6 Expert Ways to Integrate Performance Management and Talent Management
Few things in business are as important as having a talented and productive workforce. To make this a reality for your organization, two key HR concepts stand out from the crowd: performance management and talent management.
Whether you need clarity on the definition of each or are looking for best practices to combine them, this guide has you covered.
We offer a comprehensive breakdown of the differences and overlaps between talent management and performance management, complete with six best integration practices.
An added bonus?
Enjoy some eye-opening insights from leaders describing their approach to developing people to their true potential.
👨💼 What is talent management?
The term "talent" has been widely used in the English language since the 1800s but was initially used to describe people with a natural ability in arts and sports rather than in business.
The concept of talent management took off in the corporate world in 1998. It was popularized by McKinsey and Company, which released "The War for Talent" to describe how companies aggressively compete to hire the most talented people in the marketplace.
Now, companies perceive talent as "some combination of a sharp strategic mind, leadership ability, emotional maturity, communication skills, the ability to attract and inspire other talented people, entrepreneurial instincts, functional skills and the ability to deliver results," as noted by Michaels et al.
Talent is a significant corporate resource; harnessing it ensures your organization has a healthy pipeline of people to meet your strategic goals. Therefore, talent management involves creating processes to find, develop, retain, and reward your people.
📚 Check out our complete guide to talent management.
What are the key elements of talent management?
Talent management includes the following:
- Recruitment: attracting high-caliber applicants and keeping them engaged throughout the candidate journey.
- Onboarding: orienting new employees and providing them with the skills and tools they need to ramp up and become productive.
- L&D: providing employees with the proper training, upskilling, and leadership development opportunities to stay current and become better contributors.
- Performance management: setting goals, providing feedback, and assessing progress by creating a high-performance culture of continuous improvement.
- Rewards and recognition: rewarding employees with incentives to maintain engagement and keep morale high.
- Compensation and benefits: engaging employees with attractive salary and benefits packages.
- Deployment: identifying specific skills and roles needed and ensuring the right people are in the right positions at a given time. Deployment includes developing future leaders through succession planning.
- Retention: creating a culture of belonging, encouraging employee loyalty, and reducing turnover.
💪 Why is talent management critical?
J. Willard Marriott, entrepreneur and founder of the international hotel chain Marriott International once said, "Great companies are built by people who never stop thinking about ways to improve the business."
This is the crux of talent management. It's essential for:
- Achieving business objectives.
- Enabling organizational growth.
- Hiring top talent.
- Building a strong employer brand.
- Reducing turnover.
- Directing relevant skills to the right areas of your business.
🤯 Challenges and pitfalls in talent management
But no one said talent management was easy.
There's a constant stream of internal and external hurdles for Human Resources teams to leap over to execute a winning talent management strategy.
Some typical challenges include:
- Lack of direction: companies need stakeholder buy-in or a talent management budget to create a clear path and set of practices to manage their best people.
- Retention difficulties: competitors may poach your most valued people assets by offering compensation, benefits, or other opportunities you cannot match.
- No development investment: Companies without a development budget will struggle to offer strategic training using innovative methods in the flow of work.
- Restricted strategy: some companies confine talent management to potential leaders or successors rather than understanding that all people have talent and you must develop and nurture them equally.
🙌 Use these 25 best practices in employee retention to hang onto your top talent.
📈 What is performance management?
Performance management is a specific aspect of talent management that focuses on evaluating, monitoring, and developing the performance of employees. It sets expectations for performance output and defines criteria for measuring how well your employees meet their goals.
There are multiple approaches to performance management, including:
- Annual performance reviews: delivered by a manager to a direct report.
- 360-degree reviews: a holistic approach that collects feedback from peers, managers, direct reports, and business partners.
- Self-evaluations: employees take the reins by regularly assessing their own performance.
- Regular check-ins: allow employees to receive continuous feedback in 1:1 meetings or in the flow of work.
