Performance Management Statistics 2025: Trends & Insights

Performance management remains a core function of business success. In 2025, companies are rethinking measuring performance, giving employee feedback, and aligning goals with business outcomes, especially as AI and remote work reshape workplace expectations.

B2B Reviews analyzed the latest performance data to uncover what’s working, what’s not, and where companies are investing. As expectations rise on both sides of the manager-employee relationship, performance management is becoming a key driver of engagement and long-term success.

The Current State of Performance Management

Many businesses know their current performance management approach needs improvement, but only a few are taking meaningful action. Despite strong awareness, there’s a growing gap between intention and execution.

• 65% of companies say rethinking performance management is important, yet only 24% have started making changes, and just 6% report significant progress — leaving a 59-point gap between intent and action.
• Companies that prioritize performance are 4.2x more likely to outperform peers, report 30% higher revenue growth, and see five percentage points lower attrition on average.
• 58% of companies still rely solely on spreadsheets to track performance, limiting visibility and slowing progress.
• 61% of managers and 72% of employees don’t trust their organization’s performance review process, raising concerns about fairness and usefulness.
• Over 50% of employees believe recognition would boost engagement, yet it’s still underused in many performance strategies.
• Around 60% of companies evaluate both what employees achieve and how they work — but many still focus only on outcomes, ignoring values or behaviors.
• Only 2 in 5 organizations use 360-degree feedback, while most still rely solely on downward evaluations.
• Many companies still use outdated forced distribution models (top 10%, middle 70%, bottom 20%), which can harm morale and create unhealthy competition.
• There’s a shift from complex rating systems — businesses are increasingly adopting simpler three- or four-tier formats for clearer evaluations and quicker decisions.

Challenges in Performance Management

Many companies are trying to improve how they manage performance, but several issues still get in the way. These challenges make it hard to give fair feedback and help employees grow.

• 77% of HR leaders believe traditional performance reviews fail to reflect employees’ actual day-to-day work.
• Fewer than 1 in 3 employees feel reviews are fair and equitable, while 64% see them as a complete waste of time. Bias is common, especially for underrepresented groups — women often receive vague or personality-based feedback.
• Only 26% of companies say their managers are highly effective at enabling performance. Most managers lack the training and confidence to give useful feedback, leaving high performers feeling overlooked or unsupported.
• Managers spend only 13% of their time developing people, limiting coaching and growth opportunities.
• 47% of employees don’t know what’s expected of them, showing poor alignment between goals and roles and leading to lower engagement.
• 75% of companies rate their ability to evaluate individual contributions as ineffective, making it hard to track progress or reward achievement.
• Performance reviews are costly — ineffective evaluations can cost businesses between $2.4 million and $35 million annually, especially when reviews are time-consuming and disconnected from daily operations.
• When employees feel disconnected or unrecognized, turnover rises. A single negative team member can lower overall team effectiveness by up to 40%.

Performance Management Technology Statistics

Technology is changing the way companies manage performance. More organisations are investing in tools that support goal setting, feedback, and ongoing improvement.

• The global performance management systems market was valued at $5.6 billion in 2024 and is expected to grow to $9.79 billion by 2033, at a CAGR of 6.4%.
• The United States is leading this growth, with projected revenue of $2.98 billion in 2025 from enterprise performance management (EPM) software alone.
• Businesses using AI tools are twice as likely to succeed in continuous performance management compared to those that don’t adopt them.
• AI is becoming a standard part of performance tools — according to Microsoft’s 2024 Work Trend Index, 75% of global knowledge workers now use AI in some form.
• When Oracle launched an AI-powered performance review system in 2023, 89% of employees were willing to use it, showing growing trust in AI-assisted reviews.
• 75% of multinational companies now use OKR-based systems, helping teams set clear goals and track progress more effectively.

More businesses are using performance management software to make tracking easier, improve visibility, and reduce time spent on manual reviews. With AI and goal-setting frameworks becoming more common, technology is helping companies take a more focused approach to managing employee performance.

The Employee Engagement Crisis

The performance management landscape in 2025 is deeply affected by a broader employee engagement crisis. According to Gallup’s most recent research, employee engagement in the U.S. has sunk to a 10-year low, with only 31% of employees engaged in their work.

• Among the engagement elements that declined most in 2024, key performance management factors stood out:
  • Only 46% of employees know what is expected of them at work, down 10 points from a high of 56% in March 2020.
  • Just 39% of employees feel strongly that someone cares about them as a person, a drop from 47% in March 2020.
  • Only 30% strongly agree that someone at work encourages their development, down from 36% in March 2020.
• Gallup estimates that low engagement costs the global economy $8.9 trillion annually, or approximately 9% of global GDP, highlighting the massive economic impact of disengaged workforces.
• In contrast, the best organizations Gallup has studied reach 70% or more engaged employees more than three times the global average, demonstrating that effective performance management can dramatically improve engagement metrics.

The Future of Performance Management

As organizations look to the future, performance management is evolving from a periodic review process to a continuous development approach. This shift reflects changing workplace dynamics and employee expectations.

• According to PwC, 75% of companies plan to implement real-time performance management systems by 2025, moving away from annual performance reviews to more continuous feedback cycles.
• Deloitte’s 2025 Global Human Capital Trends survey reveals that organizations with a mature organization design capability are over five times more likely to manage change effectively than other organizations.
• Only 20% of C-suite leaders strongly agree that their HR teams and the workforce practices it manages actually improve their workers’ performance, indicating a significant opportunity for improvement.
• According to Betterworks, only 54% of managers say they’re confident in coaching for career development, highlighting the need for better manager training and support.
• Companies are moving away from traditional performance management systems that only 2% of CHROs believe are effective, according to Gallup’s research.

Bottom Line

Performance management affects engagement, retention, and business outcomes. Many companies still rely on outdated tools, lack trust in their review processes, and struggle to link individual contributions with broader goals.

HR professionals are increasingly turning to AI tools, OKR systems, and performance management software to improve how they track progress, deliver regular feedback, and support employee growth. Despite this progress, challenges such as unclear expectations, low engagement, and limited manager support continue to impact results.

Stronger performance management practices are key to addressing these issues. Companies that focus on continuous development, real-time insights, and better manager training will be better positioned to build high-performing teams and achieve long-term success.

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