Perfecting Performance Management

From formal reviews to performance-based compensation, most mid-market companies have tools in place to evaluate and drive employee performance. Yet, few of those efforts are viewed as effective by company leaders, according to the National Center for the Middle Market at Ohio University’s recent survey of more than 300 C-suite executives from mid-market firms.

For example, while 73 percent of respondents said that their companies’ base-pay increases were set on performance levels, just 34 percent felt the practice was very effective. The perceived effectiveness of efforts like formal reviews, goal-setting and informal feedback was lukewarm (see chart, below). In fact, the only practice respondents ranked as “very effective” was “other monetary compensation” or offering bonuses based on performance. What’s more, a whopping 35 percent of respondents graded their companies at a “C” or below on overall effectiveness of performance management.

Why do so many attempts to improve performance yield so little? Respondents cited managers who aren’t comfortable making “tough calls,” holding people accountable, failing to maintain consistent standards and providing constructive feedback. What’s more, managers lack training in performance management and find the process too time-intensive.



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