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The Impact of Goal Setting on Employee Performance

By Harini Sridharan
Updated April 29, 2022
7 minute read

One of the most common barriers to high performance is the disconnect between the business strategy and the people who carry it out. If employees can’t see how their work drives the business forward, they risk disengaging and straying farther from their potential. But you can leverage the impact of goal setting on employee performance to drive better business results at your company.

Performance enablement bridges that gap by aligning business goals with the workforce’s day-to-day performance.

To close the loop between people, strategy, and results, your workforce needs to see how their daily contributions move the business forward. With a greater sense of purpose, employees will feel inspired to achieve more and to perform better.

Here’s how to use goal setting processes to drive employee performance and to enable people at your company to achieve their potential.

What Is Performance Enablement?

Traditional performance management looks backward and is limited in scope. Simply managing performance means you’re being transactional rather than aspirational or strategic. We need a model that potential and leaves room for growth potential and actively promotes it.

Performance enablement is the new performance management. It’s a model of frequent feedback designed to help employees stay in the loop on business priorities so they can become strategic thinkers. Enabling performance, instead of managing it, gives employees the resources and desire to rise above the day to day and work toward a greater, strategic purpose.

When you combine performance enablement with strategic goal setting, you can unlock your workforce’s full potential.

The Intersection of Strategic Goal Setting and Performance Enablement

Strategic goal setting identifies the business’s priorities for the coming months and years. This process intersects with performance enablement by linking business priorities to individual employee goals.

Here’s how these two concepts intersect to drive a more effective process of employee goal setting and achievement.

Collaborate to Set Goals That Inspire

In a performance enablement model, employees should be able to see how their performance affects strategic goals. When they know the direction they’re going in and the purpose of their tasks, they can execute more effectively. One essential way to help employees see their purpose is bring them into the goal setting process.

Employees and managers can collaborate to set effective goals that drive the business strategy forward. Have managers share the business’s priorities with their reports during team meetings. Provide some suggestions for how the team, as a group and individuals, and can set goals that move the needle on those priorities.

In doing so, leave room for employees to brainstorm, too, as they have the best understanding of what they can contribute and of the tasks and skills associated with their role. When employees understand where the business is trying to go, they can collaborate in identifying objectives that they can own.

With a straight line of sight to the business plan and a clear understanding of their role in moving business priorities forward, employees can set goals that inspire progressive action. Let them find their inspiration by participating alongside their managers in the goal-setting process.

Give More Constructive Feedback in the Flow of Work

Performance enablement relies on frequent feedback to help employees remain focused on their goals. Frequent conversations with managers will reinforce the connection between daily work and business priorities. Setting clear goals from the beginning will ensure that real-time feedback in the flow of work is targeted and relevant to business priorities.

With clear, business-aligned goals to work toward, it’s easier for managers to assess each employee’s progress within day-to-day work. Managers will be able to see where employees are struggling most and offer better, more actionable feedback.

Managers can identify and make a plan to help employees overcome their problem areas. As an example, a recruiter could take ownership of an objective like building out employer brand awareness through social channels. For such recruiters who consistently fail to drive engagement with potential employees, their manager plays an important role in helping them to step back and revise their plan to improve engagement.

This process supports greater workforce agility because, as managers offer feedback, employees can experiment with different ways of meeting goals through their daily tasks.

Offer Actionable Performance Appraisals

Goal setting processes that connect employees to business priorities come full circle in performance appraisals. Although the bulk of performance enablement occurs in frequent feedback conversations within the flow of work, it’s still important to maintain formal performance appraisals throughout the year.

Performance appraisals in a performance enablement model are not your standard annual review. The traditional annual performance review process looks backward, usually at what an employee did wrong, instead of looking forward to help employees achieve their potential. Traditional appraisals often lead employees to feel like they’re underperforming, putting their future engagement at risk.

In a performance enablement model, appraisals are designed to benchmark where the employee landed with regards to their goals, as well as help them keep going in the right direction. Formal appraisals should occur on a quarterly basis. Managers and employees briefly look back together to determine where the employee is already thriving and where their greatest opportunities for growth are.

Typically, depending on the structure of your goal setting process, performance appraisals will coincide with setting goals for the next quarter. Train managers to use formal appraisals as an opportunity to set effective future goals and foster better performance with actionable feedback.

3 Benefits of Employee Goal Setting for Better Performance

The impact of goal setting on employee performance comes down to producing better results for your business, especially for your talent strategy. When employees can see the goal setting process in action and participate in it themselves, they become more strategic in driving the business forward.

Here are some of the benefits of employee goal setting for your talent strategy.

