The Future of Performance

Management 2023
Use continuous feedback to nurture a
strong manager-employee partnership
JULY 2023

Sponsored by
 CONTENTS
3 Executive Summary

8 The Effectiveness of Performance Management Today

12 Extent to Which PM Programs Are Formalized and Structured

16 How Performance Management Has Evolved Recently

18 The Primary Objectives of Performance Management

28 How Leaders View Performance Management

32 The PM Skill Sets of Today’s Managers

36 How to Communicate and Meet Goals and Objectives

44 The Prevalence of Performance Management Technology

54 The Future of Performance Management

60 Key Takeaways

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 About the Survey Executive Summary
The State of Performance
Today’s employers have a historic performance management
Management survey ran in the
second quarter of 2023. We problem. U.S. productivity seldom declines on an annual basis, but
gathered 295 complete and partial in 2022 there was a decline of 1.6%, the largest in half a century.
responses from HR professionals What’s more, 2023 started off with a first-quarter decline of 2.1%.
in virtually every industry vertical.

Respondents are located all over Amid these trends, businesses are striving to improve their
the world, but most of them reside performance management processes, with a renewed emphasis on
in North America, especially the improving overall performance.
United States. The participants
represent a broad cross section For the first time in six years of conducting our research on
of employers by number of
performance management, we found that the most widely cited
employees, ranging from small
objective for conducting performance management reviews was
businesses with fewer than 50
employees to enterprises with
“to help the company improve overall performance.”
20,000+ employees.
This is a change from the past five years, when the most widely
cited objective was “to help employees learn and grow” (73% in
2018 versus 66% in 2023, representing a seven percentage point
decline). We don’t mean to imply that employee development isn’t
still a major objective of performance management, but the desire
to improve corporate performance is now predominant.

As organizations struggle to boost their overall performance—as

well as the performance levels of individual employees—they are
working to improve their performance structures and systems. To
better understand the details of what they’re doing, we investigated
the following areas:

● the extent to which organizations use structured, formal, and

informal performance management processes

● today’s performance management objectives and metrics,

and the degree to which organizations effectively meet their
performance management objectives

● how leaders view the performance management process,

and the extent to which managers get training and are held
accountable

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 ● the type and frequency of performance feedback, and the
extent to which organizations embrace continuous feedback
and formal appraisals

● how extensively organizations use performance

management digital technology features, and the extent to
which performance management systems integrate with
other HR systems

● how performance management has changed over the past

two years and how it is expected to change in the future

● the practices and outcomes most closely associated with

performance management success

Key Findings from the Study

Major
Finding 1 Most organizations fail to meet important performance management (PM)
goals to a high or very high degree, a problem that seems to have grown
worse in the last year.

● From 2022 to 2023, there has been a noticeable drop in the degree to
which employers’ performance management processes have resulted
in the following to a high or very high degree:

 ability to meet organizational PM goals (44% to 33%)

 improved employee performance (44% to 34%)
 improved employee development (35% to 28%)
 increased employee engagement (37% to 31%)
 improved employee retention (32% to 24%)

Major
Finding 2 Over the past two years, performance management has changed in a
variety of ways to focus more on the needs of employees.

● There has been an increase in the frequency of one-on-one meetings,

with 32% indicating that employees and managers are meeting
together more often.

● 32% also indicate employees have had greater input into their
performance goals.

● 30% indicate that managers have been touching on issues aside from
performance, such as well-being.

● 28% say that managers have been working harder to align employees’
personal goals with business objectives.

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 Major
Finding 3 Organizations too often lack accurate performance metrics.

● Less than a third of respondents (30%) indicate their performance

management process accurately portrays employee performance.

● The three most commonly used PM metrics are:

 manager ratings (66%)

 employee self-ratings (55%)
 goal achievement (54%)

● As a means of setting and tracking goals, the most widely-used

methods organizations are:

 SMART goals (63%)

 key performance indicators (38%)
 objectives and key results (20%)
 method used in organization’s performance module or system
(15%)

Major
Finding 4 Most managers lack PM-related training and accountability, which
could help explain poor performance management skills.

● Only 31% agree and strongly agree managers have received

sufficient training in PM.

● This probably contributes to why just 23% of HR professionals

agree or strongly agree that the managers of their organizations
are skilled at overall performance management, and just 32%
say they are good at having conversations about workplace
performance and behaviors.

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 Major
Finding 5 Although a majority of HR professionals think that top leaders see
performance management as useful, many still believe leaders see it in
a negative way.

● Over half (56%) believe top leaders view PM in a positive light.

 15% say it aids employee development,

 15% think it improves engagement,
 13% say it is an effective way to make employee-related
decisions, and
 13% report crucial for business performance, which is of
particular concern considering it is a strong part of the purpose
of performance management.

● Nonetheless, the wide response is that top leaders view PM as

a “necessary evil” (34%), and another 6% believe leaders see it
as an “unnecessary waste of time,” indicating that two-fifths of
organizations have leaders with a negative view of PM.

Major
Finding 6 Most organizations use digital technologies for the purpose of
performance management, but the technologies often fall short in
certain ways.

● 80% of organizations use digital technologies, but only 42% use

them to a high and very high degree, while another 17% use them
to a moderate degree.

● The most commonly cited capabilities of PM systems are:

 tracks performance appraisal ratings (63%)
 facilitates the review process (62%)
 allows users to evaluate performance in relation to goals (58%)
 provides timely reminders to managers (54%)
 permits managers to add notes at any time (53%)
 permits automated reminders (51%)

● Given the reported importance of employee development, it is

surprising to find that only:

 34% say their system tracks training and development

achievement
 28% say their system aids training and development (T&D)
 17% make T&D suggestions
 16% say their system can integrate with third-party solutions
(for example, learning management systems)

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 Major
Finding 7 Compared to organizations that do not excel at PM, those that do are:

● nearly 4X more likely to get better employee development and 4X

more likely to get better employee performance
● 4X more likely to discuss formal reviews or appraisals of employee
performance four or more times per year
● over 3X more likely to have top leaders who think performance
management is an aid to employee development and nearly 2X as
many leaders who think performance management is crucial to
the business
● nearly 3X more likely to hold managers accountable by tracking
their coaching and/or conversations
● nearly 3X more likely to hold managers accountable for
engagement and/or retention rates of direct reports assessed
● nearly 2.5X more likely to tie managers’ performance management
goals to compensation rates, bonuses, or other rewards
● nearly 2X more likely to say managers are held accountable for
KPIs metrics
● nearly 2X more likely to have manager and employee
conversations about career goals and aspirations four or more
times per year
● 2X more likely to accurately portray employee performance
● nearly 2X more likely to improve manager-employee relationships
● 2X more likely to be good at helping employees set goals
● over 2X more likely to say managers are satisfied with their
performance management system
● nearly 2X more likely to say their PM technology systems can
integrate with third-party solutions
● are nearly 2X more likely to say managers have received sufficient
training in PM
● nearly 1.5X more likely to embrace a structured and formalized
performance management process
● nearly 1.5X more likely to allow for continuous feedback
● 1.5X more likely to say the future will focus on boosting employee
performance

Please note that the findings and recommendations contained in this report are informational only. Nothing in this report should be construed as
constituting legal opinions or advice. Please consult an attorney if you have questions about the legal requirements, rules or regulations associated with
any content discussed in this report.

