How High-Performing Companies Manage Employee Performance [New Research]
Recently we wrapped up an amazing new project, the Lighthouse Research & Advisory Performance Management, Engagement, and Business Results study. This provided some amazing insights and has given us a great picture of how employers can fight back in the ongoing battle to keep great talent while simultaneously keeping them highly engaged.
Key Research Findings
Logically, we would expect to see variations between what high-performing companies are doing and the rest of respondents. And that’s exactly how things shook out. High performers were much less likely to be using what we call “negative” performance practices like rankings and much more likely to be using “positive” practices like coaching, peer feedback, etc. Check out the table below for the full list.
|Talent Practice||Gap Analysis: High Performer are…|
|Focus on eliminating weaknesses||25% less likely to focus on eliminating weaknesses|
|Forced/stacked ranking||31% less likely to use stacked ranking|
|Annual goal setting||4% less likely to prioritize annual goals|
|More frequent goal setting (two or more sessions annually)||44% more likely to do more frequent goal setting|
|Coaching for development||20% more likely to use coaching for development purposes|
|In the moment manager feedback||29% more likely to use in the moment feedback|
|Peer feedback||26% more likely to use a peer feedback mechanism|
|Recognition for performance||37% more likely to use recognition to drive performance|
|Focus on strengths||14% more likely to focus on employee strengths|
Source: Lighthouse Research & Advisory Performance Management, Engagement, and Business Results Study (n=258)
Additionally, high-performing companies are 58% less likely to say to say their approach to performance management is ineffective. Similarly, three-fourths of high performers believe their approach to performance actually increases worker engagement.
On the culture side, there’s an incredible divide between firms with a collaborative/create culture and those with a more controlling/competitive culture.
- 0% of employers with a competitive/controlling culture say their approach to performance management is highly effective.
- Conversely, while just 7% of collaborative/creative companies say their approach is highly effective, they say that the process actually enables greater performance, not just measures it.
The other findings paint a very interesting picture and we’re actively working to produce a more holistic report examining many of them.
The Premise of the Research
The intent of this study was simple. I wanted to be able to try and make as many connections as possible between performance management and engagement. As with our Talent Mobility Value Chain model, where talent practices connect with engagement, and engagement links to revenue and other business metrics, we felt like making that connection very evident would bring additional value and guidance for employers that were considering a different approach to managing and measuring employee performance.
While other research exists, you can find the studies below that we used as a guide for building out our hypothesis. If you’re not into academic literature and want the short version, the research points to a few key themes:
- Organizational culture can drive market performance
- Performance practices can drive engagement and market performance
- Engagement is connected with market performance
When these are examined holistically, we should be able to validate some of this research by showing connections among these areas (culture, business results, engagement, and performance management).
i4cp People-Profit Chain: A positive culture has a high correlation with market performance (defined as revenue, profit, market share, and customer satisfaction).
Kotter: Organizations with strong, adaptive cultures are more likely to have higher long-term stock performance.
i4cp People-Profit Chain: A workplace that maximizes employee productivity and performance is also highly correlated with market performance.
Kahn: Workers that understand the broader meaning of their tasks and feel comfortable with their environment are more likely to be engaged.
Sweetman & Luthans: Performance conversations based on coaching and agreement between both parties are more likely to drive employee engagement levels.
Gilbert et. al: Performance management based on forced ranking or similar systems disengages employees and harms performance.
Gallup: high engagement leads to higher customer satisfaction, profitability, productivity, and employee retention while simultaneously decreasing shrinkage, absenteeism, safety incidents, and quality defects.
Markos & Sridevi: engaged workers lead to better individual performance outcomes (Say (advocacy), Stay (retention), Strive (productivity/performance) as well as better organizational outcomes such as profitability, growth, safety, and customer satisfaction.
All in all this was an amazing study to pull together and we are very excited to continue exploring the research findings in order to help you manage your workforce better. Thanks, as always, to our amazing survey partners for sharing the study and to those that took the time to respond to the questions. We couldn’t have done it without you.
Ben Eubanks is the Chief Research Officer at Lighthouse Research & Advisory. He is an author, speaker, and researcher with a passion for telling stories and making complex topics easy to understand.