Teemu Semi

Performance management as
employee engagement tool

Metropolia University of Applied Sciences

Bachelor of Business Administration

European Business Administration
Bachelor’s Thesis

02.01.2022
 Abstract

Author
Teemu Semi
Title
Performance management as employee engagement tool
30 pages
Number of Pages
02 January 2022
Date
Degree Bachelor of Business Administration
Degree Programme European Business Administration
Instructor/Tutor Daryl Chapman, Senior Lecturer
This thesis aims to research the relation between performance management and
employee engagement and how to affect one with another. The beginning of the
thesis focuses on introduction of the terms in order to give the reader better
understanding of the concepts individually. Later an analysis of secondary data is
used to compare these concepts with each other to find some key points where their
correlation is the highest. Finally, the thesis aims to exhibit how the use of
performance management could increase employee engagement. Particularly
interesting aspect of the research was how connected these concepts are to each
other and on how many engagement driving factors performance management is
able to affect, directly or indirectly.

Keywords Performance management, Employee engagement

Contents

1 Introduction 1

2 Importance of the topic 2

3 Definitions and relevant literature 3

4 Maslow’s theory 7

4.1 Criticism 8

5 Performance management 10

5.1 History 10
5.2 Implementation 11
5.2.1 Conceptual models 12

6 Employee engagement 16

6.1 Implementation 16
6.1.1 Personality 16
6.1.2 Ten C’s of employee engagement 18

7 Performance management as engagement tool 20

7.1 Correlation of the key elements 20

7.1.1 Performance improvement 21
7.1.2 Employee development 23
7.1.3 Needs and expectations, Communication and involvement 25

8 Conclusion 27

9 References 28
List of figures and tables

Figure 1: Hierarchy of needs 7

Figure 2: The performance management cycle 12

Figure 3: Contributions to performance Management 13

Figure 4: Performance Management Is Circulatory and Simultaneous 14

Figure 5: The big five personality traits 17

Table 1: The ten C’s and main concerns of performance management 21

Figure 6: Impact of employee engagement on employee performance 22

Figure 7: Coaching impact on win rates 24

Figure 8: What effective communicating firms do 25

 1

1 Introduction

Factors affecting on the selection process of the topic for this thesis arise from the
author’s own work history. During several years of working on different levels of the same
organization, the author has come across several different levels of employee
engagement. On the bottom levels of the organization, which in this company’s case
meant the warehouse, the level of engagement was rather low. After moving forward and
acquiring a job at the main office, it became evident that the colleagues there were
significantly more committed to their jobs. The less engaged employees seemed to show
up and only do their bare minimum whereas the more dedicated colleagues often went
an extra mile for the sake of the company. Comparing these two departments revealed
that that the employee turnover was much higher in the warehouse and people in the
office tended to have significantly longer careers.

The focus shifts to the managing aspect of these two departments. The warehouse had
few supervisors overseeing the whole personnel of over 100 employees, leading to
rather large team sizes. In addition, on many occasions they had to work alongside the
regular employees reducing the time they could spend on managing them. Performance
appraisals were held once a year and it was almost the only occasion for the employees
to catch up with their supervisor. In the office, the team sizes were smaller but big enough
to ensure all tasks were completed without daily contribution from the supervisor making
it possible for them to focus on managerial tasks. This reflected to the employees on
many ways such as: weekly team meetings and better internal communication flow. In
general, the people in the office knew much better what was expected from them, where
the team and company was heading to and what was their role in it.
 2

2 Importance of the topic

In a 2013 survey 71 per cent of respondents ranked employee engagement as very

important to achieving overall organizational success, while only 24 per cent of
respondents said employees in their organization are highly engaged (Harvard Business
Review, 2013).

Recruiting is always expensive. Organizations are using a lot of money only to fill a new
position in the company. After the new employee starts, the training period and getting
used to new atmosphere will eat their productivity significantly. Especially when it comes
to highly educated experts, the companies might have to compete constantly with their
rivals in order to keep their valued employees within the organization. Money cannot
always be used to solve problems in form of constant pay rises which can also be easily
altered by a competitor. That’s where organizations need employee engagement, to find
the non-salary related factors that keeps their valued employees within the company
walls.

