As the new year begins, many organizations and their employees turn their attention to performance management conversations and goal setting. This annual exercise should be considered more than simply perfunctory: According to a recent survey, 72 percent of employees cited goal setting as a strong motivator for performance.
Structure is important as well when it comes to performance management and incentives. Employees are most motivated when their company’s performance management system is consistent and simple, involving performance reviews with skilled managers, goal setting, ongoing feedback, and rewards.
As organizations and leaders prepare for 2025 and more years to come, this is an opportunity to revisit performance management systems to ensure they serve all stakeholders—the business, its leaders, and its workforce. Employers and employees should work together to refresh goal setting and make it an effective process that improves both organizational and individual performance.
Here are four changes to consider:
- Emphasize the link between business priorities and personal goals: Employees are more motivated when their goals include a mix of individual and team goals (44 percent) and are clearly linked to company goals (40 percent). As part of the goal-setting process, managers and their direct reports should discuss how the work aligns with organizational strategy, including business objectives, purpose, and the measurable targets for which they can be responsible.
- Provide year-round counseling: While goal setting may set employees up for success in the new year, managers should encourage employees to adjust goals throughout the year to align with changing business objectives for a high return on investment. Ongoing, regular check-ins can help drive performance, development, and connection, while ensuring that an employee’s goals remain relevant and top of mind.
- Find strategic ways to use technology, like generative AI: There are plentiful use cases for using emerging technologies, such as gen AI, to support performance management systems. These include helping to summarize and analyze peer feedback, building detailed career paths, and identifying the experiences and development opportunities necessary to help employees reach their professional goals. These technologies have the potential to speed up processes and reveal informative, data-backed insights that may have gone unnoticed otherwise. Now is an ideal time to explore their capabilities.
- Deploy nonfinancial rewards along with financial incentives: There are four reward categories that organizations can use to help motivate and incentivize employees—compensation, career progression, development opportunities, and recognition. Financial rewards get a great deal of emphasis. However, as work-life expectations continue to shift, nonfinancial rewards—like opportunities for upskilling or professional development—play an increasingly important role in performance management strategies.
Motivating employees through effective performance management systems can enhance employee experience and improve retention, but there’s a competitive advantage to revisiting these processes as well. Companies are more than four times more likely to outperform their peers when they focus on their people’s performance.
Take this opportunity to engage in dialogue with employees, not only to establish goals for the year ahead but also to learn how the performance management process can be adjusted to benefit all.