Managing Performance: Building Accountability for ...

Building Accountability for Organizational SuccessMANAGING PERFORMANCE:> Paul R. Bernthal > Robert W. Rogers > Audrey B. Smith

HR Benchmark GroupVolume 4, Issue 2

April 2003

Building Accountability for Organizational SuccessMANAGING PERFORMANCE:> Paul R. Bernthal > Robert W. Rogers > Audrey B. Smith

ABOUT THE DDI HR BENCHMARK GROUPThe DDI HR Benchmark Group is an alliance of organizationscommitted to sharing information and benchmarking currentHR practices. These organizations, an international mix ofDDI clients and non-clients, have agreed to respond toperiodic surveys in order to provide current information invarious areas of human resources. The organizationsrepresent a geographical and industry cross section.

ABOUT DDIDevelopment Dimensions International (DDI) is aninternational human resource company that specializes in helping clients improve their business performance byaligning people strategies with business strategies.

BENCHMARK REPORTSVolume 1: 1997–1998Issue 1—A Survey of Trust in the Workplace

Issue 2—Performance Management Practices Survey Report

Issue 3—Workforce Development Practices Survey Report

Issue 4—Job/Role Competency Practices Survey Report

Volume 2: 1998–1999Issue 1—Succession Management Practices Survey Report

Issue 2—Recruitment and Selection Practices Survey Report

Volume 3: 2000–2001Issue 1—The Globalization of Human Resource PracticesSurvey Report

Issue 2—Retaining Talent: A Benchmarking Study

Volume 4: 2002–2003Issue 1—The State of E-Learning: Developing Soft Skills

Special ReportsGlobal High-Performance Work Practices: A Benchmarking Study (1998)

The Leadership Forecast: A Benchmarking Study (1999)

Leadership Forecast 2001: A Benchmarking Study (2001)

2 Managing Performance: Building Accountability for Organizational Success

© Development Dimensions International, Inc., MMIII. Pittsburgh,Pennsylvania. All rights reserved under U.S., International, and Universal Copyright Conventions. Reproduction in whole or part withoutwritten permission from DDI is prohibited.

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CONTENTSIntroduction ............................................................................................................................................................5

Study Objectives ....................................................................................................................................................6

General Profile ......................................................................................................................................................6

Current and Past Practices....................................................................................................................................9

System Qualities..................................................................................................................................................15

Best Qualities and Practices................................................................................................................................16

Links to HR Systems ..........................................................................................................................................19

Barriers to System Effectiveness ........................................................................................................................21

Employee and Manager Perspectives ................................................................................................................22

Impact of Performance Management ..................................................................................................................25

Conclusions ........................................................................................................................................................27

Demographics......................................................................................................................................................30

Participating Organizations..................................................................................................................................32

About the Authors ................................................................................................................................................36

To order previous or additional reports, call: 1-800-DDI-1514 (1-800-334-1514)

For more information or to join the HR Benchmark Group,visit us at: http://client.ddiworld.com/client/Profile.asp

Or contact:Paul Bernthal, Ph.D., ManagerCenter for Applied Behavioral ResearchDevelopment Dimensions International1225 Washington Pike, Bridgeville, PA 15017Phone: 412-257-7533 • Fax: 412-257-3093E-mail: [email protected]

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INTRODUCTIONIn today’s economy more and more organizations are focusing their attentionon enhancing performance and increasing profitability. To accomplish thesegoals, they need to ensure their employees focus their attention onbehaviors that drive organizational success. A recent survey (2003) of 742organizations in DDI’s client base revealed that “establishing a culture ofperformance and accountability” was the most frequently selected businesspriority (70 percent) out of a list of 12. Clearly, organizations are concernedwith their ability to engage employees and achieve maximized performance.

Much of the impact of performance management derives from its ability toengage employees in their work. When employees are engaged, they aregiven opportunities to capitalize on their strengths, to receive appropriatesupport and feedback, and to find their work to be motivating. Anorganization can leverage the power of these engaged employees byfocusing their efforts on promoting the business strategy. Performancemanagement offers a mechanism for both increasing employee engagementand focusing employees on the business strategy.

When executing business strategy, an organization will find performancemanagement to be a powerful tool for creating real goals and objectives forall employees. Managers are responsible for translating department goals,which are cascaded down from the organization’s strategic goals, intospecific objectives that can be addressed by individuals. When creating a performance plan, managers can show individuals how specific goals

“roll up” to support the overall company strategy. By linking their ownperformance goals to the organization’s strategic goals, employees developmeaning and value to their work and are thus stimulated to succeed. Whenemployees understand the impact and meaning of their actions, they findtheir work more motivating.

Performance management programs also provide a unique mechanism forongoing feedback and development, a critical component of engagement.After setting goals together, managers and employees can track progressand ensure that performance stays in alignment with goals and changingwork conditions. Continuous feedback facilitates performance by helpingemployees to refocus their behaviors when they get off track. Duringperformance reviews managers can provide more specific feedback relativeto goals to help employees identify strengths and areas for development. Inthis way, new performance goals can be set to leverage employee strengthsand provide opportunities to address developmental or career goals.

Historically, performance management has been a challenge for managersand employees alike. When poorly positioned or implemented, it can beseen as a chore or unnecessary paperwork. Some managers andemployees also have difficulty setting clear objectives and measures ofperformance progress. In other words, even the most carefully designedsystem will have little effect unless employees understand the system andsee its value. The impact of performance management is largely driven byits practicality. The system must be both useful and usable.


STUDY OBJECTIVESThis study examines the practices and system qualitiesassociated with performance management.

The objectives of this study are to:

> Describe the structure of performance management systems.

> Benchmark practices associated with planning, tracking,and reviewing performance.

> Identify trends in performance management practices1

> Identify the most common barriers.

> Measure employee and manager perceptions of effectiveness.

> Identify best practices for system effectiveness.

> Establish the relationship between performancemanagement and individual and organizationalperformance.

This report is based on responses from 278 organizationalmembers of DDI’s HR Benchmark Group. A subset of theseorganizations also contributed data from 1,818 employeesand 1,814 managers. Although the overall sample wasinternational, data was reweighted so that members from theUnited States constituted half the sample. Demographics forthe sample can be found at the end of this report.

1 Bernthal, P.R., Sumlin, R., Davis, P., & Rogers, R. (1997). Performancemanagement practices survey report. Pittsburgh, PA: DevelopmentDimensions International.

Rogers, R.W., Miller, L.P., Worklan, J. (1993). Performance management,what’s hot—what’s not. Pittsburgh, PA: Development DimensionsInternational.

GENERAL PROFILEA clear majority of the organizations (91 percent) use acompany-sanctioned performance management system. Onaverage, these systems have been in place for about four anda half years (about one year longer than systems were in our1997 report).

FINDING 1: Organizations are using a consistentperformance management system with a higherpercentage of their workforces.

