Hay Group Study Finds CEOs Target Employee Performance to Achieve Bullish Growth in 2011

PHILADELPHIA--(BUSINESS WIRE)--CEOs have set bullish growth targets for 2011 and are demanding significant increases in workforce productivity to meet them, according to new research from global management consultancy Hay Group.

“Now, as they look to improve business results and get more discretionary effort from their people, it’s time for them to shift their focus to performance management.”

According to the study, firms globally are targeting 5.4 percent growth for 2011, targets that, in most cases, outstrip International Monetary Fund (IMF) local economic forecasts for GDP growth (see table below).

In the U.S., firms are targeting 4.9 percent growth for 2011. While this is less than growth targets globally, it is well above the U.S. economic growth forecast of 2.8 percent reported in the latest figures released by the IMF.

“U.S. business leaders face a significant challenge as they work to achieve aggressive growth targets with a workforce that is already stretched thin,” said Katie Lemaire, Vice President at Hay Group. “To fully harness the power of their employees, executives need to take a fresh look at how performance is really managed to ensure people are enabled to drive organizational performance.”

Hay Group’s report about Strategic performance management is based on research among 1,660 senior decision-makers in large firms across more than 30 countries worldwide. In the U.S., 250 senior decision-makers participated in Hay Group’s research.

The performance challenge

A strong majority of U.S. business leaders – two-thirds (66 percent) – admit their growth targets present a challenge. To achieve these growth targets, U.S. business leaders say they need to increase productivity by 6 percent on average, with the majority (69 percent) intending to ask even more from their workforces.

Meanwhile, more than half (54 percent) fear their employees are already too stretched to deliver current business objectives.

“In response to the economic downturn, U.S. business leaders focused solidly on controlling costs,” added Lemaire. “Now, as they look to improve business results and get more discretionary effort from their people, it’s time for them to shift their focus to performance management.”

Spotlight on performance

U.S. business leaders understand that improving individual performance is critical to achieving their growth targets. The majority (68 percent) plan to implement more rigorous individual performance management this year.

More than two-thirds (68 percent) of U.S. business leaders agree that individual performance management is an important driver of overall business performance. And more than half (56 percent) believe it makes a difference to the bottom line.

Performance mismanagement

However, most companies don’t practice what they preach – less than a quarter of firms align their performance management system to company strategy (13 percent).

At the same time, while the majority of U.S. business leaders (93 percent) stress that culture has an important influence on the effectiveness of performance management, only a quarter (27 percent) of firms align their performance management strategy to company culture and values.

And despite this clear misalignment in performance management programs, 27 percent of business leaders admit to spending 10 percent or less of their time managing poor performance.

“Businesses that want to improve performance management don’t need to throw out their existing systems,” added Lemaire. “Rather, they need to think about how to enhance their current system by having leaders provide more direction and clarity, so that employees know how their efforts tie into the broader strategy and impact results. It’s also critical that leaders create a culture of dialogue throughout the year, rather than relying on a once-a-year conversation about performance. However, the power of an organization’s culture as a whole should not be underestimated.”

Nearly two in five U.S. business leaders believe managers in their firms fail to use their performance management process effectively (36 percent) and do not actively support the performance management process (40 percent). Almost a quarter describe their process as a ‘tick-box exercise’ (23 percent).

“Most organizations view performance management as a process for controlling compensation. Leading organizations treat it as a management process that empowers employees to drive performance and creates discretionary effort.”

For further information

For more information, an interview with Katie Lemaire or a copy of the executive summary on Strategic performance management, please contact Aven James at aven@blisspr.com or 212/840-1661.

The Strategic performance management report can be downloaded in October at: www.haygroup.com/ww/spm

Notes to Editors

Please note: this study should be credited to ‘global management consultancy, Hay Group’, and not ‘Hay’ or ‘Hays’, which are separate and unrelated organizations.

Regional economic growth forecasts v. average company growth targets

Region	Average target growth	IMF forecast: 2011 GDP growth
North America	4.9 percent	2.8 percent
Western Europe	5.1 percent	1.8 percent
Central and Eastern Europe	5.1 percent	4.4 percent
Middle East	4.9 percent	4.1 percent
Asia Pacific	6.7 percent	8.2 percent
Latin America	6.8 percent	4.7 percent
South Africa	5.5 percent	3.5 percent

Source: IMF World Economic Outlook (latest reports for regions and countries featured in the study at time of writing)

About the Strategic performance management report

This is a report from Hay Group, based on independent opinion research among senior decision-makers in 1660 firms from over 30 countries across Western, Central and Eastern Europe, North and Latin America, the Middle East and Asia-Pacific. All respondents represent firms with in excess of €250 million annual turnover. Research was carried out by independent market research agency Coleman Parkes.

About Hay Group

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organizations realize their potential.

We have over 2600 employees working in 85 offices in 49 countries. Our insight is supported by robust data from over 100 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com.