The term obviously has made its way into attention of HR professionals and executives,
but many companies seem to struggle when it comes to implementing it as a key part of
the organizational strategy. Employee engagement has been studied a lot and even
though some methods focus mostly on reducing employee turnover, it is evident that the
competitive advantage resulting from more motivated, productive staff is the true perk
companies should be pursuing.

Performance management is a critical and necessary component for individual and

organizational effectiveness (Cardy et al., p. 3, 2011).

Performance management serves both sides of this goal. Meaning that companies
should aim for maximum efficiency with their existing workforce while the employees
subconsciously want to reach their own full potential. The self-actualization term is known
from Abraham Maslow’s 1943 publication “A Theory of Human Motivation” and described
as the desire to become more and more what one is, to become everything that one is
capable of becoming (Maslow, 1943).

It seems that performance management could be a crucial tool to meet both, employers
and employees needs when it comes to reach a common goal; success.
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3 Definitions and relevant literature

Before we can start mapping out specific factors that correlate between performance
management and employee engagement and how to benefit from it, we need to
determine the terms individually.

In his book “Performance Management: Key strategies and practical guidelines”

Published 2000, Michael Armstrong defines performance management as a strategic
and integrated process that delivers sustained success to organizations by improving the
performance of the people who work in them and by developing the capabilities of
individual contributors and teams. He also states that if performance cannot be defined,
it cannot be measured or managed. In addition, he emphasizes the strategic aspect of
the term since companies might be facing wider range of issues when it comes to
functioning effectively in their environments and deciding on which way to go when it
comes to achieving long term goals (Armstrong, 2000).

Armstrong states that performance management is a focal point in the middle of vertical
and horizontal integration. Vertical integration shows as alignment of business strategic
plans and goals with individual and team objectives. And horizontal integration as
valuing, paying, involving, and developing people. The book emphasizes the process of
performance management over the content of it.

Performance management is about enhancing organizational effectiveness by aligning

individual, team, and strategic goals (Towler, 2019). It develops individuals with
competence and commitment, working towards achieving common goals along with the
organization while receiving the required support from management (Lockett, 1992).
According to Walters (1995) its goal is to encourage effectiveness and efficiency in line
with the needs of the organization by directing and supporting employees.

When looking into employee engagement, there seems to be quite broad variety of
definitions. Kahn (1990) describes it as the commitment of physical, cognitive, and
emotional resources into one’s work. Other academics suggests that engagement
correlates with individual’s involvement, satisfaction, and enthusiasm (Harter et al.,
2002). And more precisely, an energetic experience of involvement with personally
fulfilling activities that enhance a staff member's sense of professional efficacy (Leiter et
al., 1998). Many of these definitions seem to share the same idea behind this mental
 4

state and energy working as a binding force between the employee and the organization.
Satisfaction is also often mentioned. However, Macey and Schneider make an important
note when it comes to defining employee engagement:

Satisfaction when assessed as satiation is not in the same conceptual space as

engagement. Satisfaction when assessed as feelings of energy, enthusiasm, and
similarly positive affective states becomes a facet of engagement (Macey et al.,
2008).

That being said, it is important to distinguish personal satisfaction in form of satiation

from employee engagement since a person might be completely satisfied with their
current job while still doing their bare minimum, and therefore it cannot be used alone to
define engagement.

A 2002 study by Harter, Schmidt & Hayes examined the correlation between employee
satisfaction–engagement and the business-unit outcomes of customer satisfaction,
productivity, profit, employee turnover, and accidents based on the data retrieved from
the database of Gallup Organization

The structure of the survey was fairly simple, it consisted of 13 statements with six
response options from strongly disagree to strongly agree, 6th being don’t know / does
not apply). The amount of gathered data being quite large; almost 200 000 respondents
from 36 different companies. The results of the survey supported the hypothesis of
Harter, Schmidt and Hayes showing positive correlation between the
satisfaction/engagement of employees and positive business outcomes (Harter et al.,
2002).

As mentioned earlier, there was a total of 198 514 replies from 36 different companies.
Obviously, the large number of replies is a positive thing but when looking closer at the
distribution of the replies, the industry specific impact is revealed; 2 communication
companies are responsible for over half of the business units taking part on this survey
and almost 20% of the total replies. This may have distorted the results slightly since
these companies had such a significant percentage of the overall data gathered.

In 2008 William H. Macey and Benjamin Schneider wrote an article where they discussed
whether employee engagement is a unique concept or a combination of already existing
constructs. Macey and Schneider state that employee engagement as a term suffers
 5

from lack of precision and therefore is usually described too vaguely. As particularly
noteworthy example of such imprecision they mention job involvement.

