Employers using pay to drive performance more likely to outperform peers

performance Businesses that make effective use of pay programmes to drive individual and team performance are 1.2 times more likely to outperform others, and 1.4 times more likely to report higher employee productivity, according to research by Willis Towers Watson (WTW).

More than 800 global organisations were surveyed, highlighting that employers using performance management programmes were 1.5 times more likely to financially outperform their industry peers, and 1.25 times as likely to report higher employee productivity.

Half of employers (49%) said they had ongoing and meaningful performance dialogue between managers and employees in a remote or hybrid working environment, with another 40% planning or considering setting this up. Almost a quarter (23%) had improved the employee and manager experience, while 54% were planning or considering doing so.

A third of organisations said their staff felt their performance was evaluated fairly, while 14% had altered their management approach to align with remote and hybrid working models.

One in four (26%) global and UK employers reported being effective at both managing and paying for performance. More than nine in 10 (95%) cited driving organisation performance as a key objective for performance management, yet just 45% said their management programme was meeting that objective.

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

“While most organisations are currently planning for larger increases in 2023, the need to demonstrate to employees how their pay is tied to performance has never been greater.”