Performance management and pay-for-performance aren’t just HR initiatives; they’re business priorities that shape how work gets done and how success is rewarded. At the same time, they touch something deeply personal: an individual’s career and growth.
When designed and delivered effectively, these programs create clarity, connection and motivation for employees while driving results for the organization. That combination — business impact and personal relevance — is what makes them so critical.
Today, that dynamic is evolving. Technology (including AI), shifting employee expectations and the demand for career opportunities are changing what “good” looks like. Rather than seeing this as a challenge, organizations have an opportunity to rethink and refresh their approach to deliver even greater impact for both employees and the business.
To understand how organizations are responding, we wanted to hear directly from compensation and HR professionals. This effort led to WTW’s 2025 Performance Management and Pay-for-Performance Virtual Focus Groups.
By leveraging focus group technology, we connected hundreds of professionals from around the world to facilitate conversations that:
- Provided a deeper conversational dive
- Introduced crowdsourced feedback to promote approaches and ideas
- Delivered real-time results to registrants as the conversations occurred
What we heard about performance management and pay for performance
Performance management and pay for performance have been around for decades — and for good reasons. They’re designed to connect what people do every day with an organization’s bigger goals. And most participants (two-thirds) still see them as effective ways to align individual and organization priorities.
But the conversations revealed clear opportunities to do better.
- Nearly half of participants said productivity would increase by 10% or more if performance management and pay-for-performance were optimized
- Only 2 in 5 respondents believe their current processes meet employee expectations
While the core ideas behind performance management and pay for performance still hold true, many organizations aren’t getting the results they should. That’s not a failure; it’s a chance to rethink and refresh how these practices to create greater value for employees and the business.
How organizations are addressing performance management and pay for performance
Forward-thinking companies have already started reviewing and redesigning performance management and pay for performance to be more impactful. Their focus is on creating clarity, fairness and a better employee experience while staying aligned with business priorities.
They are doing this by:
- Clarifying the purpose of goals and connecting employees’ understanding of both individual and business-related objectives to organizational priorities
- Reconsidering performance rating scales to improve differentiation of performance-based rewards among low, average and high performers
- Incorporating skills to deliver a more well-rounded view of an employee’s contributions and potential — which also supports an enhanced employee experience
- Investing in manager capabilities so that performance discussions — even the hard ones — are productive, honest and constructive
- Leveraging AI to enhance capabilities related to goal setting, feedback delivery and calibration
These actions are significant but worthwhile; they pay off when performance management and pay for performance become meaningful drivers of engagement, productivity and business results.
Ready to learn more?
For deeper insights into the results of the focus groups, fill out the request form at the top of this page. For more information on how you can begin your organization’s performance management and pay for performance journey, reach out to your WTW contact or email us.