Macey and Schneider attempt to take more precise stance on the matter and emphasize
that engagement is not just an opposite of disengagement; the term cannot be divided
into two ends of the spectrum.

In their framework engagement consists of 3 main elements:

• Trait engagement

• State engagement

• Behavioral engagement.

Trait engagement includes positive views of life and work, and therefore the willingness
of going beyond what is necessary and initiating change to facilitate organizationally
relevant outcomes. Trait engagement is a significant cause of state engagement
including feelings of persistence, vigor, energy, dedication, absorption, enthusiasm,
alertness and pride. State engagement links closely to organizational commitment, job
involvement, and the positive affectivity components of job satisfaction. Behavioral
engagement follows from state engagement and is described as “extra-role behavior”
and adaptive behavior intended to serve an organizational purpose as well as ‘‘going
beyond the usual or typical’’ (Macey et al., 2008).

While Frederick Taylor emphasized proper rewarding systems and finding the right
person for a job, William A. Kahn thought that the problem was less about employees
being the right “fit,” or lacking financial rewards, and more about the way they felt. These
opinions are stated in his 1990 paper “Psychological Conditions of Personal Engagement
and Disengagement at Work”

According to him the conditions necessary for employee engagement are

meaningfulness in the work, psychological safety, and psychological availability. He
states that in engagement, people employ and express themselves physically,
cognitively, and emotionally during role performances while in disengagement they
 6

withdraw and defend themselves physically, cognitively, and emotionally during same
role performances (Kahn, 1990).

Kahn acknowledges that people may hold mixtures of both, personal engagement and
disengagement but in his paper he withdraws from discussing them further. However, he
states that people have dimensions in themselves and when given the right tools and
appropriate conditions, these traits are possible to employ to drive personal energies into
physical, cognitive, and emotional labors.

He emphasizes the importance of relationships at workplace and states that:

Work tasks cannot be cleanly separated from work relationships, when workers
are considered as persons, not just employees, relationships assume great
prominence; it is in the context of relationships that people make choices about
bringing their selves fully into their work (Kahn, 1990).

The study is especially interesting due to the methodology. Kahn set up two researches;
the first was on a 6-week summer camp where he monitored the engagement of 16
counselors, and second was an prestigious architecture firm. In both cases the amount
of personal disengagement examples exceeded the amount of personal engagement
examples. The diversity of these two settings is definitely a plus when it comes to
analyzing the gathered data in the sense that summer camp as an environment is almost
as far as it can get from an architecture company with a long history. However, it may be
quite expected to find high levels of personal engagement from both of these settings
since one could argue that working in either one of these companies is more or less a
calling and therefore, being more engaged by default. Surely this does not affect on the
initial purpose of the research, but it should be kept in mind that in more neutral
environment, the results probably would have been much different.
 7

4 Maslow’s theory

Earlier in this thesis there was a reference to Abraham Maslow’s 1943 paper "A theory
of Human Motivation". Especially noteworthy part of the paper is his idea behind the
hierarchy of needs.

Figure 1. Hierarchy of needs

Although it cannot be found from anywhere in Maslow’s original work, the theory is often
illustrated in form of a pyramid as seen in figure 1. The idea behind this theory is that the
most basic needs, found from the bottom, must be achieved first and only after that
individuals become motivated enough to strive for the next step and so on. For the
purposes of this thesis, we need to look more closely into the last level of needs, “self-
actualization”

More precisely, self-actualization stands for the desire of reaching one’s full potential, as
Maslow himself describes: “What a man can be, he must be”.
 8

Maslow’s theory is often mentioned in other employee engagement related papers since
the top level seems to share a lot of features with employee engagement definitions. The
lower levels emphasize more physical and material needs, but the fifth level concentrates
on immaterial goals that can only be met if everything else below is already fulfilled.
Therefore, it resembles the employee engagement definitions mentioned in chapter 3.

The reason this theory is applicable to employee engagement is that while climbing up
the levels, some uncertainty factors are eliminated along the way. For example, once the
employee reaches satisfactory financial state, they are less likely to transfer between
companies while pursuing higher salaries. In addition, proper organizational culture will
create feeling of belonging and therefore improve the psychological needs of an
individual.