🕵️♀️ What are the key elements of performance management?
Whether you have daily performance conversations or save them for formal annual reviews, your management structure will involve some key components:
- Defining expectations: clarify the goal and expectations for performance. For example, a sales professional may have a quota for each cycle.
- Setting goals: reviewers and reviewees will work together to set goals. Use the SMART method to create specific, measurable, attainable, realistic, and time-bound goals.
- Gathering feedback: decide who can provide feedback about an employee's performance. In a 360 review, an employee may nominate certain colleagues or managers to participate in their feedback cycle.
- Analyzing feedback: review the input gathered, look for patterns, and consider how to use the guidance to develop goals or reinforce performance expectations.
- Course-correcting: use feedback to course-correct and influence the employee's behavior or performance. For example, the feedback may flag a weakness that requires some constructive (reinforcement) feedback to support an adjustment. Alternatively, the feedback may highlight employee skills in a new area, allowing you to redirect your L&D path accordingly.
- Rewarding outstanding performance: provide compensation or recognition for employees displaying extraordinary performance to drive productivity and engagement. For example, a strong performance review may lead to a promotion or transition to a higher salary band.
🎯 Want to learn how to set effective employee performance goals? Then, check out our guide, including 33 skill-based examples.
💪 Why is performance management important?
The benefits of having a performance management strategy commonly fall into three buckets, positively impacting employees, managers, and employers.
- Employees: performance management programs enable individual workers to achieve career growth by working towards their personal and professional goals.
- Managers: performance reviews allow managers to give constructive feedback, helping foster better relationships within their team. Heightened productivity and greater engagement also ensure the team functions at its best.
- Employers: by developing individual performance, employers can achieve their organizational goals resulting in increased profitability and business success.
🤯 Challenges and pitfalls in performance management
Performance management also has its fair share of obstacles on the path to success, including:
- Failing to assess performance objectively: bias can infiltrate reviews.
- Misalignment with other HR processes: making meaningful decisions about administrative actions like compensation can be challenging if performance management does not link to the rest of your HR processes.
- Feedback delays: timely and ongoing feedback is essential for performance management. Annual reviews aren't timely and can lead to skills gaps or performance issues.
- Lack of clear goals: without clear communication, managers and employees could struggle to focus on valuable objectives.
Tip: Don't confuse performance appraisals with performance management. Check out the key differences in our informative guide.
🔍 How does talent management differ from performance management?
Talent management and performance management are both integral to your organization's success. But there are glaring differences between how you plan and handle these crucial HR strategies.
Talent management begins with staffing and recruiting, while performance management processes focus on the continuous improvement of current employees.
Talent management looks at the long term, while performance management zooms into specific review cycles. But, of course, the caveat is that each of these individual review periods is like a puzzle piece that fits into the bigger picture of your employee's performance over time.
The primary goal of talent management is to optimize the organization's current and future personnel. On the other hand, performance management seeks to optimize the performance of existing individuals within the organization.
Talent management is typically a top-down strategy, while performance management is a two-way street between employer and employee.
🖇️ Why incorporate performance management with talent management?
Matthew Ramirez, CEO of Rephrasely, explains the value of merging performance with talent management for the best results:
"Talent management and performance management shouldn't operate in silos. These two have different functions, but they should work together to ensure that your company is always staffed with the right people and that those people are always performing at their best."
Let's investigate some of the top reasons for abolishing these silos to blend performance and talent management.
In his book, "Armstrong's Handbook of Performance Management: An Evidence-Based Guide to Performance Leadership," Michael Armstrong describes:
"Information for talent audits can be generated by a performance management system that helps to identify those with abilities and therefore, it is presumed, potential. This could be a standard system or, in addition, 360-degree feedback could be used to provide a detailed assessment of talent and development needs from different perspectives."