Most organizations (74 percent) use their performancemanagement system with at least 70 percent of theiremployees. Although performance management systemstend to be used by most of the workforce, some employeesrely on other approaches. The percentage of employeesusing the same system has increased somewhat in the past five years. In 1997 less than half (46 percent) oforganizations used the system with 91–100 percent of theiremployees. Today, almost two-thirds (61 percent) do.

FINDING 1Organizations are using a consistent performancemanagement system with a higher percentage of theirworkforces.

FINDING 2Many organizations (40 percent) intend to makesignificant changes to theirperformance managementsystems in the next twoyears.

FINDING 3Performance reviews areoccurring more frequently—not just once a year.

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FINDING 2: Many organizations (40 percent) intend to make significant changes to their performance management systems in the next two years.

Many organizations recognize that they need to make changes in theirperformance management systems. Today, 40 percent of organizationsintend to make significant changes to their system in the next two years (see Figure 1). Five years ago, the same percentage of organizations (41 percent) expressed their intent to make changes.

FINDING 3: Performance reviews are occurring more frequently—notjust once a year.

In 1997, 78 percent of organizations conducted yearly performance reviews.Today, 58 percent have a yearly review, while 41 percent perform reviewsmore often than once a year (see Figure 2). By having more than oneperformance review each year, employees can better gauge their progresstoward goals. They benefit from more frequent feedback, and the reviewprocess provides them with a more formalized assessment of theirperformance.

FIGURE 1: Change System Significantly in Next Two Years? FIGURE 2: Frequency of Reviews


FINDING 4: Few organizations (20 percent) use online orsoftware-based performance management systems, butmany plan to introduce them.

Online or software-based performance management systemsare a relatively new development. Few organizations in oursample (20 percent) use these delivery formats (see Figure3), but more than one-third plan to move in that direction

(see Figure 4). An equal number of organizations areundecided about making the transition. For the majority of e-system users, web-based or online delivery is the preferredapproach. In most cases (59 percent), users of web-basedsystems rely on performance management software that isindependent of any other existing system.

FINDING 4Few organizations (20 percent) use online or software-basedperformance managementsystems, but many plan tointroduce them.

FINDING 5Most organizations (68 percent) discusscompensation apart from the performance review meeting.

FIGURE 3: Use Software or Online System? FIGURE 4: Plan to Introduce Software or Online Systemin Next Two Years?

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FINDING 5: Most organizations (68 percent) discuss compensationapart from the performance review meeting.

Discussing compensation during the performance review might have animpact on the quality and focus of the review. Organizations recognize thatperformance reviews are much more than just compensation reviews. Mostorganizations in our sample (68 percent) discuss compensation at sometime other than during the performance review meeting (see Figure 5).

CURRENT AND PAST PRACTICESRespondents used a 6-point scale to rate how frequently their employeesused 15 performance management practices. Included in this list weremany conventional practices as well as more progressive approaches thatreflect the changing role of performance management. Many of thesepractices were assessed in DDI’s past two surveys on performancemanagement (conducted in 1993 and 1997). An examination of the currentmost frequently used practices and how extensively they were used in thepast reveals trends in performance management over time. Figure 6 liststhe percentage of organizations using a practice “fairly often,” “often,” or“extensively” in 1993, 1997, and 2002.

For this survey we also asked responding organizations to rate theeffectiveness of the practices they use. The frequency of use for a practicemay or may not correlate strongly with its effectiveness.

Ratings from Observers> Peer Input—Use of input from peers to assess individual performance.

> Upward Input—Use of input from direct reports to assess manager’sperformance.

> Customer Input—Use of input from customers (external and internal) to assess performance of individuals or groups.

> 360° Assessment—Use of multi-perspective surveys (i.e., ratings of anindividual’s performance by peers, direct reports, manager, customers, or other individuals) to assess an individual’s performance.

FIGURE 5: When Managers Discuss Compensation


Rating Methods> Overall Rating—Use of a single rating to represent the

overall evaluation of an individual’s performance.

> Numerical Ratings—Use of numbers as labels for ratingscales.

> Summary Statement—Use of an essay summarystatement to describe overall performance.

> Forced Ranking—Use of a predetermined percentage ofratings distribution.

Measuring Performance> Competency Guidelines—Use of organizational or job-

based competencies to help guide performance planningand tracking.

> Objective Data—Use of objective, quantifiable metrics(e.g., profit, sales, customer satisfaction measures) togauge performance.

> Subjective Data—Use of metrics based on the subjectiveratings of qualitative outcomes to gauge performance.

Supporting the Process> Manager Training—Use of training to educate managers

in performance management/appraisal concepts and tobuild skills in performance planning, managing, andappraising.

> Non-Manager Training—Use of initial and refreshertraining to educate non-appraisers in performancemanagement/appraisal concepts and to build skills thathelp them manage their own performance.

> Manager/Supervisor Accountability—Use ofmeasurements/evaluations to hold managers accountablefor performance management effectiveness.

> Development Planning—Use of a set of developmentobjectives and a plan for achieving them.

FINDING 6: Frequency of manager and non-managertraining has doubled in the past 10 years. Managers alsoare being held more accountable for the effectiveness ofthe performance management system.

In 1993 respondent organizations predicted a significantincrease in the amount of training related to using performancemanagement systems. Today, this prediction has come true(see Figure 6). Manager training for using performancemanagement systems is twice as common as it was nearly 10 years ago. Similarly, the frequency of non-manager training has more than doubled. In general, managertraining has met with more success than non-manager training.Ratings of manager training effectiveness indicate that 61percent find it at least moderately effective; non-managertraining is rated at 44 percent effective (see Table 1).

FINDING 6Frequency of manager and non-manager traininghas doubled in the past 10 years. Managers also are being held moreaccountable for theeffectiveness of theperformance managementsystem.

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FIGURE 6: Performance Management Practices Over Time

TABLE 1: Percentage of organizations indicatingthat the practice is at least moderately effective

PRACTICE EFFECTIVENESS

RATINGS FROM OBSERVERS

Peer Input 35.2Upward Input 35.6Customer Input 43.7360° Assessment 41.4

RATING METHODS

Overall Rating 58.4Numerical Ratings 57.8Summary Statement 62.7Forced Ranking 32.9

MEASURING PERFORMANCE

Competency Guidelines 49.5Objective Data 74.8Subjective Data 47.2

SUPPORTING THE PROCESS

Manager Training 60.8Non-Manager Training 43.5Manager/Supervisor Accountability 51.0Development Planning 62.8


Organizations are experiencing some difficulty in findingeffective means for training their managers and non-managers to use performance management systems. Theseproblems might derive from the quality of the performancemanagement system itself or the method of instruction.

