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The core of a company is not its mission or even its offerings, but its workforce. Employees of all roles and skill levels are the ones who make or break the success of the business. Knowing that talent is the difference between a well-oiled machine and a hot mess, many organizations invest in ways to attract and retain the best employees.

This investment can be fairly straightforward, but there are some elements that many groups get confused, unnecessarily convoluting success. Performance management can be seen as a primary way to handle the goals, behavior, and perception of employees. In reality, employee engagement is the most effective way to drive performance management. When used intelligently in conjunction, the two functions constructively manage, attract, and retain employees.

The first step is understanding the difference between performance management and employee engagement to develop a happy, productive and ambitious workforce.

What Is Performance Management?

According to Aberdeen, performance management is a process that sets company-wide goals and helps employees make individual contributions to those goals. It is about tying each employee’s performance to the bottom line. In An Employee-Centric Digital Workplace: From Onboarding through Engagement and Retention, Aberdeen Group reveals that 43% of Best-in-Class companies say that performance management of this nature is critical to executing future business strategy.

Performance management ensures that the whole workforce is focused on the overall organizational goals, making it more likely that the company will reach that goal in a timely and efficient manner. Typically, performance management involves yearly or biannual evaluations and check-ins. These help individual employees set their own goals that align with the overarching mission of the company. However, while 52% of all companies use these processes, only 55% of employees enrolled in performance management feel the programs are effective for helping them develop the right skills and grow as professionals. Performance management means nothing without engagement.

What Is Employee Engagement?

Aberdeen defines employee engagement as a positive, work-related attitude characterized by high levels of energy, emotional commitment, and satisfaction derived from the work. Employees who are engaged in this way are more likely to be invested in the success of the company and will work harder to advancing revenue and reputation. In fact, according to Aberdeen findings, companies with a formal engagement strategy in place are 67% more likely to improve their revenue per full-time equivalent on a year-over-year basis.

And with only 35% of employees saying they are actively engaged at work, the need to increase engagement is greater than ever. The benefits of encouraging proactive employment and immersing workers in a culture of positivity and enthusiasm far outweigh the costs of investing in engagement programs, such as internal communications and new technologies for recruitment, onboarding, and goal-setting.

A Powerful Combination

Simply put, performance management ensures that all employees are dedicated to organizational operations, and employee engagement creates a culture in which employees feel excited about and satisfied with their work. These functions are complementary. They subtly, yet actively encourage and assist employees in reaching both individual, professional benchmarks and overall company goals.

When managers recognize that the two are tied, they can begin to implement the types of programs that make a difference on an organizational level. Engaging employees even before they are hired, recognizing their achievements, and helping improve their weaknesses will make any performance management process stronger. Companies that do this see far greater results than the ones who don’t. The Aberdeen report revealed that 40% of Best-in-Class companies closely align employee engagement and performance management strategies.

Businesses should be paying close attention to how they engage employees, sustain that engagement, and integrate it with performance management processes. When it is developed and maintained with a singular goal, both employees and employers benefit.

To learn more about employee engagement in the digital age, download the Aberdeen research report, An Employee-Centric Digital Workplace: From Onboarding through Engagement and Retention.

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