As you can see from this illustration, a performance process forms the foundation of talent management strategies. Without it, there would be no succession planning or understanding of future talent requirements. Continuously assessing performance through role-specific competencies is instrumental in the establishment of talent pools—the talent resources that are available within your organization.
Build a high-performance culture
In a high-performance culture, everyone strives to deliver results and improve. Performance management reinforces a culture of accountability by providing regular feedback and tracking progress toward goals.
➡️ Check out our comprehensive guide to establishing a high-performing culture from the ground up.
Improve employee satisfaction
Employees who are engaged and continuously challenged will have greater job satisfaction. The intertwining of performance and talent management ensures that employees have the resources and support to reach their career goals—and that they're recognized and rewarded when they do.
In a Nectar employee recognition survey, 81.9% of respondents stated they feel more engaged when their employer recognizes their contributions.
Create a system where employees have better chances of developing critical skills, and you'll notice higher retention rates.
LinkedIn's Workplace Learning report highlights that 93% of organizations are concerned about retaining talent and acknowledge that L&D opportunities are the #1 way to improve this.
Create a supportive workplace
Performance management will keep employees on track and hold them accountable. In contrast, talent management will forge strong relationships, trust, and mutual understanding in the workplace.
🏆 6 Best practices for integrating performance management and talent management
"Even if you have a separate head of learning and head of talent, their work will overlap in many ways. A holistic talent strategy includes talent acquisition, performance management, succession planning, career pathing, learning, employee engagement, and everything in between." Peter Attfield, Chief Talent and Learning Officer at Jardine Matheson.
Here are six best practices to maximize the natural overlap between these different areas.
1. Align talent management and performance management goals
Your talent team must move in the same direction as your performance reviewers. The overarching aim is to ensure everyone develops relevant skills and capabilities to support long-term organizational goals.
Lilian Chen, Co-founder and Chief Operating Officer of Bar None Games, explains how to align both strategies:
"This means developing a plan that not only rewards performance but also encourages learning and growth. This can be done by creating specific activities that help employees develop their skills and meet their goals, such as providing training and mentoring opportunities, creating career paths, and offering incentives for outstanding performance. It's important to ensure that the activities used to foster talent and performance management are aligned with the company's overall strategy for success."
2. Lean on data and analytics
Analytics is a major HR trend, and there's no doubt that number-crunching will inform your strategic talent decisions, along with identifying top performers, pinpointing specific development opportunities, and spotlighting successors for critical roles.
Matt Teifke, CEO of Teifke Real Estate, believes in investing in technology to support talent and performance management. He told us:
"Technology solutions such as HRIS, automated time tracking, and analytics software can provide an integrated view of employee performance data that can inform better decision-making. In addition to providing visibility into each employee's work, these tools can also help in tracking performance goals, identifying training needs, and monitoring employee development.
By leveraging technology to provide a comprehensive view of talent and performance data, organizations can better equip their HR teams with the information they need to make informed decisions."
3. Link performance management to career development
Maria Harutyunyan, a co-founder of Loopex Digital, explains how performance metrics enable leaders to accelerate individual career progression while tying into overall business performance objectives and future talent planning.
She told us:
"Being able to measure employee performance objectively and compare it over time enables our company to better identify underlying skill sets, attitudes, or other aspects of an individual's work which might need further development or improvement.
Additionally, tracking employee growth in this way provides a useful benchmark against which new hires or promotions can be evaluated. Overall, this will ensure better outcomes from every angle—from improved employee morale to increased productivity."
➡️ Align your employees with company goals to skyrocket performance using 14 effective steps.
4. Foster a culture of ongoing feedback and support
Top leaders like Antreas Koutis, Administrative Manager of Financer, understand that clear and timely communication is a must-have for any organization looking to integrate talent and performance management.
He recounts his experience of doing this:
"As a manager, I have seen firsthand the value of staying actively involved and regularly connecting with employees to ensure their skills are up-to-date and they're ready to take on upcoming performance goals.