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 The Effectiveness of Performance
Management Today
Finding: From 2022 to 2023, there was
a decline in the perceived effectiveness
of performance management based on
various results

Losing Ground
We asked respondents to identify the degree to which their company’s
performance management processes bring about ten major PM
outcomes. As shown below, for the last two years, most organizations
have not received high and very high degrees of performance
management results.

Further, there has been a considerable decline in those results from 2022
to 2023. Perhaps the most concerning news is that, in 2023, only a third
(34%) of organizations’ performance management processes led to the
“ability to meet all organizational performance management goals” to
high and very high degree, as compared to more than two-fifths in 2022
(44%). Moreover, only 33% indicate improved employee performance,
compared with 43% in 2022. Likewise, in 2023, only 28% of organizations
indicate high degrees of better employee development, compared to 35%
in 2022.

Productivity Woes
U.S. productivity seldom declines on an annual basis, but in 2022 there
was a decline of 1.6%, the largest in half a century. What’s more, 2023
started off with a first-quarter decline of 2.1%. No one quite knows why
the U.S. has seen such a historic decline in productivity. There are any
number of guesses, from more inexperienced workers in the workforce
due to considerable employee turnover during the Great Resignation
period to the claims that people are less productive in remote work
situations to counterclaims that return-to-work policies are driving down
productivity.

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 To what degree does your organization’s performance
management process result in the following?
(percent responding high and very high)
44%
Ability to meet all organizational
performance management goals 34%

44%
Improved employee performance
33%

32%
Improved employee retention
24%

39%
Improved corporate culture
32%

30%
Improved distribution of rewards
23%

35%
Better employee development
28%

37%
Increased employee engagement
31%

34%
Better risk management
28%

0 10 20 30 40 50

2022 2023

There was an especially large drop in the percentage of

people saying performance management has improved
employee performance to a high or very high degree

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 Performance Management
Leaders and Laggards
To better analyze the data from our survey on performance
management, we broke our respondents into groups, based on
responses to an option in the survey question cited above.

● Performance-management (PM) leaders: respondents who

say their organizations’ performance management processes
result in them achieving all performance management goals
to a high or very high degree.

● Performance-management (PM) laggards: respondents who

say their organizations’ performance management processes
result in them achieving all performance management goals
to a moderate, low, very low degree, or not at all.

Throughout the rest of this report, we will discuss the aggregate

survey findings first. Then, if there are any major differences among
the PM leaders and PM laggards, we will report them immediately
after the aggregate data to identify possible key takeaway strategies
or practices.

Within the PM leader and laggard sections, we will reveal findings

that come from the examination of the data in a way that identifies
correlations between various organizational factors and the
perceived effectiveness of performance management. Correlation
does not prove causation, of course, but it may point our attention
toward possible best practices and potential strategies.

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 Finding: PM leaders tend to have greater
success across a variety of performance
indicators
As shown below, organizations that say they have the ability to meet all
of their performance management goals to a high or very high extent
(that is, our performance management leader organizations) are also
far more likely to have seen advances across a variety of variables, from
“improved employee performance” to “improved employee retention.”

Does your organization have a performance management

process? (select the one that best applies)

PM leaders are over

67%
4 times more likely Improved employee performance
16%
to say they’ve seen
improved employee 60%
performance to a Better employee development
14%
high or very high
extent 60%
Improved corporate culture
17%

51%
Increased employee engagement
15%

47%
Better risk management
18%

43%
Improved distribution of rewards
14%

41%
Improved employee retention
15%

0 10 20 30 40 50 60 70

PM Leaders PM Laggards

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 Extent to Which PM Programs Are
Formalized and Structured
Finding: About half (48%) indicate their PM
process is “structured and formalized”

We asked respondents to let us know which of the statements below

best describes the extent to which their programs are formalized
and structured. Just under half (48%) say their organizations have a
structured and formalized process.

Over a third (37%) say their process has both formal and informal
elements, whereas the process is not “structured” per se but may,
for example, utilize the annual performance review as a formal
component but with less rigor around what touches the review process.
Another 9% indicate “an informal performance management process
with no formalized elements,” and 6% say their organization has no
performance management process at all.

In the rest of this study, we exclude the 6% of organizations that do not

have performance management processes, except for questions about
the future of performance management.

By Organization Size
Larger organizations (55%) are considerably more likely than smaller
(33%) and mid-sized (40%) organizations to have a structured and
For the purpose of this
formalized PM process, while smaller organizations (17%) are more
report, large organizations
likely than mid-size (4%) and large (5%) organizations to have informal
have 1,000 or more
elements.
employees, mid-sized
organizations have 100 to
We believe that one reason for this, which we’ll discuss later in the
999 employees, and small
report, is that larger organizations more often have performance
organizations have 99 or
management technologies that lend greater structure and tangible
fewer employees.
measurements to the PM process.

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 Does your organization have a performance management process?
(select the one that best applies)

Less than half say

their organization Yes, it is a structured
and formalized process 48%
has a structured and
formal performance
management
Yes, it is a process
process
with both formal and 37%
informal elements

Yes, but it is an informal

process with no 9%
formalized elements

No 6%

0 10 20 30 40 50

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 Finding: PM leaders are more likely to
embrace a structured and formalized
performance management process

Other research suggests that putting structure around management

practices and disciplines leads to higher productivity and fosters
learning and development. This may be one of the reasons PM leader
organizations (57%) are more likely than laggard organizations (43%)
to indicate their performance management process is structured and
formalized. On the other end of the spectrum, laggard organizations
(11%) are about twice as likely as leader organizations (6%) to indicate
their performance management processes are informal, with no
formalized elements.

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 Does your organization have a performance management
process? (select the best one that applies)

57%
Yes, it is a structured
and formalized process
43%

Yes, it is a process with 37%

both formal and informal
elements
46%

Laggards are more

likely to implement 6%
Yes, it is an informal
less formalized process with no
performance formalized elements 11%
management
processes
0 10 20 30 40 50 60

PM Leaders PM Laggards

HRRI Research Takeaway: Although an organization doesn’t need to have a formal and
structured process to be successful at performance management, there do appear to
be advantages to more formal systems. So, if your current system is ineffectual as well
as informal and unstructured, you should consider investigating more formal systems
that are working well for other organizations that you respect.

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 How Performance Management Has
Evolved Recently
Finding: Performance management has
become more personalized and has
incorporated non-performance-based
discussions
How has performance management changed over the last two years?
Generally speaking, we found that organizations are most likely to
have increased their focus on interacting with individual employees. In
fact, about a third (32%) report their organization is conducting more
one-on-ones with their employees, and an equal proportion say they
afford employees more opportunities to have greater input into their
performance goals.