Employees Become Strategic Thinkers

When employees can see their role in driving business results, they can take more control over their performance. Knowing what they’re working toward helps them become better performers in their daily tasks. Train managers to reinforce this important connection between daily tasks and final business results.

If you work in a manufacturing or other production facility, for example, make sure employees at each stage of production understand how their part affects the whole. Or, for example, help your customer service agents see how their daily interactions with customers influence Net Promoter Score.

When employees have a greater understanding of their purpose in the larger business context, they’ll increase their autonomy and begin to think more strategically. Employees should feel empowered to make suggestions for process improvements that will help them achieve their goals faster and at higher quality.

When employees begin to think more like business leaders, your workforce will become more agile and innovative, giving you a huge edge over your competitors.

Employee Engagement Goes Up

Historically, employee engagement has been one of the hardest talent initiatives for HR leaders to achieve. Interestingly, engagement initially rose during COVID-19, continuing a pre-pandemic trend, and peaked at 36% in the first half of 2021 before declining to 34%. When many companies shifted to remote work at the beginning of the pandemic, they were forced to overcommunicate expectations to keep employees on track. That helped employees increase autonomy, which likely drove higher engagement.

When employees have clear goals and expectations, they’re more likely to feel engaged in their work. Thinking like a business leader or owner prompts employees to anticipate problems that could affect the final result. They’ll be more aware of the way work is done, and they may even begin questioning and refining legacy processes.

That level of investment drives engagement in the work. Employees will begin to see their colleagues and managers as partners working toward a shared purpose. When employees participate in goal setting activities and have a clear line of sight to the business, higher engagement will permeate and drive your company culture for the long term.

Team Members Execute Your Strategic Plan

Employee goals, aligned with strategic business priorities, empower the workforce to carry out your business plan with greater intentionality.

When employees understand the purpose of their performance in relation to the business plan, their performance will become more targeted. Even the most basic of daily tasks can be improved when an employee knows what they’re working toward. And when you apply that to the big-ticket items that drive aspirational goals, you can unleash employee potential through enhanced purpose.

A greater strategic purpose will drive better performance overall for your organization, helping you to achieve even your most ambitious goals.

How to Leverage Organizational Goals for Professional Development

Employee goal setting processes don’t just support achieving business goals. Working toward aligned business objectives gives employees opportunities for personal growth, too. Learning on the job is one of the most effective learning styles and can drive better professional development, which improves employee performance.

Here’s how to use goal setting to enhance your learning and development initiatives.

Taking Professional Development to the Next Level

When employees can see where the business wants to go and the role they play in getting there, they can take more control over their professional development. A greater investment in professional development will improve engagement and drive better performance across the company.

To empower professional development while maintaining your top performers, you need to demonstrate opportunities for mobility within the company. Goal alignment software can drive that home by making the organizational chart more visible to the workforce. A transparent goal-setting process makes it easier for employees to see the types of roles and skills needed, as well as where they’re located within the workforce.

With a better understanding of their options for internal mobility, employees can decide where they want to go and collaborate with their managers to make it happen.

Conversations about professional development and growth can be incorporated into frequent feedback between managers and employees. A collaborative performance enablement model encourages constructive, action-oriented performance conversations. In this model, employees are more likely to point out their weaknesses and identify opportunities for professional development.

Aligning Performance Goals With Development Goals

The goal-setting process is an excellent opportunity for managers and employees to collaborate on professional development. As you set the next round of goals for your business, encourage managers to help employees set stretch goals that close skills gaps.

Each employee should set at least one stretch goal per quarter. Stretch goals are ambitious and typically involve learning a new skill or strengthening a skill that’s lacking. “Skills” in this context might refer to technical skills, such as learning a new coding language, or transferable skills, such as taking on project leadership within the team.

Achieving performance goals offers an excellent opportunity for on-the-job learning, helping employees move the business forward along with their own development.

Helping Employees Reach Their Goals

Aligning professional goals with business goals gives employees extra motivation to succeed. Every employee at your company should have a customized professional development plan to help them achieve their goals. With a comprehensive, tailored professional development plan, employees can leverage performance goals to reach their full potential.

Have managers incorporate professional development into the performance enablement process so that every employee feels like they’re moving forward. This helps you retain top talent and drives better business results.

Closing the Loop Through Effective Employee Goal Setting

You can’t drive business results without first connecting your people with your business strategy. The best way to do that is by translating your business strategy into manageable goals for employees to achieve in their daily performance. With a clear line of sight from their goals up to the executive suite, employees can see what they’re working toward, helping them prioritize their own tasks more effectively.

By harnessing the impact of goal setting on employee performance, you can unlock your workforce’s true potential. Carrying out transparent goals through a performance enablement model will lead to sustainable improvement in performance, engagement, and professional growth for your workforce.

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