December 26, 2002 >While employees often express frustration with their employer's performance management system, the process that guides and evaluates employee performance, a new survey from Mercer Human Resource Consulting shows that employers have some frustrations and concerns with these systems, too.

Mercer's survey asked more than 300 large North American companies to assess their own performance management system. One-third said their system is completely (1 percent) or to a great extent (33 percent) effective in achieving the company's desired results.

Nearly half (48 percent) said their system is effective to some extent, and the remainder said their system is effective to a little extent (15 percent) or not at all (3 percent).

Performance management systems typically have multiple components, including performance planning, feedback, evaluation, and development. Mercer's survey suggests that companies are much better at appraising employees than coaching them. More than three-quarters (78 percent) said their managers routinely conduct annual performance reviews and communicate performance feedback and ratings, but only one-quarter (26 percent) said managers routinely provide ongoing and constructive performance feedback and coaching to employees.

"Performance management should be an ongoing process, not a one-time event," says Colleen O'Neill, PhD, who leads Mercer's talent management consulting in the US. "Companies are missing a tremendous opportunity to enhance both their employees' performance and their business results if they view performance management only as the annual performance review."

Consistent with these findings, when asked what one area of their performance management system they would most like to improve, 25 percent of the respondents cited performance planning and 14 percent cited ongoing feedback and development. Other priorities for change include leadership commitment and management accountability (11 percent), consistency between raters (11 percent), training and communication (9 percent), and automation (8 percent).

Mercer's survey also shows that effective performance management systems typically have two things in common: Engaged executives and the ability to differentiate performance.

"Performance management is often viewed as something 'the top tells the middle to do to the bottom,'" Dr. O'Neill says. "Senior management is not always committed to or involved in the process, but we have found this to be critical to success. Good performance management systems equip managers to differentiate reliably between strong, average, and weak performers," she says. "Unless your business results are simply off the charts, the majority of your people should not be rated '4' or '5' on a scale of 1 to 5."


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