Also, managers are being held more accountable for thesuccess of the performance management system. Over thepast 10 years, manager or supervisor accountability hasincreased steadily, with 38 percent of organizations using thispractice at least “fairly often.” Only about half (51 percent) ofthese organizations feel that their attempts to promoteaccountability have been at least moderately effective (seeTable 1). Finding ways to hold managers accountable can bedifficult, but their role in the process is critical. Managersmust show that they support the system and that they havefaith in the process. If not, employees will be less likely tosupport the system and the outputs will be less meaningful.

FINDING 7: Relying on input about performance fromoutside perspectives (peers, customers, direct reports,etc.) is not common but has increased somewhat.

Gathering input about a person’s performance from thedifferent perspectives of outside observers can be helpfulwhen completing a performance review. Coworkers,customers, and other individuals can provide uniquefeedback about employee behavior. About one quarter of the organizations in our sample rely on these outsideperspectives in their performance review process. Since1993 using peer and customer input has been on a slightupward trend. Only 19 percent of our sample actually uses360-degree assessments in their performance reviews.

Fewer than half of the organizations report effective use of360-degree assessments, upward input, or input from peersor customers. Organizations often are unclear about how touse this information, and there are many methodologicalconsiderations associated with its use. Sometimes, ratingsvary depending on the stated use of the data—either forevaluation or development.

FINDING 7Relying on input aboutperformance from outsideperspectives (peers,customers, direct reports, etc.) is not common but has increased somewhat.

FINDING 8Managers rely on a balance of subjective (66 percent)and objective (71 percent)data in performancereviews.

FINDING 9Organizations areincreasing their use of competencies inperformance planning and tracking.

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FINDING 8: Managers rely on a balance of subjective (66 percent) and objective (71 percent) data in performance reviews.

Organizations have many options for documenting performance or indicating the degree of performance success. When employees lackreadily identifiable outputs, managers might find it difficult to gauge trueperformance levels. Most managers rely on a combination of subjective and objective data; however, they find the objective data to be more effective (75 percent) than the subjective data (47 percent) (see Table 1).Subjectivity in ratings is not necessarily a negative quality becausemanagers must continually balance stated goals with other, sometimesunforeseen, circumstances. Much in the same way that a trial jury weighs all available evidence to deliver a just verdict, managers must balance alldata and circumstances to make the best possible judgment about employeeperformance.

FINDING 9: Organizations are increasing their use of competencies in performance planning and tracking.

An organization determines job competencies by identifying the skills andknowledge areas (such as decision making) that are necessary for successin a specific role. An increasing number of organizations are establishingand incorporating job competencies and organizational core competencies in their performance management systems. Compared to five years ago,about 16 percent more organizations are using competencies inperformance management. Linking individual performance managementgoals, measures, and tracking systems to these competencies maximizesperformance.


FINDING 10: Numbers-based ratings often are combinedwith summary statements.

Organizations continue to use overall ratings of performance(77 percent) and numerical rating scales (65 percent) (seeFigure 6). These practices have remained relatively stableover the past 10 years and have been found to be effectiveby the majority of organizations (58 percent, as shown inTable 1). Overall and numerical ratings are easy to use andcan be applied to virtually any job; however, numbers cansometimes cloud the contributions and progress included inan individual’s total performance profile. Often, numericalratings are balanced with summary statements (69 percent,as shown in Figure 6) that require a written interpretation ofaccomplishments, contributions, key strengths, anddevelopmental needs. Summary statements are usuallyeffective (63 percent, as shown in Table 1) and provide agood balance to the inflexibility of numbers.

FINDING 11: Over the past five years, forced rankingshave become more common; however, few managersfind them to be effective.

In 1997 only 13 percent of organizations used forced rankingswith high frequency. As shown in Figure 6, this numberrepresented a significant decrease from 1993. However, in recent years forced ranking has become more common (34 percent). Forced rankings require a predetermineddistribution of ratings for employee performance and rarelyconsider progress against an individual’s or team’s goals.Forced rankings can be unfair because several people whoperform equally well must be ranked—often for the purposeof distributing compensation increases. Some organizationsfacing cutbacks have even relied on forced rankings todetermine which employees should be eliminated. Numerousorganizations also have run into difficulties with forcedranking (e.g., low morale, discrimination complaints, fairnessissues), causing them to redesign their performancemanagement system.

FINDING 10Numbers-based ratings often are combined withsummary statements.

FINDING 11Over the past five years,forced rankings havebecome more common;however, few managers find them to be effective.

FINDING 12The overall quality ofperformance managementsystems has improved overthe past five years.

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SYSTEM QUALITIESOn an escalating scale from 1 to 10, respondents were asked to rate theoverall effectiveness of their performance management systems. Scoresranged from 1 (extremely ineffective) to 10 (extremely effective), with anaverage score of 5.8 (standard deviation of 1.95). The standard deviationindicates that most systems were rated between 4 and 8. This effectivenessscore is only marginally higher than the 5.2 average score from 1997.

To gain a better understanding of the effectiveness rating, we askedorganizations to rate their performance management systems across abroad range of qualities. These qualities have been addressed in pastresearch and represent many of the critical components of an effectivesystem. Figure 7 lists respondents’ ratings of general system qualities thatcharacterize an effective, integrated performance management system.

FINDING 12: The overall quality of performance management systemshas improved over the past five years.

For every dimension, performance management systems received higherratings in 2002 than they did in 1997. Significantly more organizationsindicated improvements in qualities such as consistency, involvement ofmanagers and senior leaders, and integration. As organizations respond to a tight world economy, they have used performance management as amethod to focus their employees on promoting organizational success.

FIGURE 7: System Qualities


BEST QUALITIES AND PRACTICESThe moderate overall rating prompted further analysis todiscover which qualities of a performance managementsystem are most likely to predict overall systemeffectiveness—from general qualities to specific practices.We used regression analysis to determine which qualitieswere the best predictors. Two analyses were conducted—one for system qualities and one for specific practices.

FINDING 13: The most effective performancemanagement systems are characterized by theirconsistent use throughout the organization, theirintegration with other systems, senior managementinvolvement, employee involvement, and their links to organizational strategy.

The first regression analysis revealed five qualities thatuniquely predicted the effectiveness of a performancemanagement system (in order of decreasing impact):

1. Consistency in use of the system across all managers(i.e., everyone uses the system the same way).

Consistency of performance management practices wasthe system quality that most accurately predicted overalleffectiveness. Employees perceive greater fairness wheneveryone in the organization receives the same treatmentand uses the same system. Often, organizations rely onmanager and employee training to ensure that the systemis well understood and consistently applied.

2. Integration of performance management with othersystems in the organization (e.g., training, selection,compensation).

When performance management is linked to othersystems, it reinforces a singular message and ensuresthat all systems promote the same objectives. Forexample, the training system should offer programs thathelp employees address the development areas orstrengths revealed in their performance reviews.Similarly, the selection system should be structured sothat it identifies employees who can meet theperformance objectives of the posted job. Competencysystems allow multiple HR systems to link along acommon set of employee skills, knowledge areas, andabilities.