4.1 Criticism

Maslow’s theory has received its fair share of criticism. One of the most questioned
aspect is his methodology; the characteristics of self-actualized individuals were
determined through a biographical analysis meaning that the list of qualities of self-
actualized people were identified from biographies of 18 individuals.

From a scientific perspective, there are numerous problems with this particular approach.
First, it could be argued that biographical analysis as a method is extremely subjective as it
is based entirely on the opinion of the researcher. Furthermore, Maslow's biographical
analysis focused on a biased sample of self-actualized individuals, prominently limited to
highly educated white males (such as Thomas Jefferson, Abraham Lincoln, Albert Einstein,
William James, Aldous Huxley, Beethoven) (McLeod, 2007).

Maslow studied few self-actualized women but due to the small proportion of them in the
already limited sample size, it is very difficult to generalize the findings to the whole
population.

The rule about lower needs required to be satisfied in order to progress to the next level
have also been questioned since in many third world counties people are living in
extreme poverty, yet they are still able to reach psychological needs such as love, friends
and relationships in general. In addition, many creative people, such as writers and
artists, could be argued to have achieved self-actualization, while still living in poverty
(McLeod, 2007).
 9

The rigid order of the hierarchical levels has also been questioned. Wahba and Bridwell
(1976) acknowledge that human beings do have needs to be met, but the existence of a
strict order of needs for every individual is questioned. Additionally, the hierarchy of
needs is described as too simplistic and criticized for not taking into account societal
needs at a particular time, such as recession and war (Cianci et al., 2003).
 10

5 Performance management

5.1 History

As a term “performance management” is relatively new. However, features of the

concept can be found from as early as the 1800’s when a Scottish cotton mill started
observing the performance of its employees, a noteworthy point is that the focus
remained on individual level instead of looking at the company as a whole (Mangipudi et
al., 2020).

The first documented performance appraisals were conducted by WD Scott in early

1900’s, the concept remained widely un-recognized until 1950’s when companies started
using personality-based systems for measuring performance. (PeopleHR, 2015) The
system received some criticism since it was pointed out that instead of measuring
performance, it was more focused on the personality of individuals (Mangipudi et al.,
2020).

In 1954 a new concept called “Management by Objectives” was popularized by Peter

Drucker in his book “The Practice of Management”. Drucker stated that business should
be run based on its needs and goals. These goals should be agreed on by both, the
employee, and the organization since having the option to affect on the goal setting
increases participation and commitment among employees (Drucker, 1954).
Management by objectives approach emphasizes achieving results that are linked to
established targets. Management is encouraged to focus on achievable objectives to
produce the best possible results using available resources (Mangipudi et al., 2020).

In the 1960’s, the focus shifted more on self-appraisal, and the old performance appraisal
systems become more focused on the possible achievements of individuals. At this time
the modern idea of performance management started to take form since now for the first
time businesses were focusing on goals and objectives instead of monitoring of
individuals (Mangipudi et al., 2020).
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5.2 Implementation

The framework for implementing performance management successfully lies heavily on

the continuous aspect of the process. Rather than setting goals once a year and going
through the results on retrospective during annual performance appraisals, the process
should focus on future performance planning with enough room for frequent dialogue
between managers and employees where both parties could express their performance
and development needs (Armstrong, 2000).

Performance appraisals might often be seen as part of performance management. This

is understandable since the aim of appraisals is to measure performance and possibly
set new goals for the future. The problem is that appraisals mainly focus on reviewing
past performance, providing little to none support throughout the year for the employee
to actually meet the expectations. The managers should adopt a support role where they
function as coaches with a look into the future instead of judges only focusing on what
went wrong during the past year (Armstrong, 2000).

According to Armstrong, performance management has four main concerns. Firstly, it is

concerned with performance improvement in order to achieve organizational, team and
individual effectiveness. Second concern is employee development. Performance
cannot be improved unless there is constant development on both, organizational and
individual level. It also aims to satisfy the needs and expectations of various
organizational stakeholders such as owners, management, employees, and customers.
The final concern is communication and involvement, which emphasizes a continuing
dialogue between managers and the members of their teams to take place in order to
define expectations and share information on the organizations mission, values and
objectives. This establishes mutual understanding of what is to be achieved and a
framework for managing and developing people to ensure that it will be achieved
(Armstrong 2000).

