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Press Release

Employers are reshaping performance management and pay programs

Organisations moving to broaden focus of programs to support development and career progression

December 13, 2022

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LONDON, December 13, 2022 – Employers worldwide, including those in the United Kingdom, need to reshape their performance management efforts and pay-for-performance programs to give them a much-needed boost, according to a survey of over 800 global organisations by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.

The survey found just one in four global and UK employers (26%) reported being effective at both managing and paying for performance. Additionally, the gap between the priorities for performance management and delivering on those objectives is wide. For example, more than nine in ten UK respondents (95%) cited driving organisation performance as a key objective for performance management yet less than half (45%) said their performance management program is meeting that objective. Similarly, nearly three in four (72%) said supporting the career development of their employees as a primary objective but only a third (32%) said their performance management program was meeting that objective.

United Kingdom respondents also had mixed views on the effectiveness of managers in evaluating performance and differentiating pay. Less than half (44%) agree that managers at their organisations are effective at assessing the performance of their direct reports. Even fewer – 33% – consider their managers effective at differentiating their direct reports’ performance. Further, 1 in 3 organisations indicate their employees feel their performance is evaluated fairly. Interestingly, despite the rapid increase in remote and hybrid working models, only 14% of employers report having altered their performance management approach to align with such models.

“We continue to see the impact from the pandemic and difficult labour market, including how managers evaluate the performance of their employees and tie it to their pay,” said Ruchi Arora, Senior Director, Work & Rewards, WTW. “While some employers are sticking with their overall approach to performance management, most recognise they need to reshape their programs to correspond with new work styles and employee career aspirations and provide a better employee experience.”

While most employers recognise their programs are falling short of expectations, the survey found that UK employers already have several initiatives in place or are planning or considering enhancing their performance management and pay-for-performance programs:

  • 17% have strengthened the link between performance management and career development; another 66% are planning or considering doing so.
  • Just under half of employers (49%) currently ensure ongoing and meaningful performance dialogue between managers and employees in a remote/hybrid working environment; another 40% are planning or considering doing so.
  • Only 20% of employers have improved employees’ understanding of how their performance is evaluated, but 52% are planning or considering doing so.
  • Just two in ten (20%) respondents have enhanced employee perception of the evaluation process but 51% are planning or considering doing so.
  • Almost a quarter of respondents (23%) have improved the employee and manager experience, but 54% are planning or considering doing so.

Employers that make the effort to improve their programs are likely to reap benefits. The study found that companies using performance management programs effectively are one and a half times as likely to report financially outperforming their industry peers, and one and a quarter times as likely to report having higher employee productivity than their peers. Companies that are effectively using pay programs to drive individual and team performance are also more likely to outperform their peers (1.2 times) and report higher employee productivity (1.4 times) than their peers.

“Amidst concerns over cost pressures, congoing attraction and retention issues are also adding pressure to rethink performance management as well as pay for performance programs. While most organisations are currently planning for larger increases in 2023, the need to demonstrate to employees how their pay is tied to performance has never been greater,” said Ruchi Arora, Senior Director, Work & Rewards, WTW.

About the Survey

A total of 837 organizations worldwide, including 60 UK employers, participated in the 2022 Performance Reset Survey. The survey was conducted during September and October 2022. North America respondents employ more than 2.7 million workers.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.

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