Stronger performance management linked to productivity gains, WTW finds

Organisations that roll out performance optimisation programmes can significantly increase workforce productivity, according to a global survey by WTW.

More than 400 leaders from organisations around the world were surveyed by WTW, with a focus on a central topic: performance management. The key finding: almost half of leaders said productivity could increase by at least 10% if the performance management process were optimised.

So, how can organisations achieve this? The survey identified four key areas: AI, skills development, simplification, and managerial support.

Just over one-third (37%) of organisations currently use AI as part of their performance management process. According to the study, the most common applications of AI are in goal setting (44%) and development planning (40%), followed by performance reviews (37%) and continuous feedback and coaching (35%).

Meanwhile, nearly half of organisations (46%) are not actively working on improving skills related to their performance management process. Key areas identified for improvement include learning, development and career growth (78%), goal setting (40%), and promotion decisions (29%).

Many organisations also have opportunities to simplify and improve fairness and differentiation in their performance ratings. Currently, about half (45%) use a five-point rating scale, with most of the remainder using a three- or four-point scale. However, more than half (54%) of organisations have either already changed their rating scale or are considering doing so.

“Optimising performance management involves more than a systems upgrade. By optimising how the system is used, driving the true meaning of performance, and ensuring fair practices, companies can reap significant rewards in productivity as well as employee engagement,” said Thom Janssen, Director of Employee Experience at WTW.

Another challenge lies in the role of managers. Although manager feedback is the most commonly used data source in the evaluation process, only 20% of organisations say their managers are effective at providing coaching and feedback. And while most organisations use goal cascades to set objectives, challenges remain around manager capability in goal setting, alignment and communication, and maintaining goal relevance throughout the year.

Commenting on the report’s findings, Roman Weidlich, Practice Leader for Work, Rewards and Career at WTW, said: “With an ever-increasing focus on productivity, getting performance management right is an opportunity hidden in plain sight. Companies are starting to use AI to increase efficiency, improve the quality of outcomes, and enhance both the employee and manager experience.”