Performance management systems, which are designed to help low-performing employees improve, often don't work, according to a recent survey of U.S. workers asked by Watson Wyatt. The survey reports that just 30 percent of respondents say their performance management system helps them improve their performance.

Performance management systems are an extension of a company's performance appraisal program. Employees answering the survey believe the system is valuable for assessing employee performance, at least as far as they are concerned --61 percent agreed that their performance appraisal was accurate. However, fewer than 2 in 10 employees agree that their company's program helps poor performers to improve.

Part of the problem may be a lack of understanding of performance guidelines, either by the company itself or by the employees. Just 35 percent of survey respondents agree that their program establishes clear performance goals, leaving 65 percent disagreeing.

"Performance management programs represent a lost opportunity for most companies," says Scott Cohen, Ph.D., national director for talent management at Watson Wyatt. "These systems, if designed and implemented properly, can have a strong, positive impact on individual performance and financial results --our studies suggest possibly a 20 percent improvement on shareholder value."

Cohen has some advice for companies that want to make changes to their performance management system. First, he says, eliminate HR lingo. Rather, he suggests using the language of the business to communicate with employees. Second, Cohen says you must make the tough decisions by recognizing star performers and confronting poor performers as soon as possible. And third, Cohen recommends that you lose the paper forms tied to your performance management system. Automation is more user-friendly, and means your system will be better, faster, and cheaper. "A company's success is contingent on the success of its employees," Cohen says. "In the end, the companies that make the needed changes to their performance management process will generate significant competitive advantages and create more value for shareholders."