Manager Capability: The Bottleneck Most PM Systems Ignore

We spend millions on performance management software. We debate rating scales for months. We redesign forms, adjust cycles, and roll out new tools with fanfare.

Meanwhile, 25-33% of managers lack basic skills for performance conversations. And 43% of managers report being burned out.

The research suggests there may be a more effective place to focus.

The Capability Gap

McKinsey's 2024 research found that more than one in four employees say their managers lack the skills needed for effective performance reviews. When you ask the managers themselves, the number is even higher—over one-third acknowledge they don't have the skills required.

This goes deeper than training attendance. Most managers have sat through performance management training. The issue is that managing performance is genuinely difficult, and most organizations treat it as a compliance exercise rather than a skill to develop.

Think about what we ask managers to do: have difficult conversations, balance honesty with relationship preservation, coach for growth while also evaluating for accountability, translate organizational priorities into individual goals, give feedback that actually changes behavior.

That's a sophisticated skill set—one that takes more than a single training session to develop.

Why This Matters More Than Rating Scales

Here's the research finding that should redirect our attention: manager learning shows one of the strongest relationships with employee outcomes in PM research (r = 0.51).

That's from Schleicher and colleagues' systematic review of PM effectiveness. The exact strength varies by how you measure it, but the pattern is consistent: when managers develop skill through the PM process, employees are more likely to actually change their behavior.

Compare that to the endless debates about rating scales. McKinsey's August 2024 survey found that rating scale type has negligible impact on employee motivation. Whether you use three points, five points, or no ratings at all—the difference is minimal.

We're spending energy on rating scales when manager capability is the bottleneck. A system's effectiveness depends on the capability of the people using it.

The Cost of Getting It Wrong

Gallup estimates that poor management costs $960 billion to $1.2 trillion annually in the United States alone. That's not just from performance management failures—it includes turnover, disengagement, and lost productivity across all management functions.

But performance management is where poor management becomes most visible. The research on employee perceptions is sobering:

• Only 14% strongly agree their performance reviews inspire them to improve
• Only 29% strongly agree reviews are fair
• Only 26% strongly agree reviews are accurate

These aren't numbers that improve with better software. They improve with better conversations—which require more capable managers.

What Manager Capability Actually Means

When researchers talk about manager learning and capability, they're not talking about knowing how to navigate an HR system. They mean:

Conversation skill. The ability to have honest, productive discussions about performance—including the difficult ones. Knowing when to listen, when to challenge, when to support.

Feedback craft. Understanding how to give feedback that changes behavior rather than triggering defense. This is a learnable skill, but most managers have never been taught it.

Coaching orientation. Shifting from "evaluator of your work" to "partner in your development." This requires different questions, different timing, different framing.

Emotional intelligence. Reading how feedback is landing, adjusting in the moment, managing your own reactions when conversations get difficult.

Goal translation. Connecting organizational priorities to individual work in ways that feel meaningful, not bureaucratic.

These skills don't develop from system training. They develop from practice, feedback, and support over time.

Building Capability vs. Buying Software

Here's something we acknowledge as a technology company: software can support manager capability, but it can't replace it.

Even well-designed prompts and frameworks only work when managers engage with them thoughtfully. The same is true for feedback tools—their value depends on how they're used.

The question isn't "which PM system should we buy?" It's "how do we build manager capability to have effective performance conversations?" Software can support that goal, but only if capability building is the primary objective.

What does capability building look like?

Deliberate practice. Not one-time training, but ongoing opportunities to practice difficult conversations with feedback on how they went.

Just-in-time support. Guidance at the moment of need—prompts before a conversation, reflection after, frameworks that embed good practice into workflow.

Peer learning. Managers learning from other managers who do this well. Capability spreads through example and discussion, not just instruction.

Reduced burden. Managers can't develop coaching skills when they're drowning in administrative work. Streamlining the bureaucratic aspects of PM frees time for the human aspects.

Accountability. Treating performance management skill as something that matters—something managers are evaluated on and supported to develop.

Try This

Before your next PM cycle, diagnose where capability gaps are costing you. Ask:

• Which managers consistently get positive feedback on their performance conversations?
• Which managers have team members who disproportionately disengage or leave after review cycles?
• Where are the difficult conversations being avoided?

The pattern will tell you more about your actual PM challenges than any system audit. And it will point toward the real investment opportunity: building manager skill, not optimizing forms.