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Performance Management Practices

A pdf on the approach to deliver successful outcomes on the job.

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Soujanya Vahini
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71 views

Performance Management Practices

A pdf on the approach to deliver successful outcomes on the job.

Uploaded by

Soujanya Vahini
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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executivesummary

Performance Management Practices Survey Report


By Paul Bernthal, Roger Sumlin, Patty Davis, and Bob Rogers

The majority of CEOs surveyed believe their performance


management system drives the key factors associated with both
business and people strategies.

Background
In 1993, Development Dimensions International
(DDI) and the Society for Human Resource
Managements survey Performance
Management: Whats HotWhats Not, A
National Study of Current and Future Practices
examined the performance management practices
of 79 companies. The survey also asked
respondents to predict which practices they
believed would be most critical in the future.
Since that 1993 study, DDI has established the
HR Benchmark Group, an alliance of
organizations committed to sharing information
and benchmarking current HR practices. These
organizations, a mix of DDI clients and nonclients, have agreed to respond to periodic
surveys in order to provide current information in
various areas of human resources. The
organizations represent a geographical and
industry cross section.
This study, Performance Management Practices,
substantiates that successful organizationsmore
than everrealize that performance management
is a critical business tool, particularly in

translating a strategy into results. Performance


management, therefore, continues to grow and
develop as an integrated business system, with
strong links to business strategy, compensation,
employee development, and other systems.

Purpose
The objective of this study was to investigate
organizations current performance management
practices and determine which system
characteristics or qualities influenced
effectiveness and predicted success. The study,
based on survey results from 88 of the HR
Benchmark organizations, was designed to
establish a general profile of each organizations
performance management system as well as
address four main areas:
1. Current and best practices.
2. CEO ratings of the effectiveness of their
organizations performance management
system in relation to areas such as improving
financial performance, developing

organizational talent, and driving the


organizations strategic plan.
3. Overall system effectiveness.
4. Each systems impact on business, the
organizational culture, and customer
satisfaction.

Impact and Best Practices


for Results
In addition to determining the most effective
performance management systems, it was
important to discover the program qualities and
practices that linked directly with organizational
success in terms of five critical outcomes
financial performance, productivity, product or
service quality, customer satisfaction, and
employee job satisfaction.
Most survey respondents perceived that their
performance management systems directly
influenced key outcomes. And, when those
performance management systems were flexible
and linked to strategic goals, organizations were
more likely to see improvements in these five
critical areas. This analysis also showed that
team objectives, nonmanager training, appraiser
accountability, and links to total quality
management were the specific practices most
strongly associated with positive outcomes.

performance review. About 16 percent of the


organizations conduct biannual reviews.
Most Frequently Used Practices

Today, 51 percent of organizations frequently


train managers in applying performance
management systems, and 22 percent
frequently train nonmanagers.

Thirty-eight percent of the sample


organizations frequently use competencies in
their performance management systems. They
establish job competencies and/or core
competencies to clarify what is expected of
employees and to link different systems.

Twenty percent of the current sample of


organizations frequently include team-based
objectives in individual performance plans.
Team appraisal, in which team members or
peers actually set goals and appraise one
another, is less common.

Approximately 2025 percent of the


organizations in this survey frequently use peer
input, customer feedback, and input from direct
reports.

For rating techniques organizations rely


primarily on overall ratings (a single rating that
represents the overall evaluation of an
individuals performance), summary statements
(an essay that summarizes overall
performance), and numerical ratings.

Findings Overview

Changes in Usage

Performance Management Today

Training for both managers and nonmanagers


in performance management has doubled in the
past four years.

Forced rankings (i.e., the use of a


predetermined percentage of ratings
distribution) decreased by more than 300
percent since 1993. Numerical rating, which
involves the use of numbers as labels for rating
scales, also has declined. These ratings reflect
more quantifiable performance data, but they
are rarely used as the sole form of evaluation.

A clear majority of the organizations (89%) in


the sample currently use a company-sanctioned
performance management system or approach.
For the average organization this system is
three to five years old and is used by all
employees.
A large majority (78%) of the performance
management systems involve a single yearly

Team-based objectives have become more


common.

the strongest relationship to overall ratings of


effectiveness.

