Employers in North America are due for a much-needed boost to their performance management and pay-for-performance programs, according to WTW’s 2022 Performance Reset Survey.
The survey, conducted in September and October, found that just 1 in 4 (26%) North American employers reported being effective at both managings and paying for performance. Respondents reported that their performance management programs were falling short of expectations: 93% said their key objective for managing performance is to drive organization performance, but only 44% believe their programs are meeting this objective.
Employers have their work cut out to raise the bar on their performance management programs, Amy Sung, WTW’s Work & Rewards global growth leader said in a Dec. 13 media release. Ideally, they “will reshape their programs to correspond with new work styles and employee career aspirations and provide a better employee experience,” Sung added. A total of 837 organizations worldwide, including 150 North American employers, participated in the survey. The North American respondents employed more than 2.7 million workers, WTW said.
Many employers in North America are already doing the work to improve their situations, the WTW survey found. In particular, they’re investing in ways to ensure managers effectively assess their direct reports’ performance. More than half (54%) currently ensure managers “engage in an ongoing and meaningful performance dialogue” with their direct reports, according to the survey.
Employers are “shaping these interactions through a combination of tactical and strategic guidance,” Alex Weisgerber, WTW’s senior director, of Work & Rewards, told HR Dive in an email. Tactical guidance includes: ensuring that managers check in with direct reports “on a regular cadence”; providing managers with agendas and checklists for the check-ins so the interactions stay focused on performance and development; and having managers report on check-in frequency and effectiveness, Weisgerber explained.
The most common strategic priorities include:
Guiding managers to think about how to accommodate the distinct needs of individuals who use different work styles (e.g., on-site vs. fully remote);
Allowing managers more flexibility to set goals so they and their direct reports can share an understanding of performance priorities
Ensuring that managers provide specific guidance on required competencies, skills, and overall work expectations; and
Ensuring that managers understand their direct reports’ career aspirations and can help them navigate their careers by making this a dedicated topic and frequently integrating it into the interactions.
The survey confirms another often-reported problem: Only 1 in 3 respondents indicated their employees felt performance is evaluated fairly. This aligns with the results of a second-quarter 2022 Gartner survey: Less than a third (32%) of the 3,500 workers Gartner surveyed believe they’re fairly compensated, HR Dive reported.
These perceptions don’t necessarily reflect company commitments or existing pay disparities, Gartner said. Rather, they have to do with employees not trusting employers, a senior principal explained. And that may be due to poor communication and lack of transparency, Gartner noted.
Several barriers may be getting in the way, WTW’s Weisgerber explained. Of particular significance, managers aren’t comfortable having the “tough” conversations with direct reports, such as explaining pay differentiation or addressing underperformance, he said. Managers may also be concerned the conversations will disengage employees.
But there are actions employers can take, starting with training, enabling, and equipping managers to effectively evaluate performance. For example, it’s important to help managers understand expected levels of differentiation [and] ensure employee expectations of performance ratings are not misaligned from the actual ratings,” Weisgerber said. Employers also need to make sure managers have sufficient time to gather relevant information, prepare for the performance discussion, conduct the evaluation, and not get “crowded out” by other urgent tasks, he added.
WTW also found that 58% of North American organizations have, or are considering, shifting their rating scales, he said. Similarly, 43% of organizations report exploring OKRs or other goal-setting approaches to clarify performance expectations.
Overall, the employee/manager experience is getting better, at least for a quarter of the respondents, according to the survey. This appears to be because these organizations were disproportionately more likely to improve employee understanding of performance evaluations and implement technology to ensure clear, consistent conversations, Weisgerber said.
Interestingly, these organizations are also much more likely to invest in increased upside earning opportunities [ies] for high performances and ensure managers can deliver differentiated pay to acknowledge performance distinctions,