Employers are vying for better productivity gains from workers, but improvements have been slow to come. RTO policies and increased employee monitoring may provide some initial advantages, but increased clarity on performance management systems may be the ultimate solution to the problems that persist. A new report from WTW revealed that only 20% of organizations believe their managers provide sufficient training or feedback to employees, which is a startlingly low number for the scale of operations running today.
The report also found that many organizations believe they could see productivity gains of 10% if only their performance management processes were optimized. Effective performance management also comes with the perk of improving employee engagement, fueling workers’ desire to learn and grow at the organization rather than moving on. Unclear performance management metrics leave a lot unsaid despite having all the data needed on the table, suggesting that businesses that want to see a spike in productivity need to invest in change.
Efficient performance management could maximise workplace productivity, but the lack of clarity on operations may be holding your organization back. (Image: Freepik)
Performance Management Systems Lack Clarity and Structure in 2025
The importance of performance management is understood by every business, and the very presence of managers to oversee operations is a sign of this theory. Managers not only deploy these operations, but their roles require them to provide feedback and criticism on every metric, governing how their subordinates operate. Despite this, WTW’s survey shows that only 39% of organizations believe their performance management process is effective at delivering on the expectations of “clear goals and priorities, regular feedback, fair ratings, and strong ties to rewards.”
It’s easy to place the blame solely on managers, only 20% of whom appear to be effective at providing coaching and feedback to employees, but the problem goes beyond that. While managers have certain qualifications that make them eligible to provide this coaching, many are ill-equipped to do so for varying reasons. Some lack the training to make insightful contributions, while others are limited in their authority or opportunity to do so.
“Managers often lack the training and tools needed to have difficult conversations and deliver honest feedback, which limits the effectiveness of performance management,” Kristy McClellan, Director of Work and Rewards at WTW, said concerning the results of the study. “Companies are starting to use AI to increase efficiency, improve the quality of outcomes, and enhance both the employee and manager experience.”
Unclear Performance Management Systems Need to Be Addressed at Once
Understanding why performance management matters is the first step to addressing and improving the capabilities of your workforce. It is just as important to have a clear management system that is easy to understand and employ. In many organizations, workers remain unsure of the exact metrics they are being evaluated on. Some struggle with a lack of instruction on how to improve the metrics they have been poorly rated on.
WTW found that organizations are working to simplify their performance management to introduce clarity into its usage. About 45% of organizations now use a five-point rating scale, with the rest relying on a 3- or 4-point scale. Flipping the numbers, about 54% of organizations have either changed their rating scale or are hoping to do so soon enough.
We have to pause and note that utilizing a simple system can eliminate unnecessary complications within the workplace, however, oversimplified scales can also skew employees into good or bad categories too easily. The need for better performance management shouldn’t solely be looked at in terms of simplification, but the utility of the data and scores that are calculated in the end.
Businesses Are Turning to AI to Address the Need for Better Management
Just like rifling through a box of tools to see what you can use for a project, employers are looking at the resources at their disposal. It is not surprising to see them pull out some AI tech from the mix of options. WTW found that over one-third of organizations are using AI for their performance management process, and a similar number of them should soon follow suit. How are they addressing unclear performance management with AI exactly? It’s quite simple, really.
Around 44% of businesses are using AI for goal setting, while 40% use AI to construct developmental plans. This is followed by 37% reporting AI use in performance reviews and 35% relying on the technology for coaching. We’ll be the first to mention that AI technology is not essential to govern these aspects of performance management in the least.
It is much easier and more efficient to rely on HR teams and their conversations with employees to handle any aspect, from conducting performance reviews to charting a course of action to improve performance based on these reviews. However, if you’re looking for ways to implement AI tools within our organization, this does present a productive opportunity to do so.
Communicate for Clarity on Performance Management
From hiring a consulting service to taking tips from AI, there are many ways to improve the performance management process and introduce clarity to the system. While relying on these external tools might feel more convenient, they can be ultimately ineffective if the employees are left out of the conversation and don’t fully grasp how and what these tools and services evaluate.
Managing employee performance opens the golden door to productivity, but it requires collaboration and communication with the workers who are being managed. Understanding their strengths and limitations isn’t something that can be achieved from a distance. It also cannot be achieved without the support of good managers.
With all the benefits considered, investing in training managers on how to evaluate and regulate performance is essential for every business that hopes to maximize its performance and seek the scale of growth that has evaded it thus far.
Is your organization also looking for greater clarity in performance management or other aspects of supervising a workforce? Subscribe to The HR Digest for more insightful glimpses into the shifting nature of the workplace and the trends and technology that are reshaping how we operate.