Rethinking Performance Management: From process to impact 

• Executives see it as toothless, unable to drive results
• Managers experience it as a bureaucratic burden with little return for effort.
• HR is frustrated by being cast as “process police.”
• Employees are drained by endless cycles of appraisals, forms, and feedback requests that too often leave them feeling disengaged rather than inspired.

Why is this happening? In many organizations, frameworks prioritize the management of performance rather than enabling employees to improve and unlock their performance and potential. However, it does not have to be this way. Organizations can rebalance the equation by rethinking performance management as a lever for business growth, talent engagement, and organizational agility. 

The three biggest priority areas for change are:

In a climate of economic uncertainty, achieving growth and productivity gains is an uphill battle. Performance management must begin with sharper focus: aligning individual contributions with enterprise-level goals that matter.

• Calibrate goals with intent. Ensure goals are relevant, achievable and tied to business outcomes. It is not enough if goals are simply entered into a system. 
• Leverage human and AI collaboration. Harness the power of people and technology to sharpen priorities and accelerate organizational progress and results.

When goals are clear, relevant and shared across the organization, performance management shifts from being a routine exercise to a powerful driver of resilience and growth.  

Today’s managers are under immense pressure. They must inspire, coach and steward talent, yet many lack the skills to deliver. Organizations need managers who can act as performance enablers. 

• Upskill for impact. Focus on core capabilities such as setting direction, giving meaningful feedback, managing the employee experience, activating total rewards and leading through change.
• Invest early: Use structured programs such as Mercer Learning workshops on managerial effectiveness  to build these skills across the business.

When managers are equipped to unlock potential, they become the critical link between strategy and execution

Despite many organizations claiming they have a pay-for-performance philosophy, it’s rarely executed well. Compensation is still largely influenced by tenure, starting salary or subjective factors, rather than performance ratings. This misalignment not only erodes motivation but also hinders the organization’s ability to retain top talent and drive overall performance.

• Use data to test alignment. Analyze how pay correlates with business performance, market competitiveness and shareholder outcomes
• Educate for transparency. Ensure managers and employees, not just HR, understand the organization’s pay philosophy and affordability equation.

Performance management is a strategic tool for growth. By sharpening goals, strengthening managerial effectiveness and aligning rewards with real performance, organizations can transform performance management into a catalyst for both business results and employee engagement.