reviews.

Take an Active Approach to Engage and Retain Employees

Performance management statistics show that the process shapes the employee experience in a significant way. Without it, employees get the message that your company isn’t concerned with their performance, progress, or future plans. On the other hand, companies that proactively build a performance management framework can engage employees, help them improve, and ultimately boost retention rates.

Here are several ways that active performance management and employee retention are linked.

1. Ease Nerves and Eliminate Confusion.

With active performance management, you can alleviate employees’ fears and uncertainties about how they’ll be evaluated and when those conversations will happen. Set a regular performance review cycle and stick to it. Prepare employees and ease nerves by scheduling reviews in advance and making them aware of performance criteria and rating scales.

2. Give Feedback That Employees Can Use Right Away.

Although feedback can be useful after the fact, it’s most effective when given in the moment. That way, employees can apply it immediately rather than waiting for another situation where it can be applied. Not to mention, employees’ projects will benefit from real-time feedback.

96% of employees want to receive feedback more often than they’re getting it. And when they do, they’re more likely to stay on at your organization. Retention is up to 14.9% higher at companies that understand the importance of employee feedback.

3. Get Everyone Involved.

Get the most accurate picture of employee performance when you get more than just their direct manager involved in the review process. Many types of performance management systems offer 360-degree performance reviews, which are one way to incorporate peer feedback into the review process. Employees’ team members have a different perspective of their performance that can highlight hidden strengths or shed light on problems managers might have overlooked. 

360-degree feedback is also a great way to increase the fairness of performance reviews. Since they gather feedback from multiple colleagues, the review presents a well-rounded view of employees’ work style, how they communicate, how well they work on a team, where they excel, and where they need more growth. It also helps the employee understand how their performance is perceived by their colleagues vs. just their manager.

4. Show Your Appreciation.

Recognition isn’t always the first thing that comes to mind when you think of employee performance, but don’t underestimate its impact.  According to Great Place to Work, 37% of employees would be encouraged to produce better work by more personal recognition — more than those that said they’d be motivated by pay or promotions.

The increased job satisfaction that happens as a result of being appreciated at work inspires loyalty among employees — companies with a culture of recognition are 3x more likely to see increased retention.

5. Focus On Growth and Long-Term Success.

Employees are looking for a role in which they can see a clear path for the future. They’re also looking for an employer that helps them grow their skills. For 66% of 18 to 24-year-old workers, it’s number three on their list of priorities. 48% of workers say they would even consider switching jobs for professional development opportunities.

Map out potential career trajectories for new hires when they start at your organization and help them set goals, too. That gives them confidence in their future at your company and objectives to work toward.

6. Learn From the Data.

Power your strategy with a performance management system to gather valuable data from your workforce that just isn’t possible with manual processes. The best performance management software can produce reports to provide you with quick insights: 

• Pinpoint trends for individual employees, managers, and departments
• Get updated on performance review cycle progress
• Monitor goal alignment, progress, completion
• See changes in performance over time

These reports may tell you something about performance you may not have realized without them. For example, you can look into why one manager scores their team consistently lower than average compared to other managers. Maybe the manager needs to be re-trained on how to score performance reviews, or maybe there’s a larger performance issue at hand.

Either way, you can now address it and find out what’s going on. And that goes for every insight you gain — you can now take a data-informed approach when making decisions about performance management at your company.

Step It Up With Software

With only 14% of employees saying their performance reviews are motivating, there’s a disconnect between how employees want to be evaluated and how companies are actually doing it. Employees want more feedback, a plan for the future, and appreciation for their daily work — and performance management software can make it much easier to meet those expectations. Step up your processes, reconnect with your employees, and retain top talent with performance management software.

Luckily, there’s a software solution out there that can give you all these benefits — and more.  Get a sneak peek of how performance management can be transformed in your organization with a demo of ClearCompany’s Performance Management Platform. Sign up for a demo with the experts today.