Rounding out the top five changes:

● conducting more performance discussions remotely

● spending more time discussing issues aside from performance

(e.g., well-being)

● working more to align employees personal goals with business

objectives

On the other hand, just 17% indicate the structure of performance

appraisals has become more reciprocal/multi-rater, and just 16% say
managers have developed their PM skillsets for remote workers. The
latter is just one of various data points in the study suggesting that
managers could benefit from better performance management skill sets.
Most organizations (78%) have seen some type of change over the last
two years.

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 By Organization Size
Smaller organizations and mid-size organizations (both at 42%) are
considerably more likely than large (23%) organizations to indicate
managers are scheduling more one-on-one meetings. We don’t know if
this is because larger organizations had already adopted this process
early during the pandemic or because managers at larger organizations
are stretched too thin due to managing too many direct reports. Larger
organizations (23%) are more likely than smaller (8%) and mid-size (16%)
organizations to indicate managers have developed their performance
management skill sets for remote workers.

How has performance management changed in your

organization over the last two years? (select all that apply)

Managers are scheduling more frequent one-on-one meetings 32%

Employees have greater input into performance management goals 32%

Managers are conducting performance discussions remotely rather than face-to-face 31%

Managers are touching on issues aside from performance (e.g., well-being) 30%

Managers work harder to align employee personal goals with business objectives 28%

Performance appraisals have become more reciprocal and/or multi-rater 17%

Managers have developed their performance management skillsets for remote workers 16%

Performance management has become more project-based rather than yearly 11%

There have been no changes 22%

0 5 10 15 20 25 30 35

Just 11% say that performance management

has become more project-based

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 The Primary Objectives of Performance
Management
Finding: The single most common
performance review objective is to improve
overall performance, but PM typically has
multiple important objectives

A majority of organizations (71%) say that their most common objective

for conducting performance reviews is to help the organization improve
overall performance. Although this doesn’t sound surprising, it actually
represents an interesting change from previous years.

Longitudinal Changes in PM Objectives

2018 was the first year in which the HR Research Institute asked HR
professionals, “Which of the following describes your organization's
objective for conducting performance reviews?” At that time, the top
response was “To help employees learn and grow,” cited by 73% of
respondents. For four years, that remained the number one response to
that question. In 2023, however, we saw a change. For the first time, the
top response was “To help the company improve overall performance.”
Meanwhile, the response about helping employees learn and grow fell to
third place and was cited by only 66%.

The shift from 73% to 66% represents a statistically significant drop,

according to a chi-square test.

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 An Important Shift
Although we don’t want to read too much into this decline, we do
think it might be an important turning point. As we noted earlier, the
United States suffered an overall decline in productivity in 2022, the
largest decline since 1974, according to data from the Bureau of Labor
Statistics. In the context of these widespread productivity woes, it makes
sense that overall organizational performance has become the most
widely cited objective of performance management.

There Are Multiple Important Goals

Although overall performance is most widely cited, there are six different
objectives cited by over half the respondents, as can be seen in the
chart below. It’s clear that performance management continues to be a
function from which much is expected in today’s organizations.

By Organization Size
Larger organizations (63%) are considerably more likely than smaller
(38%) and mid-size (48%) organizations to say that objectives of
performance review meet organizational requirements (e.g., for
compliance). This may be because some larger organizations have
a wider range of compliance initiatives, given their size. It may also
be linked to their more common use of performance management
technologies.

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 Which of the following are objectives your organization's performance
reviews are designed to achieve? (select all that apply)

Help the organization improve overall performance 71%

Boost communication between employees and managers 68%

To help individual employees learn and grow 66%

Boost the individual performance of an employee 62%

Increase employee engagement 55%

Identify barriers to employees at work 53%

Meet organizational requirements (e.g., for compliance) 49%

Facilitate performance-related changes in pay 42%

Increase employee retention 41%

Have a legal record of interactions with employees 39%

Force a conversation about poor performance 35%

Justify dismissing low-performing employees 28%

0 10 20 30 40 50 60 70 80

Just 42% say their organization uses performance

reviews to facilitate performance-related changes to pay

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 Finding: When structuring and managing
goals, organizations most commonly use
“SMART” goals to increase performance

A classic performance management approach, and one backed with

a great deal of research, is the SMART process (specific, measurable,
achievable, relevant and time bound goals). Nearly two-thirds use this
method (63%), the only option used by a majority of respondents.

Key performance indicators (KPIs) are the second most common

method (38%), which are subsets of goal-oriented activities or objectives
that help an organization realize if it is on track for meeting a particular
goal. The third most widely cited method is Objectives and Key Results,
often known as OKRs.

By Organization Size
Smaller organizations (26%) are more likely than larger (6%) and mid-
size organizations (13%) to say they do not use any of these tracking
methods. This may be because smaller organizations use technology
less often, or perhaps they believe such formal tracking methods are
less necessary when performance is more easily apparent when there
are small numbers of employees.

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 What methods does your organization use to set goals and
track results for the purpose of increasing performance?
(select all that apply)

SMART (specific, measurable, achievable,

relevant, and time bound) goals 63%

Key performance indicators (KPIs) 38%

Objectives and Key Results (OKRs) 20%

Method used in our performance

module or system 15%

Management by objective (MBO) 13%

Key Result Area (KRAs) 11%

Agile goals 10%

Progress, Plans, Problems (PPPs) 9%

Behaviorally anchored
rating scales (BARS) 5%

Assessment Center Method 2%

0 10 20 30 40 50 60 70 80

Just 10% use agile goals and even fewer use

behaviorally anchored rating scales

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 Finding: Organizations most commonly rely
on manager ratings

The most common type of metric incorporated into performance

management processes is manager ratings (67%). Somewhat
fewer organizations (54%) indicate goal achievement, which we find
worrisome since without goal achievement metrics, organizations
can become more susceptible to subjectivity and performance rating
bias. Subjectivity can also bring transparency into question, making
employees more concerned about favoritism and inequitably distributed
performance pay and promotions.

Over half of organizations now use self-ratings (55%). Self-assessments

may give individual employees a voice as well as allow them the chance
to pause and introspect about how their performance and behaviors
contribute to organizational performance and the organization’s culture.

A much smaller percentage of organizations use 360-degree feedback

(14%) and peer ratings (8%). Although there are many reported
advantages of the use of 360s, there can also be challenges, such as the
fact that some employees may not be comfortable receiving criticism
from a peer.

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 What types of metrics are incorporated into your PM process?
(select all that apply)

Manager ratings 67%

Self ratings 55%

Goal achievement 54%

Behavior-related scores 28%

Rankings (but not forced) 17%

360 feedback 14%

Customer feedback 13%

Metrics/analytics from
12%
other systems (e.g., ATS, HRMS)

Forced rankings 9%

Engagement scores 8%

Peer ratings 8%

Net Promoter Scores 6%

4%
Social recognition scores

Employee sentiment scores

3%
(e.g., based on NLP)

9%
We use no metrics

0 10 20 30 40 50 60 70 80

Only 28% evaluate behavior-related scores

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 When structuring manager accountability,
organizations most commonly track whether
a manager completes a formal appraisal
We asked participants to indicate the methods they use to hold their
managers accountable for performance management. While 56% track
whether formal appraisals are conducted, most organizations are not
holding managers accountable. In fact, just 22% say their performance
management activities are part of their key performance indicators, and
only 13% say their coaching and/or conversations with employees are
tracked.

