CEOs Expect Higher Levels of Employee Productivity

According to a June 2011 survey released by Hay Group, a global management consulting firm, American business leaders have set ambitious growth targets for 2011 and expect workforce productivity levels to rise to meet business objectives. However, many companies do not have a clear strategy in place for motivating employees to improve their individual performances.

The information was gathered from 1,660 senior decision-makers in large companies across more than 30 countries worldwide, including 250 U.S. executives, and showed that companies globally are targeting 5.4% growth for 2011, with U.S. companies anticipating growth of 4.9% this year. Researchers pointed out that these targets outstrip International Monetary Fund (IMF) local economic forecasts for GDP growth. Based on the latest IMF figures, the U.S. economy is forecast to grow at a rate of 2.8% in 2011.

Two-thirds (66%) of the U.S. CEOs surveyed admitted their growth targets present a challenge. When asked how they intend to achieve these targets, respondents said they need to increase productivity by 6% on average, with 69% saying they intend to ask even more of their workforces. At the same time, more than half (54%) have concerns that their employees are already being pushed to the limit.

"U.S. business leaders face a significant challenge as they work to achieve aggressive growth targets with a workforce that is already stretched thin," said Katie Lemaire, vice president at Hay Group. "To fully harness the power of their employees, executives need to take a fresh look at how performance is really managed to ensure people are enabled to drive organizational performance."

More than two-thirds (68%) agree that individual performance management is an important driver of overall business performance, and more than half (56%) believe it makes a difference to the bottom line. The majority (68%) said they plan to implement more rigorous individual performance management programs this year. However, just 13% reported that their organization aligns its performance management system with company strategy. And, while nearly all (93%) agreed that culture has an important influence on the effectiveness of performance management, only 27% said their company aligns its performance management strategy to company culture and values.

Despite this misalignment of performance management systems with corporate objectives, 27% reported that they spend just 10% or less of their time managing poor performance. More than two-thirds (36%) said they believe managers fail to use their performance management process effectively, and 40% do not actively support the performance management process. Almost one-quarter (23%) described their company's process as a "tick-box exercise."

"In response to the economic downturn, U.S. business leaders focused solidly on controlling costs," Lemaire observed. "Now, as they look to improve business results and get more discretionary effort from their people, it's time for them to shift their focus to performance management."

Lemaire also pointed out that companies seeking to improve their performance management process do not need to throw out their existing systems. Instead, she recommended enhancement of current systems by having leaders provide more direction and clarity, so that employees understand how they impact "big picture" results.