Performance Management vs. Talent Management: How to Use Both for Success Reviews and Employee Retention

A recent survey of more than 30,000 workers worldwide indicates that nearly 41% of the participants plan to switch or quit their professions. In the UK, 38% of the surveyed employees plan to quit work in six months or a year. And in the US, the Department of Labor indicates that more than four million people resigned from their jobs voluntarily.

talent vs performance management

According to the research, the primary reason why most employees quit is the company’s management system. To keep up and ensure better employee retention, you need to pay more attention to your talent and performance management strategies. When done right, these can save you thousands of dollars in unnecessary talent acquisition costs. In fact, good retention can maximize an organization’s profits by up to 4 times.

First, it’s important to understand the difference between performance vs. talent management. In this article, we will highlight what performance and talent management entails, their differences, and how you can use the two to get the most human capital management benefits in your businesses.

Keep reading to get an in-depth insight into performance and talent management difference.

Talent Management (TM): General Definition

Talent management encompasses the whole employee lifecycle, starting from recruiting, learning, retention, to promotion. An effective talent management system mitigates attrition by ensuring the business has access to an adequate supply of skilled and dependable talents.

Moreover, talent management can help you develop a team-centric management structure that guarantees current and long-term business success.

Performance Management (PM): General Definition

Performance management enhances a systematic dialogue with employees to help them set goals that are in line with those of the organization. HR software for performance management helps communicate business goals effectively across the board, facilitate change, enhance the right administrative roles, and limit lawsuits by employees.

Managers can also get a better insight into every employee based on performance reviews. Organizations can then identify high-performance employees and reward them accordingly to realize overarching business goals.

Performance Management vs. Talent Management: What’s the Difference?

Before we look into the variations of talent management vs. performance management, it’s imperative to note that the latter is not the same as performance appraisal. In performance appraisal, human resources are in charge of evaluating employee strengths and weaknesses every year, with only one-time feedback. On the other hand, managers spearhead performance management with ongoing, real-time feedback.

Here is a table highlighting more differences between performance management and appraisal:

Performance ManagementPerformance Appraisal
Dialogue assessmentTop-down assessment
Ongoing/continuousAnnual or semi-annual
Qualitative and quantitative approachesQuantitative approach
More engagement with employeesMore documentation
Run by managersRun by HR departments

Now, let’s look into the differences between performance management and talent management. They vary in the following ways:

  • Approach

Although talent vs. performance management strategies both focus on a common, overarching organizational goal — human capital management — their approaches are different. Performance management focuses on delivering present outcomes, while talent management focuses on future delivery.

  • Function

A talent management system discovers valuable talents and qualifications among employees to deploy them to the right department or roles. On the other hand, performance management evaluates what keeps employees from performing better and takes appropriate actions to foster optimal performance across the board.

  • Goal

The main goal of talent management is to retain profitable and better-performing employees. Businesses can achieve this through servant leadership, open dialogues with workers, competitive compensation, and recognition. Conversely, performance management targets employee goal setting and accountability plans.

The Benefits of Leveraging Talent and Performance Management Tools

Besides customers, employees are the most critical assets of any organization. Both talent and performance management tools help businesses manage these assets and sustain a competitive edge in volatile job market trends. For instance, we are moving into an era where finding skilled talents to fill a job position is pretty daunting. With the feedback from your talent management and performance management tools, you’ll know when to contact resourceful companies that offer IT staff augmentation services to supplement your talent supply.

Newxel is a go-to outstaffing company with years of experience in helping enterprise businesses and small startups build an offshore R&D center in Ukraine. We do the tricky part of managing and assessing the hired talents for you as you focus on the other critical areas of improving your business.

Here are the benefits of performance management and talent management tools/ strategies.

1. Talent Management

Talent management can help fine-tune your human capital through:

  • Strategic Recruitment

Strategic hiring entails aligning employee onboarding with the long-term goals of your business. Talent management tools give you a futuristic insight into pipeline projects to allow you to make informed decisions before recruiting. For instance, you can spot a talent gap in advance and plan for hiring instead of a last-minute scuffle. Even better, you’ll weigh your options of hiring permanent employees against a contingent workforce.

  • Multi-skill Building

Talent management helps your team build their skills around many roles. For instance, your manager can create a work rotation strategy to diversify the skills sets of every team member. Look at this as a career development opportunity that helps your team learn secondary skills. In return, you build a motivated team with better billability. Gartner notes that organizations face up to 40% attrition rates if they don’t implement career development strategies for their teams.