Further, less than a fifth say their managers’ compensation rates, bonuses,
and other rewards are tied to performance management activities (18%),
and over a quarter (27%) say managers are not held accountable in any way.
We would also note that only few organizations are collecting feedback
(9%) or ratings (8%) from employees about their manager.

How do you hold managers accountable for

completing performance management activities?
(select all that apply)

The formal appraisals they do

with employees are tracked
56%

The process is part of their

key performance indicators (KPIs)
22%

Their compensation rates, bonuses or

other rewards are tied to it
18%

Their coaching and/or conversation

sessions with employees are tracked
13%

The engagement and/or retention rates

of direct reports are assessed
12%

The direct reports fill out an annual

manager feedback survey
9%

Their employees rate them, in part, by

how well they manage performance
8%

They are not held accountable

in any particular way
27%

0 10 20 30 40 50 60

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 Finding: PM leaders are more likely to hold
their managers accountable
While a large majority of PM leaders (60%) and laggards (57%) indicate
that formal appraisals are tracked, PM leaders are more likely to move
beyond this basic participation metric and do more to hold managers
accountable.

For example, PM leaders (35%) are about twice as likely as laggards

(17%) to track and assess manager KPIs as they related to performance
management activities. In addition, PM leaders (31%) are over twice as
likely as laggards (13%) to tie compensation rates, bonuses, or other
rewards to their managers’ performance management goals.

PM leaders also more often recognize the importance of development

and engagement in performance management. For example, nearly three
times as many PM leaders (24%) as laggards (9%) track coaching and
feedback conversations. In addition, PM leaders (22%) are far for likely
than laggards (8%) to assess their managers’ engagement retention
rates of direct reports.

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 How do you hold managers accountable for completing PM
activities? (select all that apply)

35%
The process is part of their key
performance indicators (KPIs)
17%

Their compensation rates, 31%

bonuses or other rewards
are tied to it 13%

Their coaching and/or 24%

conversation sessions with
employees are tracked 9%

The engagement and/or 22%

retention rates of direct
reports are assessed 8%

Laggards are twice They are not held 15%

as likely to fail to hold accountable in any
particular way 30%
managers accountable
in any way
0 5 10 15 20 25 30 35

PM Leaders PM Laggards

HRRI Research Takeaway: PM leader organizations are considerably more likely to go beyond
just tracking to see whether managers have engaged in formal performance appraisals. We
believe that going beyond such tracking indicates that these organizations take performance
management more seriously as part of the duties of a manager. In our view, it makes sense
to somehow hold managers accountable for the quality of the process itself. After all, true
performance management is the essence of what a manager does.

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 How Leaders View Performance
Management
Finding: HR indicates that top leaders most
commonly view performance management
as “a necessary evil,” though a majority of
leaders see performance management as
useful in some way
We asked respondents to pick the one factor that best represents
how top leaders view performance management in their organization.
Three-fifths indicate that top leaders think performance management is
useful in some way (56%), such as aiding employee development (15%),
improving engagement (15%), boosting performance (13%), or as an
effective way to make employee-related decisions (13%).

However, the remaining 40% view performance management in a

negative light. In fact, thirty-four percent say that top leaders view
performance management as a “necessary evil,” suggesting that leaders
may struggle to understand how to do performance management well.
Further, another 6% say leaders view PM as an “unnecessary waste of
time.”

In our opinion, this is a major finding and a serious problem. If leaders

do not believe in the efficacy of performance management, then they will
be less likely to implement and encourage a process that truly serves
the needs of the organization. They may also fail to invest in or even
recognize a good system.

28 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 In your organization, how do most top leaders tend to view
performance? (select the one that best applies)

As a necessary evil 34%

As an aid to employee
development 15%

Only 13% say As a means to improve

top leaders view engagement and/or retention 15%
performance
management As crucial for overall
business performance 13%
as crucial
for business As an effective way to make
13%
performance employee-related decisions

As an unnecessary
waste of time 6%

0 5 10 15 20 25 30 35

Editor's note: The graph above excludes the “other” category responses, which amounted to 4%.

56% imply that top leaders view

performance management as
useful in some way

29 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: PM leader organizations are far
more likely to have executives who believe
in the value of performance management
PM leader organizations (29%) are over three times as likely as laggards
(9%) to say their executives view performance management as an aid for
employee development. On the other hand, about two-fifths (42%) of top
managers in PM laggard organizations view performance management
as a “necessary evil,” whereas this is true in 16% of PM leader
organizations. Overall, the larger majority of respondents from PM leader
organizations say their executives have a favorable view of performance
management.

30 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 In your organization, how do most top leaders tend to view
PM? (select the one that best applies)

29%
As an aid to employee
development
9%

As crucial for overall 18%

business performance
10%

16%
More than two-fifths of As a necessary evil
laggards view PM as a 42%
“necessary evil”

0%
As an unnecessary
waste of time
11%

0 10 20 30 40 50

PM Leaders PM Laggards

HRRI Research Takeaway: It can be difficult to change the opinions of top organizational leaders,
but in this case, we believe HR needs to try. HR can marshal information and data to demonstrate
to top leaders the virtues of effective performance management systems. Business leaders
can be educated about why performance management is useful and how they can work with
employees more collaboratively and in partnership to achieve their performance goals. One
possible way of achieving this might be by bringing in successful leaders from other respected
organizations who can vouch for their own performance management systems.

31 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 The PM Skill Sets of Today’s Managers
Finding: Just 23% HR respondents think
managers are skilled at performance
management
Less than a quarter (23%) of respondents say that managers in their
organization are skilled at overall performance management. We find
this a very troubling number, especially in light of the fact that a mere
31% say respondents agree or strongly agree that managers in their
organization have received sufficient training. After all, HR typically is in
charge of learning and development, so in many organizations it should
be able to influence the training and skill sets of managers in this area.
In essence, many HR respondents are admitting that they either lack the
power or the ability to hone the capabilities of managers in the area of
performance management.

HR thinks managers are a little better at helping employees set

goals (39%), though just 30% say think managers are good at having
conversations about workplace performance and behaviors. So, it’s
little wonder that most managers themselves are unsatisfied with
performance management (70%).

By Organization Size
Large (21%) organizations are far less likely than smaller (57%) and mid-
size (42%) organizations to agree and strongly agree that managers are
good at helping employees set goals. Large organizations (21%) are also
less likely than smaller (38%) and mid-size (35%) organizations to say
managers have received sufficient training in performance management.
What’s more, large (16%) organizations are also less likely than smaller
(44%) and mid-size (34%) organizations to indicate managers are good
at having conversations about workplace performance and behaviors.

