A recent global study by WTW has found that organisations investing in performance management optimisation can unlock significant productivity improvements across their workforce. The research highlights that well-designed and effectively implemented performance systems not only drive efficiency but also improve engagement and employee satisfaction.
Productivity Potential Hidden in Performance Management
The survey, which gathered insights from over 400 business leaders worldwide, focused on the link between performance management practices and productivity outcomes. Nearly half of respondents reported that enhancing their current performance management approach could boost productivity by at least 10%.
These findings underscore a key message: refining performance processes is no longer just an HR initiative — it’s a strategic business opportunity that can deliver measurable financial and operational benefits.
Four Key Drivers of High-Performing Organisations
WTW identified four critical areas where organisations can make meaningful changes to achieve stronger performance results:
Artificial Intelligence (AI)
Skills Development
Simplification of Processes
Managerial Support and Coaching
The Growing Role of AI
While the integration of artificial intelligence into performance management is still emerging, 37% of organisations have already adopted AI tools to enhance their systems. The technology is most commonly used for goal setting (44%) and development planning (40%), followed by performance reviews (37%) and continuous feedback and coaching (35%).
AI’s contribution lies in its ability to streamline repetitive administrative tasks, personalise development paths, and provide data-driven insights — allowing managers and employees to focus more on growth and outcomes rather than bureaucracy.
Gaps in Skills and Development Initiatives
The study also revealed that nearly half of companies (46%) are not yet focused on improving the skills linked to effective performance management.
Among those that are, the top priorities for improvement include:
Learning, development, and career growth (78%)
Goal setting (40%)
Promotion and progression decisions (29%)
This data suggests that many organisations still rely on outdated or inconsistent approaches to performance discussions, limiting opportunities for career advancement and engagement.
Simplifying Ratings for Fairness and Clarity
WTW’s research further shows that organisations can benefit from simplifying their rating systems to improve fairness and transparency. Around 45% of companies currently use a five-point rating scale, while others rely on three- or four-point systems. Interestingly, over half (54%) of respondents have either already adjusted their rating model or are considering doing so — an indication that performance differentiation remains a work in progress.
“Optimising performance management isn’t just about upgrading software or systems,” said Thom Janssen, Director of Employee Experience at WTW. “It’s about rethinking how organisations define and measure performance, promoting fairness, and ensuring the process genuinely supports both business results and employee motivation.”
The Critical Role of Managers
Another area that continues to challenge organisations is manager capability.
Although most performance evaluations depend on manager feedback, only one in five organisations (20%) believe their managers are truly effective in providing constructive coaching and continuous feedback.
Moreover, while goal cascades — the process of aligning individual objectives with company goals — are widely used, many managers still struggle with setting relevant goals, communicating priorities, and maintaining alignment throughout the year.
AI and Human Insight: A Winning Combination
According to Roman Weidlich, Practice Leader for Work, Rewards and Career at WTW, the findings serve as a wake-up call for organisations aiming to enhance productivity in a competitive landscape.
“With the rising focus on efficiency and output, effective performance management represents an untapped opportunity,” he explained. “More companies are beginning to use AI to improve process efficiency, elevate the quality of evaluations, and enhance the overall experience for both managers and employees.”
The Takeaway: Performance Management as a Growth Engine
The message from WTW’s research is clear — organisations that take a strategic, data-driven, and human-centred approach to performance management can achieve substantial productivity improvements.
By combining technology, simplified processes, skill-building, and stronger managerial support, companies can move beyond traditional evaluations and create performance systems that truly drive engagement, accountability, and business growth.
