Poor performance management hindering UK companies

2003

Britain’s productivity gap with other European countries may be due to the failure of companies to effectively manage employee performance, according to the conclusions of a survey by Mercer Human Resource Consulting.

The new Britain at Work study, covering over 3,500 British workers, reveals that only 1 in 5 employees feel that good performance is rewarded, and only 1 in 3 feel there is an adequate link between pay and performance. Fewer than 4 in 10 workers think that employees who under-perform are managed appropriately.

Dr. Patrick Gilbert, head of the Organisational Research & Effectiveness group at Mercer, said: "In the face of increasing competition and cost pressures, organisations have sought to improve productivity and customer service by creating a performance-based culture - one in which high levels of performance lead to greater financial reward. Yet the link between pay and performance remains as weak and ill-defined as ever."

This is particularly true of incentive pay and only 1 in 5 employees say their bonus plan is personally motivating. Dr. Gilbert said: "Incentive pay is often seen as an entitlement to boost base pay levels, instead of a reward to encourage good performance.

"Linking pay to performance requires a robust performance appraisal process and the active support of line managers - the people who must take the tough decisions to distinguish between good and poor performers. Yet our results indicate that many managers either lack the training or support to conduct this process."

He added: "When poor performers are not managed and good performers are not rewarded, standards will inevitably drop. Left unchecked, companies face the prospect of a ‘regression to mediocrity’."

Training, development and career progression
Similarly, managers may not be investing the time required for employee development. According to the findings, only 1 in 5 employees say their line manager regularly coaches them to help improve their performance. And just 4 in 10 workers feel their manager plays an active role in their career development.

Dr. Gilbert said: "In a world of competing priorities, managers feel compelled to focus on activities with a short-term return. Employee development gets put on the back burner as its effect on results is less immediate."

He added: "Companies need to realise that a relatively small investment in employee development can yield a huge return on investment in the future. This is an area that should be treated as a strategic priority."

Survey results show that only 1 in 3 employees feel that promotions are generally given to the most capable people. The same number believes that their employers are doing a good job of retaining the best employees.

"In times of slow economic growth when job opportunities are limited, employees are more sensitive about promotion and career development," said Dr. Gilbert. "Organisations that develop staff now will have a competitive advantage in terms of their ability to attract and retain the best people."

Due to lack of investment in training, only 4 in 10 employees feel their organisation develops people to their full potential, while 4 in 10 say that they are not strongly committed to their organisation.

Dr. Gilbert said: "Our research indicates that companies are not getting the best out of their people. Employees are motivated by recognition and reward, and a motivated workforce will be more productive and deliver better customer service."

He added: "Organisations that continue to adopt a short-term focus in managing their workforce will face a talent drain when the economy improves and employment opportunities become more widely available. Make no mistake, when the war for talent resumes, the ‘best and the brightest’ will migrate to those companies that have a true performance-based culture and a track record of investing in their employees."

Copies of the survey report cost £25 and are available from Vivienne Hicks on 020 7423 5452 or at [email protected]