32 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 To what extent do you agree with the following statements
about most managers in your organizations? (percent
responding agree and strongly agree)

They are good at helping

employees set goals
34% 5% 39%

They have received sufficient

training in performance 26% 5% 31%
management

They are good at having 26% 4% 30%

conversations about workplace
performance and behaviors

They are satisfied with our 27% 2% 29%

performance management
system

They are skilled at 19% 4% 23%

performance management

0 5 10 15 20 25 30 35 40

Agree Strongly agree

Just 5% strongly agree that managers in their

organization have received sufficient training in
performance management

33 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: Managers in PM leader
organizations are more likely to have skills
and training
Respondents from PM leader organizations (62%) are more than twice
as likely as those from PM laggard organizations (30%) to agree or
strongly agree that managers in their organizations are good at helping
employees set goals. In addition managers in PM leader organizations
(46%) are also nearly twice as likely as laggards (26%) to be better at
having conversations about workplace performance and behaviors.

These differences may be, in part, because managers already have the
knowledge, experience, and training to help managers set goals and/
or partner with employees to set their goals. In fact, considerably more
leaders (45%) than laggards (25%) say their managers have received
sufficient PM training. Training may increase employee satisfaction
with the PM system in general. This may be why PM leaders (45%) are
more likely than laggards (21%) to indicate they are satisfied with their
performance management system.

34 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 To what extent do you agree with the following statements
about most managers in your organization?
(percent answering strongly agree and agree)

62%
They are good at
helping employees
set goals 30%

They are good at having 46%

conversations about workplace
performance and behaviors 26%

They have received sufficient 45%

Only a quarter of
training in performance
laggard organizations management 25%
have managers
sufficiently trained They are satisfied with our 45%
in performance performance management
system 21%
management

They are skilled at 39%

performance
management 16%

0 10 20 30 40 50 60 70

PM Leaders PM Laggards

HRRI Research Takeaway: HR and L&D are in a unique position to help improve performance
management in their organizations by enabling managers to get better at it. Of course, training
can’t be optimal unless there’s a solid performance management process already in place. But
once it is, managers should provide proper instruction in how to get the most out of current
processes and systems. And, we think a version of such instruction should be readily available via
e-learning because over time managers may forget certain details and best practices.

35 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 How to Communicate and Meet Goals
and Objectives
Finding: Performance management typically
involves positive and constructive feedback
as well as a focus on work goals
Performance management is based on feedback and discussions
of goals. Nearly three-quarters say that PM-related communication
includes both positive feedback and a constructive critique (73%), and
the same percentage cite a discussion of work goals. These are at the
heart of most performance management.

What’s fascinating, however, is that less than a third (30%) indicate that
performance management processes accurately portray employee
performance. Why? One reason may be that feedback is not typically
captured continuously. In fact, less than half (45%) have features that
allow for continuous feedback. Moreover, just 47% say the performance
management process is easy to understand or is easy to use.

By Organization Size
Smaller organizations (60%) are more likely than large (41%) and mid-
size (38%) organizations to allow for continuous feedback. Continuous
feedback may be easier because smaller organizations have fewer
people to manage. This may be one of the reasons why respondents
from larger organizations (39%) are less likely than those from smaller
(63%) and mid-size (54%) organizations to say performance processes
improve relationships between managers and employees.

36 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Which of the following are features of your organization’s
performance management process? (select all that apply)

Includes both positive feedback 73%

and constructive critique

Includes a discussion
of work goals 73%

Involves a conversation
about developmental 66%
goals and activities

Improves relationships
between managers and 50%
employees

Is easy to understand 47%

Is easy to use 47%

Allows for continuous

feedback 45%

Accurately portrays
employee performance 30%

0 10 20 30 40 50 60 70 80

Editor’s note: The graph above excludes “None of the above,” which were 4% of respondents.

Only 30% say their performance management

processes accurately portrays performance
management

37 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: PM leaders are nearly twice as
likely as laggards to say PM improves
relationships between managers and
employees
When it comes to features of their PM process, PM leaders and laggards
differ in substantial ways. PM leaders (72%) are considerably more likely
than laggards (40%) to say their performance management systems
improve relationships with managers. One reason for this may be
because managers in PM leader organizations are more likely to engage
in continuous communication. That is, PM leaders (59%) are more likely
than laggards to allow for continuous feedback (40%).

PM leaders (48%) are also twice as likely as laggards (24%) to indicate

their performance management process accurately portrays employee
performance. This may be, in part, due to greater transparency, with more
feedback and more data from technology as well as better structure and
accountability, as previously discussed.

38 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Which of the following are features of your organization’s
performance management process? (select all that apply)

Improves relationships 72%

between employees
40%
and managers

59%
Allows for
continuous feedback 40%

56%
It is easy to use
44%

55%
It is easy to understand
PM leaders are twice 44%
as likely to accurately
portray employee 48%
Accurately portrays
performance
employee performance 24%

0 10 20 30 40 50 60 70 80

PM Leaders PM Laggards

HRRI Research Takeaway: Good performance management is far more likely than weak
performance management to improve relationships between employees and managers. One way
to enhance PM may be to make healthy feedback more frequent, or even continuous. It seems
to help if processes are relatively easy to understand and use. Although it’s difficult to accurately
portray something as complex and ever-changing as performance, organizations should strive
to portray performance as accurately and fairly as possible even while keeping the process
constructive, useful and usable.

39 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: More than two-thirds say managers
see performance management as simply an
obligation to get through

We asked respondents who do not think the performance management

process “improves relationships with managers and employees” why that
is the case and found a large majority think managers and employees
just see the performance review as an obligation to get through (68%).
Another 64% indicate that managers lack good skills in this area.

It is again likely that communication may be breaking down between

the manager and employee possibly because managers are not adept
at coaching employees well because they do not understand how to
motivate or develop employees based on their backgrounds. Just 14%
indicate that employees do not like constructive feedback, and 11% say
performance management appraisals are too threatening.

In the previous question, you did not choose “It improves

relationships between managers and employees.” Why don’t
you feel the performance management process improves
relationships between managers and employees?

It is seen as an obligation to just get through 68%

Managers lack good skills in this area 64%

Only 14% think

employees do not Employees do not like constructive feedback 14%
like constructive
feedback
Performance appraisals are too threatening 11%

0 10 20 30 40 50 60 70 80

Editor’s Note: This chart does not include those who responded, “other.”

40 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: Although formal appraisals are
still most likely to happen only once a year,
other forms of performance management
occur more frequently
Although a majority of formal appraisals happen once a year (58%),
feedback between supervisors and employees (69%) happens four times
or more a year. Conversations about performance are also most likely to
occur four times or more per year. This highlights that most managers
and employees are indeed communicating about performance beyond a
formal review period.

However, we also see that, despite the fact that helping “individual
employees learn and grow” is among the objectives of performance
management, only 27% say they have conversations about career goals
and aspirations four times or more in a year.

On average, how often are the following actions conducted in your organization?
80
69%
70
57% 58%
60 55%

50

40
28% 27% 27%
30 22% 21%
21% 21% 19%
20 13% 12% 12%
10% 8% 8%
10 5% 5%

Less than once a year Once a year Twice a year Four times or more a year

Formal reviews or appraisals of employee performance Supervisor and employee conversations about career goals
Supervisor and employee conversations about performance Work-related feedback between supervisors and employees
Peer-to-peer feedback (coworkers give one another feedback)

Editor’s Note: This chart does not include those who responded, “Don’t know.”