3. Involvement of senior management in driving the use ofthe performance management system.

Senior managers drive the success of many HRprograms. Without their support, programs do notreceive high priority and might falter in the face of other,more demanding needs. When senior managers play astrong role in driving the performance managementsystem, they model the appropriate behaviors for theirdirect reports. These direct reports then use the sameapproach with their own groups, thus cascading thesystem throughout the organization.

FINDING 13The most effectiveperformance managementsystems are characterizedby their consistent usethroughout the organization,their integration with other systems, seniormanagement involvement,employee involvement, andtheir links to organizationalstrategy.

FINDING 14The most effectiveperformance managementpractices includedevelopment planning,manager accountability,objective data, andcompetency guidelines.

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4. Employee involvement in the performance management process.

Performance management works best when employees feel a sense ofownership over their plans and play a role in defining their ownmeasures of success. Research has often shown that high involvementbreeds support. Employees and managers can work together to createperformance plans and, as work unfolds, make adjustments. Whenemployees cannot control the direction of their plans, they might feelthat their goals or performance measures are unreasonable orunrealistic. Their lack of buy-in can greatly reduce the effectiveness ofthe system.

5. Value of performance management for driving the organization’sstrategic goals/vision.

Linking performance management to an organization’s strategic goalsand vision makes a big difference for success. In a well-designedsystem, the individual plans tend to have direct links to the organization’sgoals. For example, if an organization’s strategic goal is to increasemarket share, each employee might have a specific performanceobjective related to market share for his or her area of the company.

FINDING 14: The most effective performance management practicesinclude development planning, manager accountability, objective data,and competency guidelines.

The second regression analysis focused on the specific practices used toplan, monitor, and review employee performance. The analysis revealedthat the following four practices uniquely predicted the effectiveness of aperformance management system (in order of decreasing impact).Interestingly, specific rating methods were not important predictors of overall success.

1. Development Planning

One of the primary goals of performance management is to identifyareas where employees have performed especially well or poorly.Managers can then use this information to create development plans toremedy weaknesses, leverage strengths, or prepare employees forfuture positions. The presence of a development plan was the practicemost strongly predictive of overall system effectiveness. Past DDIresearch shows that employees place great importance on theopportunity to develop their skills.2 Employees want to know more thanwhether they have achieved their objectives; they want to know howthey can improve and prepare themselves for future challenges.

2 Bernthal, P.R., & Rioux, S.R. (2001). Retaining talent: A benchmarking study. Pittsburgh, PA:Development Dimensions International.


2. Manager/Supervisor Accountability

The support and accountability of management ensurethat the performance management system isimplemented appropriately. Many organizations havegood plans, but they are never executed. Otherorganizations hold managers accountable for thesuccess of the performance management system bylinking employee compliance to compensation or otheroutcomes. When managers perceive consequences forcompleting their planning and review meetings, they aremuch more likely to comply. Management supportmakes the system work on a daily basis.

3. Objective Data

Not all employees have readily identifiable, objectiveoutcomes that can be linked to their individualperformance. In the absence of such hard results (e.g.,sales revenue), managers can instead set specific goals,such as meeting completion dates or achieving specificsteps that lead to an outcome. In this way, goalaccomplishment is less subject to interpretation.Employees appreciate objective data because it givesthem clear goals for monitoring their progress; managersvalue the reliable data available for measuring success.

4. Competency Guidelines

More and more organizations are linking theirperformance management systems to competencies.Competencies clearly delineate the requirements for ajob and allow employees to evaluate their performancerelative to those requirements. Competencies also helpremove any doubt about what knowledge, skills, andabilities an employee should be demonstrating for aparticular job. Some organizations use corecompetencies, which indicate the knowledge, skills, andabilities required of all their employees. Using corecompetencies ensures that all employees have theminimum requirements for success in the organization.

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LINKS TO HR SYSTEMSPerformance management systems often have close ties with other HRsystems. For instance, performance management data can be used tomake succession decisions, facilitate career planning, or guide trainingselection. Ideally, this data can be closely linked to all these systems. Bymaking use of competencies, organizations should be able to improve thequality of these links.

We asked respondents to indicate how closely their performancemanagement system linked to the following HR systems:

> Succession planning—Data used to identify and develop leaders forfuture openings in the organization.

> Promotion decisions—Data used to help make decisions about whoshould be promoted.

> Career planning—Data used to identify and plan career paths foremployees.

> Compensation—Data used to determine levels of pay, pay increases, or other compensation.

> Training—Data used to determine what type of training employees should pursue.

> Selection—Data from the selection process (strengths, weaknesses) used to help establish an individual’s performance plan.

TABLE 2: Closeness of the link between performance managementdata and HR systems

Not at All Somewhat Very Doesn’t Much Apply

Succession planning 15.5 36.2 40.4 7.9Promotion decisions 4.3 37.8 56.6 1.4Career planning 15.5 52.2 29.1 3.3Compensation 3.0 21.6 74.0 1.4Training 10.3 58.7 28.7 2.3Selection 36.1 43.0 15.7 5.3


FINDING 15: Most organizations (74 percent) make astrong link between their performance management dataand compensation.

By far, compensation was the HR system most strongly linkedto performance management data. Although most of theorganizations conduct compensation discussions separatelyfrom performance management discussions, the links areobvious. When determining who should receive a small orlarge increase, management must consider all objective dataand make recommendations based on those results.Because performance management systems documentemployees’ specific goal accomplishments, it makes sense todrive compensation decisions based on performance data.Thus, organizations must ensure their systems are fair andaccurate in this regard.

FINDING 16: Performance management systems aremost effective when linked to other HR systems.

We conducted a special analysis to determine if the numberof HR systems linked to performance management data had any implications on the overall effectiveness of theperformance management system (which, as mentioned inthe System Qualities section, was rated on a 1–10 scale).We recoded the responses presented in Table 2 such that anorganization received one point for indicating a rating of “Very

Much” and zero points for ratings of “Not at All” and“Somewhat.” Thus, an organization could have a score ashigh as six (i.e., all systems strongly linked) or as low as zero(i.e., no systems strongly linked).

As shown in Figure 8, the more systems that are linked to theperformance management data, the more effective the overallsystem. Conversely, one could argue that only thoseperformance management systems considered to be effectiveare linked to other systems. Still, there is a clear correlationbetween the two measures: The best performancemanagement systems are better integrated with other HRsystems.

FINDING 15Most organizations (74 percent) make a strong link between theirperformance managementdata and compensation.

FINDING 16Performance managementsystems are most effectivewhen linked to other HRsystems.

FINDING 17Poor compliance or usageis the greatest barrier tosystem effectiveness.

FIGURE 8: System Links and Effectiveness

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BARRIERS TO SYSTEM EFFECTIVENESSEvery HR system encounters unique barriers that interfere with the system’soverall effectiveness. We asked respondents to indicate which of 10possible barriers were currently affecting their ability to provide a high-qualityperformance management system. By using a principle componentsanalysis, we were able to identify three classes of barriers:

Poor Compliance or Usage (60 percent selected overall)

> Difficult to ensure that all managers and employees are using the system correctly.

