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Performance management and pay programs are being changed by employers.

The Research Results

WTW,Willis Towers Watson, surveyed more than 800 organizations around the world and found that employers in North America need to change their performance management and pay-for-performance programs to give them a much-needed boost. The survey showed that everyone came to the same conclusions.

Based on the survey, only 26% of North American employers said they were good at both managing and paying for performance. 93% of North American respondents indicated one of the key aims of performance management is to increase organizational performance, yet 44% claimed their program meets that goal. Also, 72% stated assisting employees to improve their careers is one of their primary aims, but just 31% believed their performance management program met that goal.

North Americans have differing opinions on how well managers analyze performance and set pay. Less than half (49%) say their company’s management are good at evaluating direct reports. About the same number, 46 percent, think their managers are good at telling how their direct reports are doing. Also, only one in three companies says their employees think their work is evaluated fairly. Even though remote and hybrid work models are becoming more popular quickly, only 16% of employers say they have changed their approach to performance management to fit these models.

“Employers have a lot of work to do to get their performance management programs to a higher level. “Many know that their programs haven’t kept up with the changes caused by the pandemic and the tight job market, but they haven’t done anything about it,” said Amy Sung, global growth leader for Work & Rewards at WTW. “In an ideal world, employers will change their programs so that they fit with new ways of working and the career goals of their employees.”

The poll indicated that North American companies already have or are planning or thinking about a number of strategies to improve their performance management and pay-for-performance programs.

Three out of ten respondents (34%) have made the link between performance management and career development stronger, and another 60 percent plan to or are thinking about doing the same.

Over half of employers (54%) make sure that managers and employees talk about performance regularly and in a meaningful way in a remote or hybrid work environment. Another 39 percent are planning or thinking about taking steps to make sure there is meaningful dialogue.

17% of businesses have made it easy for employees to understand how they’re evaluated, but 70% aim to.

23% have improved the employee and manager experience, whereas 64% are planning or considering improvements.

Employers who work to make their programs better are likely to see financial gain. The study found that companies that use performance management programs well are 1.5 times more likely to report doing better financially than their peers in the same industry. They are also 1.25 times more likely to report that their employees are more productive than their peers. Companies that utilize pay programs to effectively motivate individual and team performance are more likely to outperform their counterparts (1.2 times more probable) and have more productive employees (1.4 times more likely) than their peers.

Alex Weisgerber, senior director of Work & Rewards at WTW, said, “Our results show that performance management and pay-for-performance programs can be key ways to set yourself apart from the competition.”

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