Unlocking employee motivation: key takeaways from McKinsey's latest survey

McKinsey’s latest survey on performance management uncovers key factors that genuinely motivate employees, offering valuable guidance for businesses seeking to refine their performance strategies. The survey of over 1,000 workers emphasises the importance of a cohesive and transparent framework, showing that both what you do and how you do it significantly influence employee motivation.

Let’s explore how McKinsey’s findings align with current workplace trends and highlight the role of a coaching management style in enhancing employee engagement.

The “what” and “how” of performance management

A central insight from McKinsey’s survey is the importance of consistency and clarity in performance management. Employees are most motivated when their goals are measurable, aligned with company priorities, and when the performance management framework they work within is coherent and easily understood. This represents the “what” of performance management—setting clear objectives and ensuring they are consistently applied across the organisation.

Equally crucial is the “how.” It’s not just about setting goals but involving employees in the process, ensuring they understand how their individual contributions connect to broader organisational goals. This participatory approach fosters a sense of ownership and fairness, which is vital for maintaining motivation. The survey highlights that employees are more engaged when their goals are regularly updated to reflect the evolving priorities of the business.

The relational impact of coaching in management

A standout aspect of McKinsey’s data-backed view is the critical role that skilled managers play in performance reviews. The effectiveness of performance management isn’t merely a matter of the tools or scales used, but the competence of those delivering feedback. This is where a coaching management style becomes particularly valuable - not just in terms of performance and goal setting, but in nurturing the relationships that underpin effective management.

A coaching approach is relational at its core. It focuses on building trust, understanding, and open communication between managers and employees. This relational aspect goes beyond simply setting and reviewing goals; it’s about creating a supportive environment where employees feel genuinely valued and understood. When managers act as coaches, they foster a two-way dialogue that encourages employees to share their challenges, aspirations, and feedback, leading to a more engaged and motivated workforce.

The survey clearly shows that employees who engage in ongoing development discussions are far more motivated than those who do not. This stresses the effectiveness of the coaching management style, which prioritises regular, meaningful interactions over sporadic, formal reviews. By investing in manager training to develop these relational coaching skills, organisations can significantly enhance their performance management systems.

The growing importance of non-financial rewards

While financial rewards have long been a cornerstone of performance management, McKinsey’s findings highlight the increasing relevance of non-financial incentives. In today’s work environment, where work–life balance and personal development are becoming paramount, non-financial rewards such as professional development opportunities, increased autonomy, and public recognition are emerging as powerful motivators.

The survey finds that employees are more likely to feel motivated when non-financial rewards are part of their organisation’s performance management strategy. These rewards tap into intrinsic motivators - such as the desire for mastery, autonomy, and purpose - which are key drivers of sustained engagement and performance.

A holistic approach to performance management

McKinsey’s report serves as an important reminder at a time when many organisations are grappling with going back to the office mandates or finessing hybrid working agreements, that performance management is not just about setting targets and measuring outcomes. It’s about building a cohesive system where goals are clearly defined, regularly updated, and aligned with organisational priorities. It’s also about recognising the importance of how these goals are communicated and reviewed, and the vital role that skilled, coaching-oriented managers play in this process.

As businesses navigate economic uncertainty and evolving workplace norms, adopting a coaching management style and integrating non-financial rewards can help foster a more motivated, engaged and high-performing workforce. By focusing on both the “what” and the “how” of performance management, companies can ensure they are not just managing performance but truly inspiring it.