Performance-management Plans Going Unmeasured

By Staff Report

Apr. 8, 2005

Companies are measuring performance, but they’re not measuring the success or failure of their measurements.

It’s ironic, says Hewitt Associates, which found that 30 percent of companies don’t measure the success of their performance management programs at all. Hewitt’s study included 129 U.S. companies with median revenues of $2.5 billion.

Despite not measuring the success of the programs, 66 percent of companies rely on their performance plans to make pay-increase decisions. Another 47 percent use the plans to make bonus decisions.

Bob Campbell, senior consultant at Hewitt, says that when companies do track the results of their efforts, it’s usually to gauge employee satisfaction, or simply to determine if the paperwork is getting done on time.

Marc Nicolet, CFO and human resources director at the Children’s Cabinet in Reno, Nevada, says that while companies may not be actively measuring the success of their performance plans, it may be happening indirectly.

For one thing, he says, “most private companies directly tie compensation and bonuses to their success,” and the amount of bonuses provided are a good measure of whether the plans are working. On top of that, he says, most performance plans are built around company goals, and if a company is doing well, it’s an indication that the performance-management system is functioning as intended. “I’m a huge believer that the forces of capitalism and survival of the fittest will reward those companies that are doing it right,” he says.

Lastly, Nicolet says, if good employees don’t feel that they’re being rewarded for their efforts, they’ll eventually walk. “Top superstar performers are going to go where top superstar rewards are,” he says.

Nicolet adds that it’s important that a company’s culture bring out employees’ best skills and knowledge, rather than stifling it. For example, he says, “If you’ve got a real control freak at the top, he or she is not going to let people spread their wings and do what they’re good at because (the leader) is not good at delegating.”

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