Performance management and pay for performance affect business outcomes
Organisations that are highly effective at both aspects are more likely to say they perform better financially
Significantly higher financial performance
Effective at performance management: 1.48X
Effectively using pay-for-performance programs: 1.16x
However, only 2 in 5 employers have figured out how to get it right
How are Asia Pacific employers handling these programs?
They’re putting focus on different performance aspects
- Individual performance 82%
- Team performance 60% (High-effectiveness organisations are 3x as likely to also include these aspects)
- Demonstration of skills 63%
- Individual potential 54%
- Progress against development plan 53%
They’re differentiating pay for performance
Employees who did not meet expectations
Merit increases: 0%
Short-term incentive: 0%
Employees who met expectations
Merit increases: 100%
Short-term incentive: 100%
Employees who far exceeded expectations (e.g., top 10%)
Merit increases: 170%
Short-term incentive: 147%
Note: All numbers are medians expressed as a percentage of the median of the number for employees who met expectations.
Yet only 2 in 5 indicate their employees feel their performance is evaluated fairly
Managers play a critical role
Majority of employers agree that managers are effective in differentiating and evaluating performance fairly
65%
Managers are effective at assessing the performance of their direct reports
63%
Managers are effective at properly differentiating the performance of their direct reports
Note: Agree/strongly agree
Barriers to managers properly differentiating their direct reports’ performance
44%
Discomfort in explaining the differentiation/having difficult conversations
44%
Concern/avoidance of having to address underperforming employees
38%
Concern/avoidance of having to address underperforming employees
Note: 4 or 5, to a very great extent, on a 5-point scale
Employers are taking actions to improve the performance management approach and process
Changes in the performance management approach
- Ensure ongoing and meaningful manager and employee performance dialogue in a hybrid working environment
Already taken action: 43%
Planning or considering taking action: 38%
- Allow for more flexibility in goal-setting and/or discretion in year-end evaluation to account for business volatility
Already taken action: 41%
Planning or considering taking action: 42%
- Strengthen linkages between performance management and career development
Already taken action: 35%
Planning or considering taking action: 56%
- Mitigate against rater bias
Already taken action: 27%
Planning or considering taking action: 55%
- Respond to recent talent attrition pressures through enhancements in performance management redesign and delivery
Already taken action: 15%
Planning or considering taking action: 57%
Changes in the performance management process
- Improving goal alignment
Already taken action: 33%
Planning or considering taking action: 51%
- Improving employee understanding of how their performance is evaluated
Already taken action: 32%
Planning or considering taking action: 57%
- Improving employee perception of fairness of the evaluation process
Already taken action: 30%
Planning or considering taking action: 57%
- Introducing Objective and Key Results
Already taken action: 26%
Planning or considering taking action: 33%
- Improving the employee and manager experience
Already taken action: 25%
Planning or considering taking action: 63%
Two most common areas employers are investing in to enhance employee experience of performance management
73%
Manager capability building
72%
Employee learning and development programs
Note: 4 or 5, to a very great extent, on a 5-point scale
Next steps for employers
- Help employees set performance goals that are aligned with their team’s objectives as well as the strategic goals of the organisation.
- Consider employee behaviours as well as attainment 2 of goals when assessing performance.
- Enhance manager capabilities by providing training around performance assessment, sharing feedback and handling difficult conversations.
- Emphasise the importance of having career development programs and a continuous dialogue with employees, particularly in hybrid work environments.
- Differentiate pay through merit increases and rewards programs to recognise and retain outstanding performers.
Source: 2022 Performance Reset Survey – Asia Pacific findings
About the survey
2022 Performance Reset Survey, exploring actions organisations are taking, or considering taking, to reset performance management and pay for performance, was conducted mid-September to early November. The infographic reflects responses from 377 Asia Pacific organisations employing 1.2 million employees.