> No measures available to see how well the system is working.

> Users are not held accountable for completing reviews.

Lack of Value (38 percent selected overall)

> Performance management plan has low relationship to employees’daily work objectives.

> Employees do not find the system useful (i.e., they have little use for the process and data).

> Ratings do not reflect actual performance.

Lack of System Direction (26 percent selected overall)

> Unclear or changing business strategy makes it difficult to set individual goals.

> Poor link between performance reviews and compensation.

> Lack of clarity for how the system should be used (i.e., system objectives).

> The performance management process keeps changing.

FINDING 17: Poor compliance or usage is the greatest barrier tosystem effectiveness.

Most of the organizations experienced at least some level of challengeregarding their ability to make sure their performance management systemwas operating properly. About four-fifths (80 percent) felt that it was difficultto determine if managers and employees were using the system correctly(see Figure 9). Because performance management is largely defined bythe relationship between managers and their employees, objectively trackingand measuring the quality of that relationship can be difficult. Organizations

FIGURE 9: Barriers to Performance Management Effectiveness


might measure compliance by asking their employees tosubmit their performance plans and reviews to the HRdepartment, but this documentation cannot tell the wholestory. These components are only specific checkpoints in theentire performance management process.

FINDING 18: Some organizations (26 percent) experienceproblems with determining the role of performancemanagement and its links to other systems.

Organizations sometimes have trouble finding direction anddetermining the role of performance management. Theseproblems can arise from internal HR strategy issues (e.g.,role of performance management and how it operates) orexternal factors (e.g., links to company objectives orcompensation). In both of these situations, organizations are experiencing difficulty in determining how performancemanagement “fits” in the organization and what it shouldaccomplish. One of the most common problems is keepingindividual performance goals current in the face of frequentlychanging business strategies. As a result, the actualperformance management process and practices also mightrequire changes to keep pace with the business. With somany changes occurring, organizations also have troubleusing performance management data for one of its mostcommon purposes—determining compensation.

EMPLOYEE AND MANAGERPERSPECTIVESAlthough HR is usually responsible for establishing anorganization’s performance management system, employeesand managers are the real users. So, they have a uniqueperspective on how well the system is working. We askedemployees and managers at the participating organizations toprovide ratings for the three stages of the performancemanagement process:

> Planning—Coming to consensus about performance goalsand how performance will be tracked.

> Performing—Ongoing monitoring of performance,providing feedback, coaching, and promoting development.

> Reviewing—Reviewing performance and assessingprogress.

FINDING 18Some organizations (26 percent) experienceproblems with determiningthe role of performancemanagement and its links to other systems.

FINDING 19About half of managers andemployees agree that theirorganization’s performancemanagement system iseffective.

FINDING 20Compared to employees,managers are much morepositive about theperformance managementprocess.

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FINDING 19: About half of managers and employees agree that theirorganization’s performance management system is effective.

When asked if they were satisfied with their organization’s system formanaging performance, only 55 percent of managers and 46 percent of employees indicated agreement. Similarly, only 54 percent of managersagree that the system for managing their direct reports’ performance iseffective (see Figure 10). For employees, only 47 percent agree that theirorganization’s system for managing their performance is effective (seeFigure 11). These results show that both employees and managers do not view performance management very favorably.

FINDING 20: Compared to employees, managers are much morepositive about the performance management process.

When asked about the three phases of performance management, thepercentage of favorable ratings by managers was consistently higher than the employee ratings (see Table 3). This trend can partly be explained as the managers possibly rating their own behaviors when they were asked torate the performance management process. Self-ratings of behavior tend tobe higher than observers’ ratings. Nevertheless, most managers do agree thatmany of the critical behaviors in the performance management process aretaking place. The only manager rating that was below 80 percent agreementis for the item “The performance management system supplies employeeswith data they can use to understand and improve their performance.”

FIGURE 11: Is the System Effective? Employee RatingsFIGURE 10: Is the System Effective? Manager Ratings


FINDING 21Employees and managersare most satisfied with theperformance managementsystem when it providesdata to improveperformance and when its reviews reflect actualperformance.

TABLE 3: Manager and employee ratings of performance management phases

AGREEMENTEmployees Managers Agree

Ratio*

PLANNING 83% 91%

Employee performance goals are linked to organizational goals or objectives. 84% 93% .29/.47Manager and direct reports are jointly responsible for planning performance. 86% 93% .31/.42Overall, employees have a good understanding of what they are supposed to be doing in their jobs. 92% 92% .42/.39Manager and employee equally share the responsibility for making the performance plan work. 68% 85% .27/.32

PERFORMING 58% 85%

Employees get sufficient feedback about how well they are doing. 58% 87% .25/.25Job provides employees with chances to grow and develop. 67% 92% .30/.40Employees get the support and guidance they need to achieve performance goals. 60% 93% .20/.33Employees get sufficient feedback or advice on areas in which they need to improve. 57% 89% .17/.27Employees get sufficient feedback or advice on how they can maximize their strengths. 49% 82% .16/.24The performance management system supplies employees with data they can use to understand and improve their performance. 54% 65% .18/.20

REVIEWING 65% 82%

Results of the performance review accurately reflect employees’actual performance levels. 60% 82% .23/.31Performance reviews focus on the behaviors and skills employees need to do their jobs. 69% 81% .18/.24

* Indicates the proportion of the total agreement score that is “strongly agree.” Higher proportions indicate a higher degree of “strongly agree” responses. The first value represents the ratio for employees; the second, for managers.

25

FINDING 21: Employees and managers are most satisfied with theperformance management system when it provides data to improveperformance and when its reviews reflect actual performance.

Some discrepancies exist between the high level of agreement for many ofthe behaviors associated with the performance management process (seeTable 3) and the overall ratings of system effectiveness. How can a systembe ineffective when many of the necessary behaviors are in place? Weconducted a special regression analysis to determine, from the managers’and employees’ perspectives, which behaviors in the process werepredictive of overall effectiveness. We found several behaviors to bepredictive of managers’ and employees’ effectiveness ratings. Two of thesewere significant for both managers and employees; one was significant foremployees only:

> The performance management system supplies employees with data theycan use to understand and improve their performance.

> Results of the performance review accurately reflect employees’ actualperformance levels.

> Employees get sufficient feedback about how well they are doing(employees only).

Apparently, managers and employees are most concerned with the system’sutility and accuracy. They are much more likely to perceive the system aseffective when it generates data that can be used to make changes.Additionally, reviews need to demonstrate fairness by showing that theresults are true indicators of employees’ long-term performance. Foremployees, the presence of ongoing feedback also makes a majordifference in perceptions of effectiveness.