Performance management can contribute to the development of a high-involvement

organization by getting teams and individuals to participate in defining their objectives and
the means to achieve them (Armstrong 2000).

Armstrong states that the early performance management systems have been criticized
for their rigid, up-down characteristics that are set for a failure due to looking for a simple
solution for a complex issue. In fact, performance management should be treated as an
 12

ongoing, flexible system not concerning only the employees, but the management and
organization as a whole as well (Armstrong, p. 16, 2000).

5.2.1 Conceptual models

The conceptual model for performance management system, proposed by Armstrong, is

vague due to the importance of each organization creating a tailored version of it to match
their own needs.

Figure 2. The performance management cycle (Armstrong, p. 17, 2000).

On role definition, the key result areas and capability requirements are agreed.
Performance management is the planning stage. At this point expectations are defined,
meaning the setting of personal objectives, and agreeing on how the performance will
be measured. In addition, it is important to map out which capabilities are needed to
deliver the required results. The purpose of personal development plan is to set out the
measures individuals aim to use in order to develop themselves, extend their knowledge,
increase their capabilities and performance in specific areas. Managing performance is
a continuous process taking part after the performance agreement and personal
development plan are implemented in individuals’ day-to-day work. On this stage the
emphasis is on frequent feedback on performance, informal progress reviews, updating
 13

of objectives and possible performance problems. Performance review is the formal

evaluation stage in which performance over longer period of time is being reviewed. Key
points being achievements, progress, and problems (Armstrong, p. 18-20, 2000).

As mentioned earlier, successful performance management system does not only

depend on the employees as individuals. Armstrong describes it as a partnership
between the organization and each individual. In this model the contribution of both
parties is needed when it comes to defining the objectives, tasks, standards, and other
contents of the processes illustrated on the performance management cycle. Especially
on the planning stage it is crucial to make sure the managers are able provide enough
support and guidance, so their employees are able to meet the goals (Armstrong, p. 21,
24, 2000).

Figure 3. Contribution of organization and individual to performance

Management (Armstrong, p. 21, 2000)
 14

Another model, created by Gary Cokins for his 2015 publication, illustrates the
conceptual framework slightly more precisely.

Figure 4. Performance Management Is Circulatory and Simultaneous (Cokins, p. 9,

2015)

This particular model is built to support value creation for a commercial organization. But
Cokins emphasizes that the added value is more of a result of the whole process, rather
than the ultimate goal:

Shareholder wealth creation is not a goal. It is a result (Cokins, p. 9, 2015).

Cokins’ model shares some key points with Armstrong’s performance management
cycle, as they are both intended to function on ongoing basis. Cokins describes his model
as circulatory flow of information and resource consumption similar to one’s heart and
blood-vessel system (Cokins, p. 10, 2015).

The starting point of this counterclockwise cycle is on “Customer Satisfaction”. According

to Cokins, it plays a crucial role for four main reasons:
• Customer retention (Cost of a new customer > cost of retaining a customer)
• Source of competitive advantage (Shifting from commodity like product
differentiation to value-adding service differentiation apart from the product or
standard service-line)
• Micro segmenting of customers (A focus on customers’ unique preferences
rather than mass selling)
• The Internet (Gives power from suppliers to customers and buyers)
(Cokins, p. 9, 2015)
 15

Like on Armstrong’s cycle, the other parts of the figure include the planning, monitoring
and feedback phases running in a form of a circle eventually leading back to the starting
point and therefore restarting the cycle.

.
 16

6 Employee engagement

The definition of employee engagement remains vague. Parts of the theory have also
been introduced under different frameworks throughout the history. Noteworthy
examples of these models are employee satisfaction and employee loyalty.

Employee engagement is the extent to which employees feel personally involved in the
success of the company (Smythe, 2007).

For the purposes of this thesis, it is important to differentiate employee engagement from
the other concepts mentioned above since they do not directly correlate with
engagement. Cook (2008) stated that individual’s long career might lead to loyalty
towards the organization and complete satisfaction to one’s work but due to the lack of
energy, innovation and drive, the customer experience is likely to suffer.

6.1 Implementation

Key point to a successful employee engagement program is a solid framework.

Organizations should acknowledge the main drivers creating engagement, which
sometimes can be difficult since these factors may be heavily affected by individual
preferences. There are some examples of suitable platforms for successful employee
engagement plan. However, there is no one right way to do it, since the results might be
affected by many variables such as the industry, and nature of the work being done.

