"It's evident from our ongoing years of research and consulting that many of today's performance management programs aren't very effective and need significant improvement," said Ravin Jesuthasan, managing director, Talent Management, Willis Towers Watson. "In many cases, performance management reviews have become nothing more than a compliance exercise with little impact on future results. Employees are increasingly frustrated and are questioning the purpose of performance management."
Consider these findings from the 2016 Global Workforce Study, a survey of 31,000 employees worldwide including 3,105 from the U.S.
- Fewer than half (45%) of employees say that performance reviews have helped improve their performance.
- Barely half (54%) think their performance was accurately evaluated in their most recent review.
- Only 44% say there is a clear link between their job performance and their pay.
- Only half (54%) say their organization does a good job explaining the performance management process.
- Only half (51%) say people are held accountable for their individual performance.
Employers, for their part, also recognize that their performance management programs are falling short. The 2016 Global Talent Management and Rewards Survey, a survey of more than 2,000 companies globally, including 441 from the U.S., found only 37% indicate their performance management process is effective at clarifying what responsibilities employees would be held accountable for in specific roles. Barely half (54%) of employers say their performance management process is effective at driving high performance across the workforce. Even fewer say it's effective at encouraging employees to set stretch goals (46%) or creating a positive employee experience (43%).
"It's encouraging that many employers recognize the need to improve their process and are taking action," said Asumi Ishibashi, senior consultant, Talent Management, Willis Towers Watson. "Despite recent headlines, very few companies are actually going to a ratingless performance review process; in fact, we believe some companies that went ratingless are realizing they went too far. Now, most employers are focusing on improving their existing process through more agile and frequent goal setting, distinguishing the role that performance management plays in development versus compensation, and increased and better performance conversations. Given that employees, especially millennials, are asking for more performance feedback, increased dialogues will benefit everyone."
Indeed, the Talent Management and Rewards Survey found only 10% of employers have eliminated performance ratings entirely, although a quarter (26%) are either planning to or considering doing so. Conversely, more than a third (35%) are increasing the frequency and improving the quality of performance conversations and dialogue between managers and employees. Almost half (47%) are planning to or considering doing so. Roughly one in five (19%) plan to use the performance management process to evaluate future potential.
Managers cited as barrier to effective performance management
Manager effectiveness is often the key to effective performance reviews. Employees who reported that their performance review helped them improve their performance were most likely to cite their manager having the necessary skills as the reason. Among other employees, over a fifth say their managers do not have the time (23%) or skills (20%) to do performance management well.
Employers' views on the effectiveness of performance management are also not very favorable. Only a third (33%) say managers are effective at working with employees to set appropriate individual performance goals, while just a quarter (24%) say managers are effective at giving employees regular coaching and feedback on their performance. Less than half (43%) believe managers are effective at fairly reflecting overall performance in an employee's final performance rating.
"A critical element to effective performance management is having managers devote sufficient time to the process. Currently, more than half of managers spend only four hours or less per employee on performance management. In many cases, much of that time is spent on administrative activities rather than communicating and engaging with employees. To improve performance management, employers will need to find ways to engage managers and employees in the critical business of improving individual and collective performance versus completing forms," said Jesuthasan.
About the surveys
The Willis Towers Watson Global Talent Management and Rewards Survey was conducted from April to June 2016 and includes responses from 2,004 companies worldwide, including 441 companies from the U.S. The participants represent a wide range of industries and geographic regions.
The Willis Towers Watson Global Workforce Study covers more than 31,000 employees selected from research panels that represent the populations of full-time employees working in large and midsize organizations across a range of industries in 29 markets around the world. It was fielded online during April and May 2016. The U.S. sample includes 3,105 employees and has a margin of error of ±1%.