IMPACT OF PERFORMANCE MANAGEMENTWhen a performance management system is successful, employees should be able to attain close to all their stated performance goals. Andachievement of performance goals translates into successful businessoutcomes.

Estimating the impact of a performance management system is possible by converting human performance into dollar values. One way to estimatethe value of an individual employee is to use the person’s overall salary.Employees can be viewed as organizational assets that return value to theorganization in proportion to what they are paid. If an organization pays anaverage employee $35,000 a year, that employee should bring back at leastthat amount of value to the organization; otherwise, the person could beconsidered a losing investment. Ideally, employees return more than whattheir organization pays them, thus producing profit. In our example, one percentage point improvement in performance is worth $350 (i.e.,$35,000 X .01). When an organization has an effective performancemanagement system, it increases its employees’ ability to achieve theirgoals. Essentially, employees who achieve more goals are more valuablefor the organization (i.e., an improvement in human capital).

We asked both managers and employees to estimate the percentage of goals that employees achieved each year (0% = no goals achieved; 100% = all goals achieved). Then we asked them to estimate thepercentage of goals that would be achieved if the current performancemanagement system were not in place. By noting the difference in thescores, we were able to estimate the overall value of the performancemanagement system.


FINDING 22: The average performance managementsystem improves the ability of employees to achievetheir goals by 10 percent. In an organization of 10,000employees, this equates to a benefit of approximately$34 million.

With their organization’s current performance managementsystem, managers estimate that their direct reports achieve 14 percent more of their stated goals than if the system were not in place (see Figure 12). Employees estimate that theyachieve 6.2 percent more of their stated goals because of theperformance management system. By using these scores(average of 10.1 percent) and combining the results with

average salary levels in the United States3, we were able toestimate an overall benefit for performance managementsystems: For one employee the benefit works out to $3,410attributable to the presence of the performance managementsystem. For 10,000 employees this benefit exceeds $34 million.

FINDING 23: The best performance managementsystems yield up to twice the benefit of the lowest rated systems.

When comparing the strongest and weakest performancemanagement systems, there is a large difference inperformance improvements (see Figure 13). We divided theperformance management effectiveness ratings of managers

FINDING 22The average performancemanagement systemimproves the ability ofemployees to achieve theirgoals by 10 percent. In anorganization of 10,000employees, this equates toa benefit of approximately$34 million.

FINDING 23The best performancemanagement systems yieldup to twice the benefit ofthe lowest rated systems.

FINDING 24Depending on the type ofresult, organizations withstrong performancemanagement systems are41–51 percent more likely tooutperform their competitors.

FIGURE 12: Impact of Performance Management onEmployee Productivity

FIGURE 13: Quality of Performance Management andEmployee Productivity

3 The average hourly salary for employees in the United States is $16.23.This information is drawn from the National Compensation Survey (2001).

and employees into three groups of effectiveness: low, moderate, and high.Then, we computed the average impact of the system based on percentage of goals achieved. From the employee perspective, results show that the best systems produce twice the benefit in performance than the low systems.Managers indicate that, in terms of employee goal attainment, the mosteffective systems are about 33 percent better than the least effective systems.

FINDING 24: Depending on the type of result, organizations withstrong performance management systems are 41–51 percent morelikely to outperform their competitors.

We asked organizations to indicate their performance in the past yearrelative to their competition. Data was gathered for eight outcomes. Theseoutcomes were submitted to a principle component analysis, yielding twoprimary factors:

Hard Results Soft Results> Growth in revenue > Customer satisfaction

> Productivity > Employee satisfaction

> Profitability > Retention

> Market value > Quality of products or services

Then, we split the organizations evenly into two groups: those with the most effective performance management systems and those with the leasteffective. Results showed that when the performance management systemwas more effective, organizations were 51 percent more likely to indicatethat they outperformed their competitors during the past year in terms of“hard results.” A similar result was found for the “soft results” category (41 percent more likely to indicate superior performance).

CONCLUSIONS1. Performance management is becoming more dynamic.

Since we conducted our 1997 survey, performance management hasunquestionably evolved and become more dynamic. Virtually all system qualities and practices have become stronger or more prevalent.Organizations indicate more consistent usage, more frequent reviews,increased use of software, and more training of managers and employees.We also observed an increase in the diversity and use of practices such asobserver input and competency guidelines. And managers and employeesare talking more frequently about goals and progress. Unlike the previousstereotype of a static, once-a-year review event, performance managementis becoming a daily process with a real influence on performance.Additionally, as managers and employees receive more training, systems arebecoming more consistent. Training promotes effectiveness by ensuring thatall users understand the system and apply it using the same rules andprocedures.

Despite the improvements, many organizations continue to indicate that they will change their systems in the next two years. This indicates thatorganizations are still learning about performance management and fine-tuning their processes. However, ongoing changes make adapting to aparticular system difficult for users. At least one quarter of our sampleorganizations find that changes in the system interfere with its effectiveness.

27


2. Performance reviews need a balance and a diversityof data sources.

In the absence of hard outputs, human performance can bevery difficult to define. Even when objectives have been set,managers and employees might need to take other factorsinto consideration when gauging progress toward goals.Having a variety of data sources can help to develop acomplete understanding of the circumstances surroundingperformance. Our results show that organizations makealmost equal use of objective and subjective data to measureperformance. While some might consider it less valid,subjective data is not necessarily inaccurate data. Numbersdo not tell the whole story. Human interpretation andperspective add real value by looking beyond the numbers to assess and weigh all the circumstances surroundingperformance. Similarly, data from outside observers, such aspeers, customers, or direct reports, can provide even moredepth and understanding. The end result of all theseperspectives is a more accurate performance managementprocess. The error inherent in any given data source can bebalanced by information from other sources.

Our results show that when data from performance reviews ismore accurate and useful, employees and managers view thesystem as more effective. The use of practices such asnumerical ratings, summary statements, and observer inputensure that all parties feel confident about the quality of theinformation received.

3. Integration with strategy and involvement at multiplelevels drives effectiveness.

Performance management is one of the primary systems for creating accountability in groups and with individuals.Organizations with well-planned business strategies and a visionfor success need to cascade accountabilities to all organizationallevels. Compared to five years ago, performance management is better linked to business strategies and other organizationsystems. This development is especially critical because systemeffectiveness is significantly predicted by links to an organization’sstrategy and the strength of its links to other systems.

Better integration also is reflected in the involvement of seniorleaders and employees in the performance managementprocess. Senior leaders drive system effectiveness bybecoming articulate advocates and ensuring consistent use of the system at all levels. Similarly, employees driveeffectiveness by becoming involved in the management oftheir performance and developing a sense of ownership.Senior leader and employee involvement are both significantpredictors of system effectiveness.

Organizations often use competencies as the basis for many oftheir HR systems. A common set of competencies ties systemstogether and ensures that employees receive a consistentmessage about what behaviors are important. Our results showthat more organizations are relying on competencies inperformance management. Competencies have been found tobe a significant predictor of overall system effectiveness.

