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Firms shooting wide of performance goals

Published on Friday, 25 Oct 2013
Chris Frost

In today’s challenging and often unpredictable business world, establishing effective performance-management programmes remains a challenge for many organisations – despite an understanding that talent management can provide a competitive advantage.

Chris Frost, managing director at the Corporate Executive Board (CEB) Hong Kong, says analytics that benchmark employee performance are useful tools to drive growth. “Once organisations have their operations processes in place, it is people and the way that people perform that offers the best opportunities to improve performance,” he says.

For example, Frost says, benchmarking the performance of a company’s sales team against best-in-class metrics can achieve business insights and align talent and functional strategies.

According to recent research conducted by CEB, a company membership organisation that provides advisory services to businesses worldwide, companies will need to see a 20 per cent increase in employee performance to hit their performance goals across the next 12 months. However, improvements to existing approaches to drive employee effort and improve performance-management systems will, at best, only generate about 5 per cent performance improvement.

Frost says that in many growing companies in Asia, there are still limited opportunities to grow headcount. Instead, companies are looking for ways to increase the performance of their existing workforce. Sophisticated analytics tools, capable of analysing performance from the enterprise down to the individual level, are useful for shaping training and development programmes. By using comprehensive data matrices, performance analytics tools can also be used to identify potential leaders. “As companies seek efficiencies and higher productivity, they must also develop and support future leaders,” Frost says.

Findings in the 2013 Global Performance Management Survey conducted by HR and financial services firm Mercer also showed the need for tighter performance-management strategies. The survey found that one in three organisations around the world believe that improving managers’ ability to have candid dialogues with their employees would directly improve performance. Companies also said they would like to improve the way they link talent measurement to career development in their pay-for-performance value propositions.

In high growth markets in Asia-Pacific, expectations from the workforce are rising, so performance-management results are tightly linked to pay and promotion decisions. While the survey found that 94 per cent of companies in Asia-Pacific follow the global trend of pay for performance, formal conversations regarding pay-for-performance alignment are less common. “It is not surprising that one-third of Asia-Pacific participants report that the linkage between pay and performance needs work,” says the report.
The report also stated that the primary objective of pay for performance in Asia-Pacific is driving employees to high levels of performance, closely followed by attraction and retention strategies. But differentiation and flexibility in how rewards are applied are also becoming more important, as the Asia-Pacific markets continue to mature. This is particularly noticeable as large companies and state-owned enterprises on the mainland continue to fight to retain talent.

Other findings in the report noted that the Asia-Pacific region has the most extensive practices in setting performance expectations. Australia and India lead the way in the use of balanced scorecards, with 40 per cent and 44 per cent respectively, versus 27 per cent globally. Around the region, there is also a clear trend in the way expectations are set. For instance, 70 per of Asia-Pacific companies report weighing goals and behaviour, versus 55 per cent globally.

Despite this clear focus on the front-end of the process, there are regional differences in the formal and informal messaging around performance expectations. South Korea and India, for example, set the highest level of goals.

Nevertheless, rapid and consistent business growth makes it harder to identify employees that are not performing to expected standards. As such, Australia and Singapore place greater emphasis on qualitative performance measures, such as competencies and values, and lead the region in the use of development plans.

Colleen O’Neil, senior partner at Mercer, says that even though there is a lot of discussion about innovative performance-management practices, many companies struggle to focus on the areas that drive higher-performance outcomes. “Few successfully support effective and dynamic career development,” O’Neil says, adding that only a minority of companies revise their practices to keep pace with changing business needs.

Mercer’s survey also highlights that Asian growth markets are placing greater emphasis on evaluation, as opposed to development, in their performance processes. While in Hong Kong, India and China, memos and e-mails are the primary communication methods when detailing performance-expectation guidelines, the report indicated that technology available to measure performance is underused in the region.

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