It is safe to say that most companies should have a tailored employee engagement plan.
This plan then should focus on the main drivers of engagement.

6.1.1 Personality

Ideally the process starts already from recruiting. It is important to determine precisely
what kind of person is needed for the position and how they will fit into the existing
culture. Personality traits also play important role when it comes to engagement in
general.

“The big five personality traits” is a psychological personality theory developed by

multiple researchers. In 1936 Gordon Allport and Henry Odbert first formed a list of 4500
 17

terms relating to personality traits. Later In the 1940’s, Raymond Cattell and his
colleagues narrowed down Allport’s list to sixteen traits. Finally in the 1960’s Lewis
Goldberg, an American psychologist, summarized these traits into five primary factors
(Ackerman, 2021).

These five factors are illustrated below.

Extraversion

Conscientiousness Agreeableness

Personality

Openness to
Neuroticism
experience

Figure 5. The big five personality traits

The theory consists of five personality traits: openness to experience,

conscientiousness, extraversion, agreeableness, and neuroticism. A 2006 study by
Langelaan et al. measured extraversion and neuroticism, it was found out that
engagement was positively related to extraversion but negatively to neuroticism
(Langelaan et al., 2006). To further support the importance of personality when it comes
to engagement, in their 2008 study Wildermuth and Pauken found out that even under
imperfect management and working conditions, the engagement remained positive on
some employees (Wildermuth et al., 2008). These findings heavily imply that
engagement could be linked to personality on some level.
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6.1.2 Ten C’s of employee engagement

In their 2006 study “What engages employees the most or, The Ten C’s of employee
engagement”, Gerard H. Seijts and Dan Crim created ten dimensions that they thought
were crucial when it comes to increasing engagement. Seijts and Crim summarize these
Ten C’s of employee engagement as it follows:

Connect: Employees are often referred as the most important asset of the organization.
This obviously should transmit to the employees themselves meaning that leaders must
show that the value their employees. Different motivation measures are mentioned such
as profit sharing and work–life balance initiatives. A noteworthy side note is that fractured
relationship between managers and employees will cripple people’s performance at top
levels regardless of the substantial perks.

Career: This dimension emphasizes the goal setting and progression in one’s career.
Employees might want to do new things, so it is important to offer job rotation, push
people towards progression and make sure the tasks have enough duties and
responsibilities. Employees should be challenged while making sure that they have the
required tools and knowledge to reach goals, otherwise this might become a de-
motivating factor as well as increase the likelihood of stress, frustration, and
disengagement.

Clarity: The communication within the organization should be clear and transparent
enough for the employees to understand goals and visions set for the organization, units,
and teams. Understanding goals plays crucial role when it comes to success.

Convey: The leaders’ expectations towards employees should be clearly stated. In

addition, enough feedback should be provided, even on a daily basis rather than just
once a year. When it comes to mastering tasks and goal achievement, the leaders should
be the ones providing correct tools for the employees to do so.

Congratulate: Employees often feel that the feedback is immediate when it comes to
poor or below expectations performance, while topline performance gets far less
recognition. Successful leaders should aim to provide recognition and positive feedback
for well performing employees.
 19

Contribute: People want to see and know how their own contribution affects on the
success of the organization. Good leaders help their employees to realize how their work
is impacting the organization and contributing to its success.

Control: The seventh dimension implies that employees should feel they have control
over things directly affecting themselves. This can mean flexibility in working hours for
people with families or being included in the strategic decision making of the
organization. In addition, setting of goals and milestones should be mutually agreed, not
just dictated by the employer.

Collaborate: When employees feel that they have the trust, support and cooperation of
their peers working in the same team, they are able to outperform individuals and other
teams that might be lacking these key points. The building of successful team is on the
responsibility of the leader and successful leaders are also excellent team builders.
Team building is not only about choosing the best individuals as part of the team, but the
leader should also create an environment that fosters trust and collaboration. Surveys
indicate that being cared about by colleagues is a strong predictor of employee
engagement. That being said, the employees should be constantly pushed and
challenged to collaborate on organizational, departmental, and group goals, while
excluding individuals pursuing their self-interest.