The most common rating toolsoverall ratings


and summary statementsare used even more
frequently now than they were four years ago.

Alignment

Respondents to the 1993 survey predicted a


large increase in the use of team appraisal.
That prediction proved to be off target.

Different forms of performance management


input have become more common, particularly
peer input.

A View from the Top


CEO Ratings
The majority of CEOs surveyed (63%) believe
their performance management system drives the
key factors associated with business strategy. But
an even greater majority, approximately 79
percent perceive their performance management
system drives the people or the cultural strategies
that maximize human assets.
Survey results also indicate that when CEOs
realize the value of performance management in
driving business strategy, overall system
effectiveness is significantly higher. In general,
the success of performance management and its
affect on business and cultural strategies depend
heavily on senior- level support.

Effectiveness
Given that system effectiveness scores ranged
between 2 and 8 (on an escalating scale of 110),
researchers wanted to determine which
performance management system qualities
differentiate a highly effective system from a less
effective one. Although some system qualities
such as employee involvement and flexibility
were more prevalent, they were not necessarily
the qualities most predictive of system success.
The following system qualities and practices had

Aligning performance management to support


organizational goals and to integrate with other
systems proved to be the most critical
differentiator in system effectiveness. However,
it was the least common quality of the
performance management systems in our sample.

Accountability and Training


The most successful performance management
systems required training in using the system,
established clear accountability for the people
using it, and focused on competencies.

Participant Profile
A total of 88 organizations participated in this
study.

The typical survey respondent was a human


resource manager (84%).

Half of the organizations in the survey sample


(44) also completed a special survey section for
CEOs.

The sample included both DDI clients (47%)


and non-DDI clients (53%).

The average organization was in manufacturing


(33%), but the total sample represented 14
different industries, ranging from banking to
hospitality to communication.

In 1996, 37 percent of the surveyed


organizations reported revenue in excess of $1
billion.

Median total company size was 4,000


employees (range 147 to 122,000).

The average organization reported a workforce


of approximately 50 percent hourly employees.

All U.S. geographic regions were represented


in the sample, with the largest proportion of
respondents located in the Midwest (41%).

A Look Forward
Today performance management is a broad,
sweeping, living system, characterized by
ongoing interactions, feedback, and mutual
ownership. Based on the trends observed in the
past four years, performance management should
continue to grow, playing an even stronger, more
diversified role in organizational and individual
success.
The most obvious changes, a reflection of this
broadening role, will be in how organizations use
performance management to achieve multiple
goals. Expectations will be for performance
management to drive individual performance,
career planning, succession planning, training
transfer, and business strategy. To do all of this,
it will become flexible and personalized.
Organizations will increasingly use their
performance management system to
communicate organizational objectives. By
establishing and

incorporating core organizational competencies


and competencies for individual jobs into their
performance management system, organizations
will translate their overall strategies into
individual expectations, behaviors, and activities.
Despite all these changes, common practices
(overall ratings, summary statements, and
numerical ratings), supplemented with other
practices, will continue to define rating systems.
However, as this study revealed, the practices that
make a difference for business success often are
less commonly used. These seemingly
conflicting findings indicate that, to stay ahead,
organizations should continually reevaluate and
try new methods for managing performance.
New practices mean new challenges, but
organizations will have to continually align and
realign, monitor and modify, and search for new
ideas so their performance management system
will be able to accommodate new business
demands.

For more information, contact:


HR Benchmark Group
Paul Bernthal
Development Dimensions Intetnational
1225 Washington Pike
Bridgeville, PA 15017
Phone: 1-800-9-DDI-MAIL, extension 2786
Fax: 412-220-5204
E-mail: [email protected]

To order a complete report, call:

Paul Bernthal
Senior Research Consultant
Survey Series Director

800-DDI-1514
(800-334-1514)
MKTCPGN43

Printed on recycled paper.


Development Dimensions International, Inc., MCMXCVII. All rights reserved.

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