Almost half of global organizations say employee productivity would increase by at least 10 per cent if their performance management process was optimized, according to a new survey by WTW.
The survey, which polled nearly 500 employers, found while their employees expect clear goals and priorities, regular feedback, fair ratings and strong ties to rewards, just 39 per cent of these organizations said their performance management process is effective at delivering on these expectations.
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Although manager feedback is the most commonly used source of data in the evaluation process, just 20 per cent of organizations said managers are effective at providing coaching and feedback to employees. While most organizations use goal cascades to set goals, challenges remain around manager capability to help set goals, alignment and communication and keeping goals relevant throughout the year.
“Managers often lack the training and tools needed to have difficult conversations and deliver honest feedback, which limits the effectiveness of performance management,” said Kristy McClellan, director of work and rewards at WTW, in a press release. “Companies are starting to use [artificial intelligence] to increase efficiency, improve the quality of outcomes and enhance both the employee and manager experience.
More than a third (37 per cent) of organizations are currently using AI as part of their performance management process and a similar number are considering doing so. Goal setting (44 per cent) and development plans (40 per cent) were the most commonly cited uses of AI, followed by use in performance reviews (37 per cent) and continuous feedback and coaching (35 per cent).
In addition to AI, more than half (54 per cent) of organizations have incorporated skills into their performance management process. Among these employers, the most common uses include the areas of learning, development and career growth (78 per cent), goal setting (40 per cent) and promotion decisions (29 per cent). Just 18 per cent of these organizations said they’re using skills for pay decisions.
Organizations are also seeking more simplification, fairness and differentiation around performance ratings. Currently, about half (45 per cent) of organizations use a five-point rating scale, with most of the rest reporting using a three- or four-point scale. However, more than half (54 per cent) of organizations either have changed their rating scale already or are considering doing so.
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