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Poor Performance Management Can Derail Even the Best of Plans

By Mark Royal and Tom Agnew, Principals, Hay Group

In conversations with CEO, we often hear the refrain, “We came up with a good plan and communicated it very clearly, but it is not being carried out. Why?” One reason is poor performance management resulting in poor organizational performance. What is happening at the front line isn’t what is necessarily needed to deliver the business results asked for by the CEO. What has been “communicated” has not always been as clearly understood. There is a disconnect between strategy and goals at a company level and how these are translated into targets at the team or individual level. 

Our experience from working with clients to create high-performing organizations reveals the same telltale signs about what is not working. In the majority of cases, there is a gap between the work employees do, how their performance is managed, and the impact on achieving business goals.

Hard & Soft

Strategic performance management makes the connection between “hard goals” (business goals and strategy) and “soft goals” (employee motivation and culture. It links an organization’s strategy and culture to its managers’ ability to improve employees’ performance.

Most employees want to do the right thing, but they can do so only if they know what the right things are and receive regular feedback about their work, if their rewards are aligned, and if they understand the impact they can have on delivering the business strategy. By successfully connecting three things – people, strategy, and culture – CEOs can improve their business results, enhance employee productivity, and increase the likelihood of achieving their business objectives.

What Gets In The Way?

Over the years, much time and effort has been invested in implementing performance management “best practices” as a way to ensure competitive advantage. Yet for many organizations, these efforts still fail to deliver superior performance. The famous “balanced scorecard” generates a lot of data that managers often have difficulty translating into actions that produce the desired business results. What’s more, many managers are concerned about giving feedback that might demoralize hard-working employees or, worse, cause them to leave. 

Often, there is little regular communication between managers and employees – no “culture of dialogues.” Reward decisions are based on complex processes of translating performance into reward strategies that deliver the wrong results. And despite a big investment in training managers in the processes, procedures, and behaviors needed to implement effective performance management systems, employees complain that their performance systems are too complicated, too technical, and not transparent about how individual performance helps deliver corporate goals.

In other words, strategic performance management is more than just a target-setting process or a way to enhance a leader’s ability to give feedback. Rather, it’s about aligning company strategy to team and individual goals and rewards, and ensuring that the whole organization is pulling together in the right direction.

A New Performance Model

The missing link is the performance model. It provides guiding principles for the entire set of performance management beliefs, systems, and processes for the business as a whole. A performance model helps to define principles from a strategic and cultural context. By generating transparency across the organization on what the goals are and how they can best be achieved in the current culture, the model creates enormous power and motivation.

To develop a strategic performance model, executives need to ask themselves how they actually want to manage performance in their organization:

  • What are the key levers in the business model to drive organizational performance?
  • When looking at strategic targets, what are the key metrics to apply in the measuring systems?
  • Who is in charge of making it happen?
  • What is the accountability of line management?
  • What is the reward philosophy around differentiating performance levels?
  • How does the organization reward the performance of its best people in terms of career opportunities?
  • How does management deal with low performance?

Excerpted from The Enemy of Engagement, by Mark Royal and Tom Agnew. © 2011 by AMACOM. For more information, go to www.amacombooks.org/book.cfm?isbn=9780814417959

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Winter 2012

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