Credibility: People want to be proud of their jobs. Maintenance of company’s reputation

and demonstration of ethical standards is on the leaders’ responsibility. As an example
of high commitment to an organization due to its reputation Seijts and Crim use Canadian
WestJet Airlines. 85 per cent of the employees own shares of the company, and this is
due to the high status of the company. Being one of the most admired organizations in
Canada, WestJet has received numerous awards including number one spot for best
corporate culture.

Confidence: Leaders should increase the level of confidence towards the company by
showing example of high ethical and performance standards. In addition, they should
seek for possible dis engagement on an ongoing basis, find the reasons behind that and
actively try to eliminate those reasons. Employee engagement can only be achieved and
sustained with the constant efforts of the management (Seijts et al., 2006).
 20

7 Performance management as engagement tool

The purpose of this thesis is to study the correlation between performance management
and employee engagement and how to positively affect one with another. So far, we
have gone through the key elements of both terms individually. In order to study how
performance management could be used to have a positive impact on employee
engagement we have to distinguish some key factors that are directly binding these
theories together.

To do so, we are going to look closer into Armstrong’s key concerns of performance
management, mentioned earlier on chapter 5.2, and map out how these elements
correlate with Seijts’ and Crim’s Ten C’s of employee engagement.

7.1 Correlation of the key elements

The idea behind this selection process is to determine how the use of performance
management on these main concerns will support Seijts’ and Crim’s dimensions and
therefore lead to increased engagement.

Below is an illustration how Armstrong’s four main concerns of performance

management correlate with the Ten C’s of employee engagement. As we can see, not
all ten dimensions are being used and this is due to the fact that some of the elements
do not have that significant level of correlation with Armstrong’s theory. The dimensions
that ended up having closest connection to the concerns of performance management
are Convey, Career, Collaborate, Clarity, Contribute, and Connect.
 21

Performance Employee Needs and Communication

improvement development expectations and involvement
•Convey •Career •Collaborate •Contribute
•Convey •Clarity •Collaborate
•Convey •Connect
•Convey

Table 1. Correlation between the ten C’s and main concerns of performance
management.

7.1.1 Performance improvement

It is quite self-explanatory that performance management aims to improve the

performance of individuals, teams, and organizations.

Performance can be improved directly through performance management. However, it

is apparent that employee engagement on itself could also work as a performance
improving factor.

In a 2014 journal “Determinants of employee engagement and their impact on employee

performance” Dr. Anitha J. studied the factors affecting on employee engagement and
its impact on employee performance.

On the first part of the study, they determined the following variables to measure: working
environment, leadership, team and co-worker relationship, training and career
development, compensation program, policies and procedures, workplace wellbeing and
employee engagement. As a result, they found out that all the variables above were
predictors of employee engagement. More precisely; 67.2 per cent of variance in
employee engagement was influenced by working environment, leadership, team and
co-worker relationship, training and career development, compensation program,
policies and procedures, and workplace wellbeing.

Next, they studied how the combined effect of the variables on employee engagement
correlates with employee performance. The analysis showed a 59.7 per cent influence
on employee performance by employee engagement.
 22

Figure 6. Impact of employee engagement on employee performance (Jagannathan,

2014)

When it comes to personal improvement, managers should encourage an individual to

formulate performance improvement and personal development plans. These plans are
then finalized and agreed together by the manager and the individual. These plans
should include clear objectives to be achieved by the individual with whatever support is
required from the manager (Armstrong, p. 32, 2000).

Some level of follow up is required to monitor how the agreed plans are being obeyed
and how has the performance progressed. Performance appraisals are often linked to
performance management and in some forms, they do play important role.

Appraisals are believed to enhance managerial and organizational performance

as well as positively contributing to employee motivation (Randell, 1989).

As mentioned earlier, Armstrong does not see the benefit of traditional annual
performance appraisals where the focus is on past performance. According to him
performance management focuses on future performance planning and improvement
rather than on retrospective performance appraisal (Armstrong, p. 12, 2000).
 23

However, what he emphasizes is performance reviews. These are especially important

since measuring performance is a crucial role of managers. Performance reviews open
the two-way communication channel between employees and managers and gives an
opportunity to answer the two fundamental questions: where have we got to? and where
are we going? (Armstrong, p. 70, 2000).

By seeking answer to these questions, the focus remains on both, past performance and
what is needed to perform better in the future.

Armstrong lists three main objectives for performance reviews: motivation, development,
and communication.

Motivation to provide positive feedback, recognition, praise, and opportunities for

growth; to clarify expectations; to empower people by encouraging them to take
control over their own performance and development.