In 57% of organizations, peer feedback occurs

less than once per year

41 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: PM leaders have supervisor-
employee conversations about performance
at least quarterly
PM leaders (70%) are more likely than PM laggards (55%) to implement
frequent (that is, four or more times per year) feedback among
supervisors and employees. PM leaders (60%) are also considerably
more likely than laggards (46%) to have more frequent manager and
employee conversations about performance. Moreover, nearly twice as
many PM leaders (33%) as laggards (17%) have frequent conversations
around career goals and aspirations.

Finally, it is important to point out that PM leaders (24%) are more likely
than laggards (6%) to conduct formal appraisals four times a year
or more frequently. Such conversations bring forth the potential for
managers to course correct directives to help the business, and this also
serves as an opportunity for managers to give employees development
tools to reach their performance goals. In other words, feedback has
a chance to be more natural but also needs to be directive and have a
purpose for true performance and development to happen.

42 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 On average, how often are the following actions
conducted in your organization?
(percent responding “Quarterly or more frequently”)

70%
Work-related feedback
between supervisors and
employees 55%

Supervisor/employee 60%
conversations about
performance 46%

Supervisor/employee 33%
conversations about career
Four times as many PM goals 17%
leaders talk about the
formal review at least 24%
once a quarter or more Formal reviews or appraisals
of employee performance
6%

0 10 20 30 40 50 60 70 80

PM Leaders PM Laggards

HRRI Research Takeaway: Generally speaking, more frequent conversations about performance
and development are associated with greater self-reported performance management success.
Of course, this assumes that performance-related conversations are constructive and conducted
in a skillful manner. Obviously, more isn’t better if the quality is low.

The differences between leaders and laggards are especially large (nearly a 2X disparity) in the
area of conversations about career goals. Although not every performance conversation needs to
be related to career development, it may well make sense to check in more often than just once a
year on developmental progress. This helps both managers and employees align organizational
and departmental goals with individual work goals. Of course, every corporate culture is different,
so employers must do whatever works best for their particular organization.

43 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 The Prevalence of Performance
Management Technology
Finding: Forty-two percent of
organizations use technology to support
performance management to a high or
very high degree, with large firms being
the most likely to use it
Just over two-fifths (42%) use performance management technology to
high and very high degrees, while 17% use it to a moderate degree. Two-
fifths do not use it at all (20%) or use it only to a small degree (21%).

Those that use technology more often can more easily automate and
structure processes to better support their employees and managers.
For example, these systems help schedule performance discussions,
hold the baselines for performance evaluations, and store feedback and
historical review data.

By Organization Size
Smaller organizations (21%) are far less likely than large (52%) and
mid-size organizations (48%) to use technology to high and very high
degrees. This might be because some smaller organizations think the
investment in the technology is less likely to provide a payoff for them.

44 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 To what degree does your organization use any type of digital
technology for the purpose of performance management?
(please select the one that best applies)

Very high degree 14%

High degree 28%

Moderate degree 17%

Small degree 21%

Not at all 20%

0 5 10 15 20 25 30

A fifth of respondents do not use technology

to support performance management, but they
tend to be smaller organizations

45 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: PM leaders are more likely to use
computer technology to a high or very high
degree
PM leader organizations (53%) are more likely than laggard
organizations (35%) to use digital technology for performance
management to a high degree or very high degree. This may be because
they recognize that technology helps them provide structure around
performance management, allowing employees and managers to better
understand what they are expected to do to manage their performance
over time. In addition, technology may help PM leaders capture historical
data that is critical to helping them make strategic decisions about
employee and business performance today and in the future.

To what degree does your organization use any type of digital

technology for the purpose of performance management?
(percent responding high or very high degrees)

53%

35%

0 10 20 30 40 50 60

PM Leaders PM Laggards

HRRI Research Takeaway: Adopting performance-management technology may not be

imperative to every organization, but it is correlated with higher PM success. If your organization
is struggling with performance management, then you may want to investigate existing
technologies and see if one could lend greater structure and effectiveness to your system.
Likewise, if your current technology is not meeting the needs of your organization well, you should
consider investigating alternatives. There are many different kinds of technologies on the market
today, so it’s seldom been easier to find one suited to your organizational needs.

46 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: Half of the organizations use
performance management module(s)
bundled into the HRIS/HRMS
Among organizations that use some sort of performance technology,
half (51%) use a module bundled into HRMS/HRIS. Organizations often
choose a module for easier integration and comprehensive performance
management supported by one provider.

However, a bundled solution may have fewer needed features than

some standalone/single-point solution providers, which are used by
17% of respondents. Standalone/single-point solutions can typically be
integrated with an HRMS/HRIS, though this process may take time and
work. Another 17% built their own performance management software,
and an additional 27% use Excel, Access, or similar spreadsheet or
database programs.

We should note, however, that this was a “select all that apply” question,
and organizations often have more than one technology. For example,
among those that have a single point solution, 17% also have a bundled
module. And, of those that use spreadsheet or database programs,
nearly a third (32%) also have a bundled solution and 11% have a single
point solution.

By Organization Size
Large (14%) organizations are far less likely than small (39%) and
mid-size (34%) to rely on spreadsheet and database programs. Large
organizations, by contrast, are much more likely to use modules bundles
into an HRMS (65%) when compared to small organizations (23%).

47 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Which technologies does your organization use to support
performance management? (select all that apply)

Module(s) bundled
51%
into HRIS/HRMS

Excel, Access, or
similar spreadsheet 27%
or database programs

Internal/customized software
built specifically for 17%
performance management

Stand alone or single

17%
point solutions

Other 10%

0 10 20 30 40 50 60

Editor’s Note: Those who responded, “Not at all” to the question “To what degree does your
organization use any type of computer technology for the purpose of performance management?”
were not shown this question.

More than a quarter still use spreadsheet

or database software for performance
management

48 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: Many performance management
technologies seem underpowered
We asked organizations about which capabilities their performance
management technology system(s) include.

The most commonly cited capabilities are:

● includes performance appraisal ratings (63%)
● facilitates employee performance reviews/or appraisal processes
(62%)
● allows users to evaluate performance in relation to goals (58%)

Overall, these capabilities indicate that most organizations are using

technology to track and monitor their review process, which is often
based on performance goals. Fewer organizations, however, have
technology with a higher degree of automation and user configuration
such as “permits automated reminders” (51%), “allows workflow
approvals” (48%), and “enables one-on-ones and/or check-ins between
managers and employees” (42%). The lack of reminders and timely
workflow could put organizations at more risk for biases such as
recency error (where managers often have trouble remembering older
performances).

Most organizations are also not using technology as much for

development and rewards. In fact, just 28% indicate their technology
aids training and development, which is concerning given that helping
employees learn and grow is among the widely cited objectives
of performance management. Just 23% say their technology aids
communication, another major objective of PM.