Effective communication can also identify gaps between desired goals and results and assess training workshops that need to be scheduled or alternate paths that could be taken."
➡️ Learn how to build a winning continuous employee feedback process in 10 easy steps.
5. Build a culture of continuous learning and development
By developing a learning culture, employees are more likely to be engaged, motivated, and committed to the organization's success.
Mark Pierce, CEO of Cloud Peak Law Group, decodes how to encourage employees to participate in their professional development actively.
"This can involve providing employees with the tools, resources, and opportunities to assess their own skills, strengths, and development needs.
Employees can use this information to create individual development plans that align with their goals and the organization's goals."
This is a popular approach, with Dianne Crampton, President of TIGERS Success Series, outlining how offering real-world initiatives can further boost talent development:
"The perfect storm for talent management and performance management is to train employees. It seems obvious; however, understanding learning curves and applying post-training strategies is the key.
Boosting training transfer with an application strategy gives organizations exceptional ROI on their training investments, which also improves operations. Give trainees a real-world initiative to work on in a well-run transfer group."
The key is to open up development opportunities to all. Invest in the right tools, build enriching career pathways, and watch your teams thrive.
➡️ Check out exactly how every Google employee has the chance to flourish in our compelling case study of employee performance at Google.
6. Invest in employee engagement
Encouraging employees to participate in important decisions related to performance and development relies on soliciting their feedback.
Asking for their advice and insights can foster greater support and overall buy-in.
Again, it's about encouraging your workforce to want to progress.
Charlie Southwell, Marketing Director at Let's Talk Talent, describes the virtuous circle of driving high performance and unlocking potential in people already engaged:
"Talent management does not work without performance management (and vice versa). As businesses, we need to get, keep, and grow brilliant people, and as HR leaders, that is our role. So, making sure people know what is expected of them is as important as how you measure their performance.
Keep your approach simple, consistent, and fair to create an environment where people can flourish and be themselves. Bringing your whole self to work, and all that comes with it—the flexibility to adapt to family needs, career development opportunities, having challenging conversations, etc.—is the cornerstone of great talent management."
➡️ Address these 13 drivers of employee engagement to attract and retain top talent.
➡️ Are you still struggling to create an effective performance management system? Discover best practices and five real-world examples.
➡️ Enable your people with Zavvy
Zavvy provides a suite of tools to enable performance and talent management in your organization.
Our technology simplifies complex HR processes and helps you gain visibility into employee performance, development, and engagement. Here are some essential features of our software that will be a game-changer for your team:
- ⚖️ Performance reviews: run best-in-class 360 performance appraisals to gain granular people insights and strategically develop your workforce.
- 🧭 Career pathing: build clarity around how your employees can progress within your organization. Create career frameworks and meaningful pathways between roles.
- 🌱 Employee development: cement your development process by coaching your employees to advance in their careers. Define role-specific competencies and provide transparency into promotions and lateral opportunities.
- 🔁 360 feedback: ditch the appraisal monologue and open up multiway performance conversations by collecting rich and informative input from various executives, managers, peers, and direct reports.
➡️ Ready to make performance management integral to your talent management process? Book a free demo and take Zavvy for a spin today.
Still scratching your head? We've rounded up answers to the most common performance and talent management questions below.
Is performance management the same as talent management?
No. Performance management is the process of assessing and developing an employee's capabilities and performance against specific goals, objectives, or standards. Talent management is an overarching strategy that includes performance management alongside other aspects of the employee lifecycle, like recruitment, L&D, retention, engagement, and more.
Is performance management part of talent management?
Yes, performance management is a key part of talent management. By assessing how well an employee is doing and setting individual goals to improve their performance, you're effectively supporting your talent and enabling their progression within your organization.
What distinguishes performance management from talent management?
Performance management and talent management are two terms that HR pros shouldn't use interchangeably. Performance evaluations and assessments are just one aspect of talent management.