Organizations have recently considered more significant changes to performance management, but it is important to understand what exactly motivates employees, according to an Aug. 21 article from McKinsey.
McKinsey's 2024 performance management survey includes responses gathered from late 2023 to early 2024; it included about 1,200 employees globally. It also included those working in healthcare organizations, a spokesperson confirmed, along with automotive, technology and defense industries.
Respondents ranked their level of agreement with a variety of performance management statements, such as "The way my company conducts performance reviews motivates me to perform better," the report said.
Here are four key takeaways from McKinsey's survey.
1. Performance management frameworks should be "consistent and clearly articulated."
Respondents viewed systems that were unclear and difficult to understand were perceived as less motivating and fair. Using a connected framework throughout goal setting, feedback and awards were the most motivating tools for performance, the results found.
2. Goals should be measurable and linked to the organization's priorities.
Of the respondents, 72% said goal setting was a strong motivator of performance. Aside from being motivated by goals that tied to the organization's goals, survey results also showed that employees were more motivated when their goals felt measurable.
Additionally, 44% of respondents said performance goals that included a mix of individual and team goals increased motivation. Similarly, 40% said goals linked to the company goals were motivating.
3. Performance reviews given by skilled managers were motivating.
Survey respondents showed little difference in motivation felt from numerical rating scales compared to word-based rating scales, such as "underperforming" or "exceeds expectations."
Instead, 43% said performance reviews increase motivation when "manager or feedback provider is equipped with sufficient skills or capabilities."
4. Financial rewards are not the only motivational tools that make a difference.
More than half of respondents said financial rewards combined with nonfinancial rewards were motivating. Forty-four percent said company performance is improved when nonfinancial and financial rewards are combined.