49 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Which of the following capabilities does your performance
management technology system(s) include?
(select all that apply)

Includes performance appraisal ratings 63%

Facilitates employee performance

62%
review or appraisal process

Allows users to evaluate performance

58%
in relation to goals

Permits automated reminders 51%

Allows workflow approvals 48%

Tracks performance review meetings 44%

Enables one-on-ones and/or check-ins

42%
between managers and employees

Enables 360-degree feedback between

29%
managers, employees and peers

Aids training and development 28%

Enables recognition/praise by others 28%

Aids communication 23%

Includes a calibration process 19%

Can integrate with third-party solutions 16%

None of the above 7%

0 10 20 30 40 50 60 70 80

Only 28% of PM systems aid training

and development and just 23% aid
communication

50 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: PM leaders are twice as likely to be
able to integrate with third-party solutions
PM leaders (23%) are nearly twice as likely as laggards (12%) to be able
to integrate with third-party solutions. This allows for more seamless
functioning of their PM tech systems.

Which of the following capabilities does your performance

management technology system(s) include?
(select all that apply)

23%
Can integrate with
third-party solutions
12%

0 5 10 15 20 25

PM Leaders PM Laggards

HRRI Research Takeaway: We think organizations should document the capabilities of their
technological systems and compare those capabilities to needs. Is there a close match? If so,
then they probably have the right technology.

Another area to consider is whether those who use the system are knowledgeable about and
using the most important capabilities. Sometimes HR professionals and managers are not even
aware of all the capabilities of their system.

This research suggests that being able to integrate third-party solutions is associated with greater
PM success, but we suspect that this all boils down to the details. The question is which system
are most important to integrate. For example, given that learning and communication are major
goals of the PM process, we are surprised at how few say their systems aid communication or
training.

51 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Finding: Roughly half are encouraging
employees to enter timely feedback
We asked respondents which features their performance-related
technologies include. Three features exist in about half of the
organizations with PM technologies:

● provides timely reminders to managers (54%)

● permits managers to add notes at any time (53%)
● permits employees to add notes at any time (48%)

These three features help to document a culture of continuous feedback

so managers have a trail that backs up the conversation and can more
easily compare performance pay, albeit only about half of them are using
those features.

PM technology systems more rarely make training and development

suggestions (18%) and just a third track training and development
achievements (34%), suggesting some organizations do not focus on
development as much as performance or that some organizations
have a separate learning and development system that is distinct
from performance unless data is entered manually. Likewise, some
organizations may not value recognition/rewards as part of performance
or have a separate distinct rewards/recognition system. About a third
indicate their performance system allows for recognition of employee
achievements (30%) and only 13% allow rewards for employee
achievement.

As discussed in the previous finding, many organizations do not

integrate their HR, pay, development and rewards technology systems
well, and this can make managing performance data and performance
management processes challenging because it fails to accurately
track activities well with key metrics and data, which makes it harder
for performance goals and performance pay to be as objective and
transparent as possible.

52 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 Which of the following features do your performance-related
technologies include? (select all that apply)

Provides timely
reminders to managers 54%

Permits managers to
add notes at any time 53%

Permits employees to
add notes at any time 48%

Tracks training and

development achievements 34%

Allows recognition of
employee achievements 30%

Makes training and

development suggestions 18%

Allows rewards for

employee achievements 13%

None of the above 16%

0 10 20 30 40 50 60

Editor’s Note: The graph above excludes the “other” category responses.

Less than one-fifth say their

performance-related technologies make
training and development suggestions

53 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 The Future of Performance
Management
Finding: Organizations most commonly
say future performance will include more
feedback and continuous conversations
Given previous findings in this report, we see it as a positive sign that
nearly three-fifths (58%) of respondents foresee more frequent and
continuous feedback over the next two years in their organizations. It is
also encouraging to find that more than half anticipate greater manager
training (55%) as well as more frequent, natural conversations (48%).

We suspect, given our findings, that many managers need training

on how to better interact with employees to build rapport. Further,
respondents may see value in training to better prepare managers,
direct reports and their teams on how to give and accept feedback in a
clear, concise and positive way, particularly as it relates to development
activities (47%).

That said, we are concerned that so few organizations will focus on

becoming more objective and data based (26%), particularly given the
lack of technology and low performance management effectiveness
scores documented by this study. Without objective data, it is more
difficult for an organization to become more aligned with business goals
(46%) and become better at boosting employee performance (38%).

By Organization Size
Smaller (60%) organizations are more likely than larger (39%) and mid-
size organizations (42%) to say that PM will become more aligned with
business goals.

54 The Future of Performance Management 2023 www.hr.com | 877-472-6648 | copyright © HR.com 2023
 In your organization, how will performance management
change over the next two years? (select all that apply)

Include more frequent or continuous feedback 58%

Include more manager training 55%

Include more frequent, natural conversations 48%

Will become more focused on development activities 47%

Become more aligned with business goals 46%

Become better at boosting employee performance 38%

Focus more on employee experience and well-being 33%

Become more automated 29%

Will become more objective and data-based 26%

Increasingly be based on verbal/written

25%
conversations rather than ratings

Become more integrated with

24%
employee engagement data

Become less formal and structured 19%

Become more project-based 11%

Will not change 7%

Increasingly disappear from the landscape 4%

0 10 20 30 40 50 60

Just 26% indicate that performance

management will become more objective
and data-based

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 Finding: In the future, PM leaders will focus
more on business goals alignment
Compared with PM laggards, PM leader organizations are more likely
to say that PM will become more aligned with business goals (53%)
and that they’ll get better at boosting employee performance over the
next two years.

In your organization, how will performance management

change over the next two years? (select all that apply)

53%
Become more aligned
with business goals
44%

47%
Become better at
boosting employee
Laggards are less performance
likely to say PM will 34%
become better at
boosting employee
performance over 0 10 20 30 40 50 60

the next two years PM Leaders PM Laggards

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 HRRI Research Takeaway: Over the next two years, organizations
will increasingly boost the frequency of performance feedback, train
managers to be better at PM, and focus more on career development.
At the same time, organizations that already excel at PM will work
to align it better with business goals and focus on boosting overall
employee performance.

Therefore, we recommend the following actions where they make

sense for your organization:

● Consider the frequency of performance feedback and, if you

find it doesn’t occur frequently enough for optimal results,
determine how to best increase that frequency (assuming the
feedback is of high quality to start with).

● Ensure your managers are sufficiently trained and, if they

are not, develop instruction to help them become better at
performance management

● Consider combining performance management with career

development to ensure better alignment of the aspirations of
employees with the goals of the organization.

● Analyze overall organizational productivity and quality. Can

you measurably link overall productivity to the quality of the
performance management system? If not, why? How could
such links be made?

● Align the entire performance management system with the

strategic goals of the larger organization.

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 Finding: Over the next two years, nearly two-
fifths indicate that their PM systems will
change to a high or very high degree
A quarter of organizations indicate that the degree of change in their
performance management systems over the past two years was
high or very high. This is partly due to the changes brought about by
the pandemic. For example, many organizations began conducting
performance reviews online and some organizations needed to add
collaboration features and video technology.

Looking forward, however, respondents expect an even higher degree of

change in the area of performance management, with 41% expecting a
high or very high amount of change.

Why Is Change Expected to Grow?

