Most companies have a performance management process in place. The rationale is clear: employees want to understand expectations, know how they are performing and identify opportunities to grow. They want recognition, fair rewards and meaningful development. For organisations, effective performance management is more than a nice-to-have; it is a competitive differentiator. McKinsey research shows that organisations prioritising employee performance are 4.2 times more likely to outperform peers, with 30% higher revenue growth and 5% lower attrition.
Yet, despite its importance, performance management is often experienced as one of the most frustrating and least effective workplace processes. Many companies still struggle to make it a tool for real impact. The Global Performance Management Report 2023 (Institute for Performance Management) found that fewer than 20% of organisations consider their systems truly effective at delivering high-quality feedback, accurate evaluations, coaching or meaningful development.
At the heart of the problem lies a paradox: performance management is meant to motivate and align, but often demotivates and disconnects. Traditional performance reviews are frequently dreaded, closing off communication rather than opening it. Many appraisal systems trigger defensiveness and fail to build the trust needed for open, growth-oriented and meaningful conversations.
Over the past decade, many companies have begun shifting from rigid, retrospective assessments to more agile, integrated and development-oriented models. Drawing on our work with clients, we highlight below four recurring challenges we encounter most often, along with practical strategies to address and overcome them.
1. Misalignment with the Business Reality
Many systems feel outdated, detached from day-to-day business needs and slow to adapt. While frameworks aim to balance the “what” (outcomes) and the “how” (behaviours), they often fail to reflect evolving priorities or organisational culture.
We support our clients in addressing this by:
- Revisiting how strategic goals translate into individual objectives, often moving to shorter measurement cycles e.g. quarterly objectives and key results (OKRs).
- Refreshing competency models to reflect current realities and business needs. Designing value-based behavioural frameworks that bring company values to life and cultivate a culture that is aligned with and supports the business strategy.
- Involving managers in co-creating frameworks to build ownership, practical relevance and a shared language around performance.
2. Overly Complex and Time-Consuming Processes
Performance management in organisations is often perceived as a time-consuming, bureaucratic exercise with little value.
We support our clients in addressing this by:
- Simplifying frameworks – reducing the number of competencies and establishing a unified and practical language across the organisation.
- Ensuring consistency and integration between performance and talent systems to support and reinforce employee development, internal mobility and succession planning.
3. Lack of Trust and Perceived Fairness
According to a survey conducted by Gallup, only 22% of employees strongly agree that their review process is fair and transparent. Unclear criteria, vague rating scales, inconsistent application by managers and ineffective performance discussions undermine credibility.
We support our clients in addressing this by:
- Designing descriptive rating scales with clear, observable, measurable behaviours that leave no room for ambiguity or multiple interpretations, to improve clarity and transparency.
- Introducing calibration sessions where managers justify ratings among peers, creating rigour and consistency.
4. Excessive Focus on Assessment, Not Enough on Development
Many systems emphasise evaluation over growth. Managers often lack the tools and confidence to give developmental feedback or meaningful coaching. In sectors like sport, the arts or emergency services, real-time feedback is fundamental to how they operate. For organisations to adopt a similar approach, performance management systems must be intentionally designed with this in mind. This requires much more than just targeted training. Managers also need to be provided with practical frameworks and tools to have these discussions and to effectively coach and develop their teams.
We support our clients in addressing this by:
- Equipping managers with practical frameworks that clearly define behaviours, making development discussions easier and more effective.
- Replacing annual reviews with more regular, development-focused check-ins.
- Providing managers with structured development guides aligned to competency frameworks, to support coaching, on-the-job training and career planning.
- Upskilling managers through targeted, practical training to enable effective coaching and impactful conversations.
- Using calibrated discussions to build a shared language and culture where conversations go beyond assessment to include employee potential, career growth and development opportunities.
How Performance Management Shapes the Employee Experience and Inclusion
Effective performance management goes beyond ratings and targets – it is about fostering trust, fairness and psychological safety. When done well, it enhances employee engagement, inclusion and wellbeing, helping to create workplaces where people feel valued, supported and able to thrive. Performance management, when reimagined, moves beyond a box-ticking exercise. It becomes a dynamic system that connects people to the company’s and team’s purpose, drives growth and unlocks potential across the organisation.
At Pave the Way, we support organisations in making this shift by designing and embedding performance management systems that are aligned, impactful and human-centric. We partner with you to:
- Co-create performance frameworks and behavioural models tailored to your strategy and business context.
- Simplify and connect performance with talent and succession processes.
- Upskill managers with practical training and coaching toolkits.