Development to provide a basis for developing and broadening capabilities

relevant both to the current role and any future role that the employee may have
the potential to carry out. Note that development can be focused on the current
role, enabling people to enlarge and enrich the range of their responsibilities and
the skills they require, and to be rewarded accordingly. This aspect of role
development is even more important in flatter organizations, where career ladders
have shortened and where lateral progression is likely to be the best route forward.

Communication to serve as a two-way channel for communication about roles,

expectations (objectives and capability requirements), relationships, work
problems and aspirations (Armstrong, p. 70-71, 2000).

As we can see, performance improvement is quite closely linked to the convey dimension
of Seijts’ and Crim’s Ten C’s of employee engagement. The definition of the convey
dimension also shares a lot of key features with Armstrong’s performance management
cycle, displayed on chapter 5.2.1. By using these techniques, a manager would
strengthen the continuous two-way communication channel while making sure the
employees have the necessary tools to keep performing better in their given tasks.

7.1.2 Employee development

While performance improvement focuses more on improving already existing skills and
qualities, employee development concentrates on enabling employees to acquire new
sets of skills. These two terms are closely linked to each other and Armstrong states that
development is needed in order to achieve performance improvement.
 24

Performance improvement is not achievable unless there are effective processes

of continuous development (Armstrong, p. 7, 2000).

This statement is supported by a 2017 report “Sales Enablement Optimization Study” by

CSO Insights.

In this report they studied the impact an additional coaching could have on the sales
performance. The report compares the 2017 results on previous years study where the
training was arranged with lower budget. The training in general improved the win rates
significantly and additional budget improved the results even further (CSO Insights,
2017).

Figure 7. Coaching impact on win rates (Miller Heiman Group, 2017)

By enabling the personnel to develop in their work, the managers fulfill the convey
dimension of Seijts and Crim. However, development does not necessary only refer to
improvement of one’s skills in their current occupation and therefore career dimension
can be touched as well. By emphasizing the importance of communication and hearing
employees’ expectations and aspirations, the managers can offer new opportunities and
job rotation in order to keep their employees motivated and engaged.
 25

7.1.3 Needs and expectations, Communication and involvement

The importance of internal communication from employee’s perspective is undisputed as

it has been mentioned above several times as part of performance management.

In particular, employees are treated as partners in the enterprise whose interests are
respected, who have a voice on matters that concern them, and whose opinions are
sought and listened to. Performance management should respect the needs of
individuals and teams as well as those of the organization, recognizing that they will not
always coincide (Armstrong, p. 7, 2000).

However, improved communication could bring significant advantage to the

organizations as well.

In a 2009/2010 Communication ROI Study by Watson Wyatt Worldwide they studied the
link between effective communication and financial performance of 328 companies
representing 5 million employees. Key findings included 47 per cent higher total return
to shareholders with 28 per cent more expenditure per employee for highly effective
communicating companies (Watson Wyatt Worldwide, 2010).

The study also shows what effective communicating firms are more likely to do:

Figure 8. What effective communicating firms do (Watson Wyatt Worldwide, 2010)

The chart above illustrates that companies with effective communication are three times
more likely to train their managers to lead through change.
 26

Excellent programs of employee communications are based on the concepts of strategic

management, an integrated communication function, and the managerial role, and the
two-way symmetrical model of public relations (Grunig. p. 536, 1992).

With the help of proper communication and the monitoring and review phases from the
performance management cycle on chapter 5.2.1, employees are able to see how their
work is contributing to the organizational success.
 27

8 Conclusion

The preliminary study revealed that as concepts employee engagement and

performance management both lack precision when it comes to defining them. It was
apparent that rather than having one simple definition, they both are described more as
on-going processes functioning within the identified parameters.

Further into the study it became apparent that while performance management shares a
lot of features leading to employee engagement, it might be quite difficult to use it with
sole purpose of engaging employees. Engagement seems to be one of the benefits
organizations are able to gain through performance management systems alongside
improved communication, efficiency, productivity etc. And one can not be targeted
without affecting on the others as well.

Both terms have gained relative attention among HR professionals in past years and
without a doubt, organizations should continue to be open for implementing these
techniques into their strategy. Even though, some studies implied that not all employees
can be engaged to start with due to personality differences, that does not mean they and
their organizations would not benefit from performance management on other ways.
 28

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