29

4. Manager accountability is on the rise.

Uncertainty about the correct use of a performance management system isthe largest barrier to system effectiveness. A human resources departmentcannot monitor every review and daily interaction to ensure success. Theresponsibility for ensuring system success must rest with the managers.Their role is critical. For example, they provide coaching, link individualgoals to the business strategy, create development plans, track objectives,and conduct reviews. Results show that manager accountability for systemeffectiveness has increased. Both increased accountability and managertraining predict overall system effectiveness.

5. Development planning has become a critical component ofperformance management.

Performance management has become increasingly important as a methodfor promoting employee development. Development planning is a naturalextension of the performance management process. When employeesreceive performance feedback, they often identify opportunities to develop orto leverage their skills. Many employees have a natural desire to learn andgrow; thus, the strength of development planning is one of the strongestpredictors of a performance management system’s effectiveness.

6. Performance management predicts employee and businesssuccess.

Research has repeatedly shown the importance of goal setting as a methodfor guiding performance. When the performance management system ismore effective, employees are able to achieve a significantly greaterproportion of their goals. Some systems are not realizing their maximumpotential for impact, but even minor attempts to set goals and monitorprogress can enhance performance. Enhanced goal achievement also canbe seen in the performance of the organization. Across both soft and hardbusiness outcomes, better performance management systems predictsuperior performance relative to the competition.


Number of Employees at YourIndividual Location/Facility

PERCENT NUMBER

2.9 1–105.9 11–507.0 51–100

14.0 101–20016.9 201–50017.3 501–1,00026.8 1,001–5,000

9.2 5,001 or more

Percentage of Employees Working inManagement/Supervisory Positions

AVERAGE PERCENT

21.4

Number of Employees in the EntireOrganization

PERCENT NUMBER

0.4 1–100.7 11–503.3 51–1004.4 101–2007.3 201–500

10.6 501–1,00030.4 1,001–5,00011.4 5,001–10,0008.4 10,001–20,000

12.5 20,001–50,00010.6 More than 50,000

Business Classification

PERCENT

0.4 Agriculture/Forestry/Fishing3.3 Mining2.2 Construction

29.0 Manufacturing1.9 Government

10.0 Health Care1.5 Wholesale Trade5.6 Retail Trade

16.0 Finance/Insurance/Real Estate6.7 Services

10.4 Transportation/Communications/Utilities13.0 Other

DEMOGRAPHICS

31

Approximate Revenue for Your Most RecentlyCompleted Fiscal Year

PERCENT

26.0 I cannot provide this information0.8 Less than $1 million

14.0 $1 million up to $50 million7.2 $50 million up to $100 million

17.0 $100 million up to $500 million9.1 $500 million up to $1 billion

13.6 $1 billion up to $5 billion4.2 $5 billion up to $10 billion4.9 $10 billion up to $25 billion3.4 $25 billion or more

The above revenue is for

PERCENT

18.6 Your location/facility only81.4 The entire organization

Presence in the Global Market

PERCENT

37.1 National company—we do not own,operate, or have affiliate offices outsideour country.

62.9 Multinational company—we own,operate, or have affiliate offices in multiple countries.

Public or Private

PERCENT

51.1 Public48.9 Private

Country

PERCENT

7.9 Australia8.9 Canada0.4 Colombia0.4 France0.4 Germany7.1 Indonesia0.7 Ireland0.4 Mexico

11.4 Philippines1.8 South Africa

16.1 Taiwan2.1 Thailand6.1 United Kingdom0.4 United Arab Emirates

36.1 United States

Note: Final results were weighted so that U.S.organizations comprised half of the sample.

All Organizations Listed Completed theHR Survey‡ = Leader Survey§ = Associate Survey

3Com Corporation A. Epstein & Sons International Inc. ABB Industry Pty Ltd. Advance Auto Parts, Inc. Ahold AIM Trimark Air Canada Jazz Alaska Air Group, Inc.Alaska Regional Hospital Alliance Technology Ventures Alpha Microelectronics Corp. Aluma Systems Inc. AmerUS Group Co.AMIC Technology (Taiwan)

Corporation § ‡Amkor Technology Philippines ARAMARK CorporationAsian Terminals, Inc. AsPac Oil Astec International Ltd—Regional

Operating Headquarters

Astra Credit Companies (ACC) § ‡Astra Zeneca Astra Zeneca Canada AT&T Canada, Inc. AT&T Canada LDS AT&T Wireless Services, Inc. AU Optronics Corporation § ‡B & Q International Co., Ltd § ‡Ball Corporation Ballina Beverages § ‡Bank of Montreal—Technology and

Solutions § ‡Bank of Thailand Bank Sinopac Baptist Health System Baptist Health Systems of

South Florida Barclays Bank PLC Bayer Thai Co., Ltd. BCE Corporate Services Bic Corporation BMW Manufacturing Brown-Forman Corporation § ‡Brunner-Mond (U.K.) Ltd. Brunswick CorporationBrush Wellman, Inc.

Bunnings Building Supplies Pty. Ltd. Cable & Wireless PLCCanon Marketing (Taiwan) Co., Ltd. § ‡Capital One Financial CorporationCARE USACCL Industries Inc. Centrica plcCentro Escolar University Cerebos Pacific Ltd.CGU Insurance (Thai) Co., Ltd. Chailease Finance Co., Ltd. Chi Mei Environmental § China American Petrochemical Co., Ltd. Chunghwa Picture Tubes, Ltd. ‡CIBC-Canadian Imperial Bank

of CommerceCingular Wireless Citigroup (Previously SSSB) Cleveland-Cliffs Inc CN Rail Coats Manila Bay, Inc. § ‡Cocoplans, Inc. Coles Myer Limited Communications Data Services, Inc. CSR Dairy Farmers


PARTICIPATING ORGANIZATIONS*

33

Dart Philippines, Inc. De Montfort University Delta Air Lines, Inc. Deutsche Telekom AG DHL Systems Ltd. DMR Consulting Edward Hospital & Health Services Eli Lilly and Company (Taiwan), Inc. § ‡Emery Emirates Engen Petroleum Ltd § ‡Erie Foods International, Inc. Fairton International Group § ‡Family Independence Center Far EasTone Telecommunications Co., Ltd § ‡Finance/Insurance/Real Estate (Anonymous) First Health Group Corporation Formosa International Hotels Corporation

(a Four Seasons Hotel) § ‡Fort James Corporation Franklin Resources, Inc. § ‡General Motors North American Operations Genosi, Inc. Girl Guides of Canada, Ontario Council Globe Telecom Incorporated § ‡Gordon Food Service Marketplace Great Wall Enterprise Co., Ltd. § ‡Griffin Wheel Company

