Results of the 2025 US Mercer QuickPulse® Survey: Performance Management Edition
In June of 2025 Mercer conducted the latest Mercer QuickPulse® Survey focused on performance management. Over 500 US employers participated, answering questions related to:
- Goal setting
- Performance ratings
- Administration
- Other mechanics of performance management
See what US employers had to say about the current state of their performance management plans and outlook on approaching performance management in new ways.
Plan mechanics
Most employers have one performance management plan for all employees. If they do have a segmented approach, it’s typically for executives, sales, or manufacturing/production roles.
Goal setting
At least 3 of 4 employers have a formal goal-setting process and most use their HRIS system to facilitate the process. Interestingly, most employers allow employees to update their goals throughout the year.
Performance Ratings
Almost all employers are using performance ratings, and most rely on managers to use their discretion to assign ratings. Only 8% of companies are using a forced performance rating distribution. Additional monetary awards is the most common mechanism that employers use to recognize their “superstars” (i.e., the highest performers).
Linking ratings to pay
When asked if they use performance ratings to determine annual increases and/or incentive payouts, the majority of employers indicated that they allow manager discretion with some level of alignment to set guidelines. Only 9% of employers said they do not use performance ratings to determine merit increase. Slightly more said the ratings are not used to determine incentive payouts.
Performance management in action
HR professionals and consultants often espouse the fact that performance management needs to be an on-going activity throughout the year, with managers speaking to employees weekly, monthly, or quarterly and specifically discussing performance against goals and objectives. Has this practice been implemented widely across US employers? Survey responses suggest that it doesn’t seem likely. Just over half of respondents reported that formal performance management discussions are only occurring annually.
Challenges
Employers cited a number of challenges with the performance management system currently in place at their organization, including, but not limited to:
- Manual, outdated, or nonexistent systems (e.g., Excel, no formal program, transitioning to new HRIS)
- Challenges in aligning performance ratings with compensation and company goals
- Difficulty in differentiating high performers and avoiding rating inflation
- Managers lacking training, skills, or time to conduct meaningful performance conversations
- Challenges in cascading goals and ensuring timely, SMART1 goal setting
- Lack of transparency in ratings, calibration, and decision-making
Up next
How does your organization’s performance management program stack up – do these tactics represent a shift from how you are currently managing performance? Perhaps now is the time to assess how well your plan supports your culture and talent strategy. Mercer has colleagues ready to guide you through the process and provide an industry perspective, as well as offer insights on emerging trends in performance management.
Soon we’ll be releasing the next edition of the Compensation Planning Survey with a first look at what employers are budgeting for annual increases, promotions, and salary structure adjustments for 2026. Participants in Mercer's QuickPulse® Surveys receive the results free of charge. Be sure to sign up to receive a notification when the next survey opens for participation.
Connect with one of our knowledgeable consultants at 855-286-5302 or surveys@Mercer.com.