Why is a deeper level of change expected in the future? Perhaps, as
we’ve noted before, this is because many organizations have been
experiencing productivity declines.

Also, as we finalize this report, the economy has still not entered into
a long-predicted recession. Some HR professionals, however, may
nonetheless be evaluating their performance management data in order
to determine how they could restructure their workforce if they need to.
Organizations may be thinking about how they will use PM data to justify
who stays and who goes.

We also think that organizations generally want to get better at

performance management and may realize that their data is not as
comprehensive as it could be to create the most structured and objective
processes. Because of that, some organizations may expect to enhance
or replace their existing digital technology application or look to more
tightly integrating performance management with other technologies.

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 To what degree has your PM system changed and to what
degree will it change?

Over next
two years 28% 13% 41%

A quarter indicate
Over last that over the last
two years 17% 8% 25%
two years their
performance
management system
0 10 20 30 40 50 changed to a high or
High Very High
very high degree

Editor’s Note: We have removed the Don’t Know responses from this data and recalculated the
percentages. Don’t knows represented 3% of the original “Over the last two years” responses and
11% of the original “Over the next two years” responses.

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 Key Takeaways
The findings of this research have many organizational implications.
We have highlighted them along with some recommendations in the
takeaways below.

1
Get top leaders to “rethink” PM and get their support for change.
Key Our research shows many organizations today put a significant level
Takeaway of effort into managing through a “traditional” infrequent performance
appraisal. It is often simply a ritual that managers and employees just
need to get through. It checks the compliance box, but many times
fails to adequately capture the performance details that happen from
one review to the next. This can cause pay decisions to be plagued by
subjectivity and bias, making compensation and rewards inequitable.
Consider asking leaders key questions to help them rethink PM. What are
the pros and cons of renewing performance management by enabling
more employee-manager interaction, feedback, and documentation of
milestones, rewards, and development? How should managers lead their
people to keep pace with changing on-the-job directives and goals over
time? Challenging their way of thinking by asking questions and showing
them alternatives to overreliance on traditional PM may lead to better
results.

2
Be intentional and strategic about structuring performance
Key management processes. This begins with designing a strategy
Takeaway that clearly defines what performance management means to the
organization. Organizations tend to have more effective PM processes
when those processes align their performance management objectives,
metrics, goals, and technologies with the overall vision and mission.
Think about your organization’s key objectives for PM. Evaluate
the extent to which they have been achievable and comprehensive.
Identify the positive and negative aspects of the PM process and make
applicable changes. Provide clarity to employees and managers on
what is being measured and tracked. Let them know how performance
contributes to the overarching goals of the organization and meets
employee needs. Make sure the process includes goals that are agile,
objective, and measurable.

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 3
Consider DEIB and pay equity objectives in the PM process. Take
Key a good look at how your organizational practices support DEIB
Takeaway and performance management objectives. Check if pay is linked to
performance evaluations, and evaluate how much tenure, education, and
salary history matter relative to work experience, certification and skills.
Consider tracking performance measures as much as bonuses, stock
options, pay bands, and comparable jobs and using regressions to look
for pay inequities. Check the extent to which succession plans consider
the diversity of talent.

4
Consider expanding the role technology plays in performance
Key management. The right technology can help an organization
Takeaway better structure and scale its performance processes; however, the
implementation only yields results when people actually use the system.
Ensure they are motivated to use the system and that they have access
to the data they need. Some potential features include scheduling
meetings, inserting development feedback/performance notes, tracking
milestones, identifying and linking performance/development objectives,
and tracking rewards and recognition. One of the other benefits of
technology is that it helps to build equity into the process. Make sure
that potential is being realized.

5
Embrace a PM culture that emphasizes employee development and
Key growth. Consider having conversations with managers to understand
Takeaway their development needs as well as the needs of their team. Start
drawing performance-oriented development plans and turn them
into action. Consider online learning, job shadowing, stretch projects,
mentoring, and continuing education. Make sure you make them relevant
to company goals, career paths, and general learning and growth needed
for their existing roles. Understanding an employee’s short and long-term
career goals helps build the leadership pipeline, employee engagement,
and retention.

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 6
Define what “continuous feedback” means to the organization.
Key Consider the who, what, why, how often, and the content of feedback.
Takeaway Identify scenarios when feedback should be direct, indirect, formal, or
informal. Feedback has the potential to fail when it has no purpose.
Consider the employee’s purpose as well as the organization’s goals
and the value of natural conversations. Define key milestones, and then
decide on the meeting frequency. Identify when feedback may be seen
as too much for employees or managers and curtail it to adequate
frequency.

7
Train managers and employees to be better communicators and
Key partners. Managers and employees have different values, backgrounds,
Takeaway and opinions that often dictate their working styles and preferences.
Consider manager and employee training that centers on how and when
each should share their opinions about the job and the greater world,
and teach them to recognize their inherent biases and the importance of
candor. Also, give them the tools they need to formulate “motivational and
respectful words” to help them manage up or manage down in an effort
to improve and foster an employee-manager relationship as opposed to
stressing it. Encourage building a rapport between them.

8
Develop managers to be better coaches and review assessors.
Key Understand that while coaching is critical, giving positive and constructive
Takeaway feedback is a skill that takes time to develop. This may be especially
applicable for new managers, managers who are also individual
contributors, and managers who are new to a company, department or job.
Consider what kind of training managers get to manage transitions, give
feedback, and manage performance appraisals. In between the review
period, encourage managers to teach employees to become problem
solvers.

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 9
Hold managers accountable for forging a strong partnership with
Key employees. There are a variety of ways of doing this, from simply checking
Takeaway to ensure reviews are carried out to measuring other performance-related
outcomes such as employee engagement, performance, and turnover rates.
Also consider incentivizing excellent performance management by tying it
to promotion opportunities and total rewards programs.

10
Consider managing and measuring project and team performance.
Key Managers are placing greater emphasis on team rather than just individual
Takeaway performance. However, the performance review process and their
associated goals/metrics for motivating and rewarding teams have not
caught up. One idea is to create a performance scorecard that includes
team performance, in addition to an employee’s individual performance.
Managers may also want to put greater stress on behavioral metrics, as
they often matter more when employees spend more time interacting with
their peers.

11
Take a deep dive into intrinsic and extrinsic motivation and rewards.
Key Managers and employees alike are not always aware of what drives each
Takeaway other to be successful in their professional and personal endeavors.
Identify employee needs and extrinsic rewards they require to be motivated.
Studies show that tapping into an individual’s intrinsic motivation by
nurturing interests can help them to hone their passions and become
more self-assured and self-directed. As technology continues to blur the
lines between an employee’s professional and personal lives, employees
may simply be motivated when they understand that managers know and
care about what happens to them outside of the walls of the office, further
emphasizing that the manager-employer relationship may be what matters
most to achieving performance goals and business outcomes.

12
Include compliance and legal in the process. There are many regulations that
Key relate to pay. Identify a point person or team that will oversee these regulations
Takeaway and help HR update performance management processes and technology as
necessary. Be proactive instead of reactive. Decide what information will be
shared with top leaders and when.

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