Performance Management As a Strategic Advantage

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Imagine keeping your best talent and sending under-performers to your competition (who may pay them more than you did). In this knowledge and innovation economy, managing turnover becomes a real strategic advantage.

A CPHR is an expert in the systemic causes of turnover. They understand that when a high performer leaves, it can stall the performance of your entire organization. But when low performers stay too long, it creates poor engagement, decreases productivity and increases the odds that your best talent will leave.

Some turnover is detrimental and expensive, some is not. According to Manulife Financial, losing and replacing a high performing employee can cost you up to 40% of their salary. Keeping an underperformer can cost significantly more.

Functional turnover applies to the rate at which low performers quit. It assumes that the departure of poor-performing individuals will improve (or at least not damage) organizational performance.

Dysfunctional turnover applies to high performers’ quit rates. It assumes that the departure of high-performing individuals will damage the organization and its productivity.

By implementing performance management and a total rewards program, your CPHR can work with you to develop functional turnover and create a workplace environment where your best talent chooses to stay.

Studies have proven that high performers want to work in a high-performance culture. They want to contribute, be productive and to stay challenged in a culture that rewards them for meeting high expectations. On the flip side of the coin, low performers tend to voluntarily leave these types of cultures.

To encourage and keep high performers and have low performers leave voluntarily, an organization must focus on programs that define and set employer’s expectations. Most effective HR programs can be divided into two major groups:

  1. Inducements and investments (reward programs): this includes training, pay rates, benefits, job security and procedures.
  2. Employer expectations (performance programs): this includes individual pay for performance systems, as well as employee monitoring and performance appraisals with the goals of raising overall performance levels and sorting the workforce based on performance levels.

These programs help create a positive, healthy turnover for low performers and improve retention rates for high performers. However, much of the programs’ success depends on how much employers are willing to invest in them.

Many employers fall into the trap of being underinvested or overinvested in their performance management programs. Underinvested employers place high expectations on individuals but offer low levels of inducements – causing high performers to question why they bother.

Overinvested employers offer high levels of inducements attached to little performance expectation. This create golden handcuffs, where good and poor performing employees alike have little reason to leave, reducing overall turnover and decreasing the value of your investment.

The solution is in knowing which HR programs impact the retention of high performers while ensuring the proper resources get applied to addressing the issue of dysfunctional turnover. A CPHR can help you strike the right balance.

Will more rewards reduce turnover?

Research has shown that high inducements, such as rewards programs, keep both high performers and low performers loyal (perhaps too loyal) to an organization. However, lower inducements and high performance expectations encourage poor-performing employees to leave. Another way to look at it is that when an employer emphasizes performance expectation-enhancing practices over rewards, their best talent tends to stick around longer.

Good performers really want two things from you. One, they want better opportunities to achieve, thereby earning financial rewards, validation and other valuable recognition in relation to their performance. And two, they want a sense that their goals are attainable, meaning that they are productive in their work and better able to get things done.

Are your top people getting what they need?

If you are ready to improve your company’s productivity by weeding out low performers and rewarding high performers, you must start by challenging what you know about performance management.

A CPHR can help you set high but attainable expectations for your people and choose purposeful programs that will reward high performers with incentives while further challenging them to achieve new goals. When an employee feels challenged, their productivity, along with their perceived value of the work and the desire to continue reaching new levels of success increases. In this type of dynamic culture, most low performers will self-select the option to show themselves the door.

Retaining the right people for all the right reasons requires an investment of another kind: a strategic, HR investment. Looking to strengthen your team and maximize performance? Ask a CPHR.