  • Succession Planning

As your business grows, the managerial staff will move to more senior positions. You might also need to introduce new departments when adapting to change. A talent management tool gives you overarching visibility of all your team members, geographical barriers notwithstanding. That way, you can always distribute work without relying on a single individual during succession. You’ll also mitigate any losses when critical talents quit working for your company.

  • Enhancing Productivity

The main goal of talent management is to identify and nurture valuable skills set among employees to enhance overall productivity and employee engagement. Reputable talent management software may include workforce planning tools to help assign or schedule roles based on employee interests and best abilities. An insight from Gallup suggests that utilizing employee talents through work planning tools can increase their engagement levels by up to six times.

2. Performance Management 

Performance management helps with:

  • Spotting Training Loops

The best thing about leveraging management talent tools is that employees and employers start on the same page. Everyone communicates their goals and vision openly. With that strategy in place, you can spot any training gaps that can help enhance skills across the board. Your team will also be vocal on the training needs they deem fit to advance their career.

  • Highlighting Growth Opportunities 

Talent growth comes through the combined efforts of both the staff and managerial team. With a performance management tool, you can engage employees directly and let them express how they want to grow in the organization.

  • Identifying Potential Risks

Performance management tools give you a better insight into performing and underperforming employees. Many cases, such as mental health and family, can undermine employee motivation, triggering underperformance. These are huge potential risks that can derail business goals. In that case, you can resolve the issue through open communication instead of dismissing the employee based on data. Remember, you can’t afford to lose valuable talent simply because they are going through a difficult phase in life.

Generally, aligning performance management to talent management helps your organization formulate clear objectives and expectations while also retaining the best talents. In other words, your team will know what the organization expects from them and vice versa. In the long haul, you run a business confidently, knowing that everyone is contributing to their roles as expected.

Consider Newxel Your Trusted Partner

Whether you are looking for offshore software development services or to build an R&D center, Newxel is your go-to partner for IT staff augmentation in Ukraine. Let us help you build and manage offshore teams in the country. As your offshore partner, our team will help you with recruitment, branded office space, legal & finance services, human capital management, and performance management processes, among many other related services.

We treat your business as our own by shortlisting only dependable professionals for your software project. We stay with you right from the start to the end, lifting the burden of micromanaging offshore teams from your shoulders. Other services that we offer include office space branding, legal & financial insights, global meetings maintenance, and own IT infrastructure integration.

Reach out to our team today and explore the wider software development talent pool. In Ukraine outsourcing rates are more than affordable so that you can rest assured you will find great professionals without breaking the bank.

Final Thoughts

Averagely, multinationals spend up to $1,252 per year to nurture and develop a single talent, while startups incur between $544 and $1,105. Businesses can significantly cut these costs by employing the right talent management and performance management strategies. That way, you can tell the right training areas to invest in without overstretching your budget.

A quick recap, talent management entails a broader set of strategies that increase employee turnover to stimulate growth. On the other hand, performance management assesses employee contributions against the set goals and objectives of the organization. Talent management and performance management tools can also help you enhance employee experience in many ways. For instance, getting everyone to set their performance goals ensures that the whole team contributes to the overall business growth. Most importantly, these tools enhance strategic talent acquisition and retention.


Is talent management the same as performance management?
No, there is a performance and talent management difference. The former greatly involves the managerial team while the latter touches on the broader human resource department. Nevertheless, both systems work towards a common business goal of driving success.
Is performance management under talent management?
Generally, performance management falls under talent management because human capital is a predominant factor driving performance analysis in any organization.
How Do I Leverage Talent and Performance Management?
You can leverage both talent management and performance management tools by defining the goals and vision of your startup. After that, attract the right people and onboard them before rolling out learning strategies. Finally, implement performance appraisals before strategizing how to retain the best talents or succession plans.

Contact Us

Read also
software development teams in Portugal
Why Hire Software Development Teams In Portugal Portugal is fast becoming a popular destination for hiring excellent software development teams due to its strong talent pool, competitive prices, and...
AI in project management
How AI is Transforming Project Management According to a 2023 report from, approximately 21% of project managers are already leveraging the power of artificial intelligence to maximize...
Legal and Compliance Considerations in IT Staff Augmentation
Navigating Legal and Compliance Considerations in IT Staff Augmentation The IT talent market is seeing an increase in demand for specialized talent. To close the gap, businesses are increasingly resorting to IT staff augmentation...
Book a Call