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Hay Group Study Finds Canadian and US CEOs Target Employee Performance to Achieve Bullish Growth


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Date: June 28 2011

TORONTO, ONTARIO June 28, 2011 – CEOs have set bullish growth targets for 2011 and are demanding significant increases in workforce productivity to meet them, according to new research from global management consultancy Hay Group.
 
According to the study, firms globally are targeting 5.4 per cent growth for 2011, targets that, in most cases, outstrip International Monetary Fund (IMF) local economic forecasts for GDP growth (see table below).
 
In both the U.S. and Canada, firms are targeting 4.9 per cent growth for 2011. While this is less than growth targets globally, it is well above the North American economic growth forecast of 2.8 per cent reported in the latest figures released by the IMF. They are expecting even more in the years ahead. By 2014, Canadian and U.S. business leaders say they are targetting seven per cent annual growth.
 
“Business leaders in Canada and the U.S. face a significant challenge as they work to achieve aggressive growth targets with a workforce that is already stretched thin,” said Mark Hundert, Toronto-based National Director of 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.” 
Hay Group’s report about Strategic performance management is based on research among 1,660 senior decision-makers in large firms across more than 30 countries worldwide. North America, senior decision makers at 50 Canadian companies and 250 American companies participated in Hay Group’s research.
 
The performance challenge
 
A strong majority of North American business leaders – two-thirds (66 per cent) in the U.S. and three quarters (74 per cent) in Canada ­– admit their growth targets present a challenge. To achieve these growth targets, business leaders in both countries say they need to increase productivity by six per cent on average, with the majority (69 per cent in the U.S. and 76 per cent in Canada) intending to ask even more from their workforces.
 
Meanwhile, 40 per cent of senior decision makers in Canada fear their employees are already too stretched to deliver current business objectives.
 
“In response to the economic downturn, North American business leaders focused solidly on controlling costs,” added Hundert. “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.”
 
Spotlight on performance
 
Canadian business leaders understand that improving individual performance is critical to achieving their growth targets. The majority (78 per cent) plan to implement more rigorous individual performance management this year.
 
The vast majority of Canadian business leaders (90 per cent) also agree that individual performance management is an important driver of overall business performance. And more than half (60 per cent) believe it makes a difference to the bottom line.
 
Performance mismanagement
 
However, most companies don’t practice what they preach -- less than a quarter of firms align their performance management system to company strategy (22 per cent).
 
At the same time, while the majority of Canadian business leaders (96 per cent) stress that culture has an important influence on the effectiveness of performance management, only a quarter (24 per cent) of firms align their performance management strategy to company culture and values.
 
And despite this clear misalignment in performance management programs, 58 per cent of Canadian business leaders admit to spending 10 per cent or less of their time managing poor performance.
 
“Businesses that want to improve performance management don’t need to throw out their existing systems,” added Hundert. “Rather, they need to think about how to enhance their current system by having leaders provide more direction and clarity, so that employees know how their efforts tie into the broader strategy and impact results.  It’s also critical that leaders create a culture of dialogue throughout the year, rather than relying on a once-a-year conversation about performance. However, the power of an organization’s culture as a whole should not be underestimated.”
 
One third of Canadian business leaders believe managers in their firms fail to use their performance management process effectively (34 per cent)and do not actively support the performance management process (34 per cent). A quarter describe their process as a ‘tick-box exercise’ (26 per cent).
 
“Most organizations view performance management as a process for controlling compensation. Leading organizations treat it as a management process that empowers employees to drive performance and creates discretionary effort.”
 
The Strategic performance management report can be downloaded in October at: www.haygroup.com/ww/spm
 



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