Hallmark Cards Australia Ltd. Harvard Pilgrim Health Care, Inc. Headstrong Philippines, Inc. Hilti Taiwan Co., Ltd. Hotai Motor § ‡Howard Hughes Medical Institute ICI Paints Taiwan Icon Designs Multimedia Corp. Industrial Bank of Taiwan § ‡Industrial Technology Research Institute § ‡ING Canada ‡Ingram Micro, Inc. Innovex, Inc. Intel Technology Philippines, Inc. Interweb Iron Mountain IncorporatedIron Ore Company of Canada § ‡Janssen-Cilag Ltd.Jintex Corporation Ltd. § ‡Johnson Financial Group Johnson Outdoors Inc. Kao (Taiwan) Corp. § ‡KFC and Mister Donut Philippines KG Telecom § ‡Kimberly-Clark Philippines KMHP, Airport Business Center Kraft Foods Inc. (Southeast Asia only) KYE Systems Corp

L-3 Communications Lear Automotive (EEDS) Philippines Legacy Health System Lexmark International (Philippines), Inc. Lexmark Research Development Corporation Liberty Mutual Group Lilly France SAS LINPAC Material Handling LSI Logic Corp. Management Board Secretariat Management Recruiters International Manor Care Master Foods of Australia MasterCard IncorporatedMaverick Consulting McCoy Media Tek, Inc. § ‡Merck, Inc. MetLife, Inc.Minebea Thai Ltd. § ‡The MITRE Corporation Moog Controls Inc.Multotec Group of Companies (PTY) Ltd.Musgrave Supervalu National Australia Bank Nebraska Furniture Mart New York Life Insurance and Annuity

Corporation Taiwan Branch § ‡


Niagara Lutheran Health System North York General Hospital NSK Ltd.Ontario Power Generation Organizacion Corona S.A. Orlando Utilities Commission Ortho-McNeil PharmaceuticalsOsborne Clarke ‡Otis Elevator Company (Philippines), Inc. Owensboro Mercy Health System, Inc. Oxford Funding Pty Ltd Palmetto Health Alliance PEAK6 Invesments, L.P. Penn National Insurance Pertamina § ‡PGA Tour, Inc. Philam Plans, Inc. § Philippine Airlines, Inc. Philippine Stock Exchange, Inc. Philips Semiconductors Calamba § ‡Philips Semiconductors Philippines, Inc. Pitney Bowes § ‡Pitt County Memorial Hospital Possis Medical, Inc. PPG Industries, Inc. PPL CorporationPratt & Whitney Canada § ‡Praxair Inc.

Praxair Mexico, S.A. de C.V. Primary Structures Corp. Primax Electronics Ltd Progistix-Solutions Inc. ProHealth Care Inc. PROMOS § ‡Prudential TS Life Assurance Public

Company Ltd. § ‡PSCU, Inc. PT Antam Tbk § ‡PT Badak NGL § ‡PT Bank Bukopin § ‡PT Bank Central Asia Tbk § ‡PT Bank Danamon Indonesia Tbk. § ‡PT Bank Internasional Indonesia § ‡PT Bank Negara Indonesia

(Persero) Tbk § ‡PT Exspan Nusantara ‡PT Gobel International PT IndoCement Tunggal Prakarsa, Tbk. PT Indofarma (Persero) Tbk. § ‡PT Matahari Putra Prima, Tbk.

(Matahari Dept. Store) § ‡PT Mattel Indonesia PT Sucofindo (Persero) § ‡PT Toyota-Astra Motor PT Traktndo Utama QR (Queensland Rail)

RAMS Home Loans RBC Financial GroupRDC Semiconductor Co., Ltd. § ‡Retail Trade Organization, U.K.

(Anonymous)RFM Corporation The Reader’s Digest Association

(Canada) Ltd. The Rogers Group Rolls-Royce Plc. Root Learning Inc. Rosemount, Inc. Royal and SunAlliance Rustan’s Commercial Corporation § ‡S.C. Johnson & Son, Inc.SAFECO Insurance Company St. Luke’s Episcopal Health System § ‡St. Luke’s Medical Center Sandvik Steel Company § ‡Santos Limited Scottish Water Seednet § ‡SEH America Shands at AGH Silicon Integrated Systems Corp. § ‡SOHO Group of Companies § ‡SPI Technologies, Inc. § ‡Spirox Corp. §

35

Stanwell Corporation LimitedSteelcase Inc. Steelcase North America Sterling Commerce, Inc.Subaru Suncorp-Metway, Ltd. ‡Sunnybrook & Women’s College Health

Sciences Centre SWS Securities, Inc. Tech Data Corporation § ‡TelecomAsia Public Company Limited TeleTech Holdings, Inc. Telkom SA Ltd.Tesco Corp.Tetra Pale Taiwan Textron Inc.Thiess Pty Ltd

Toyota Motor Manufacturing North America, Inc. TriAra Consulting Tricon Restaurants International Tsogo Sun Holdings TSRC Corporation (a member of CEC Group) § ‡TYC Brother Industrial Co., § ‡TYNTEK Corp. § ‡UBS WarburgUCAR Carbon Company Inc. UCI Medical Center Unilever Taiwan Ltd. Uni-President Enterprises Corp § ‡Unison Co. Ltd. § ‡Unisys Unisys Europe-Africa Ltd United Charm Co., Ltd. § ‡United Sleep Products

Universal Robina Corporation University Healthsystem ConsortiumUniversity of Ballarat University of Colorado Hospital AuthorityUniversity of Michigan Health System Support

Services—Environmental Services Department § ‡UNUMProvident VDTVF Playwear, Inc. Virginia Dept. of Transportation VP Buildings, Inc. Wachovia Corp.Walsin Lihwa Corp. § ‡Warringah Council West Bromwich Building Society Worsley Alumina Pty Ltd Wyeth South Africa (Pty) Ltd.

* When completing the HR survey, each respondent was asked to type the full name of the organization he or she represented. In publishing the list of participatingorganizations, DDI cannot assume responsibility for errors in spelling or other errors in the information provided by these individuals.


ABOUT THE AUTHORSPAUL R. BERNTHAL, Ph.D., is the manager of DDI’s Center for Applied Behavioral Research. Paul, who conducted more than100 large-scale measurement projects for DDI, is also director of DDI’s HR Benchmark Group. His publications have appearedin Training and Development Journal, Group and Organizational Management, and Advances in International ComparativeManagement.

ROBERT W. ROGERS has been a senior leader at DDI for more than 20 years and has led its growth to a $100 millioncompany. During his tenures as COO and president during the last 12 years, he has led a cultural transformation within DDI,aligning its internal culture with customer focus, teamwork, innovation, and high involvement. From that successful culturechange, he wrote Organizational Change That Works: How to Merge Culture and Business Strategies for Maximum Results.Bob has helped more than 50 senior executive teams execute a results-based performance management system as well as being the performance management champion in DDI. A recognized expert in assessment leadership, performancemanagement, and organizational change, Bob has authored numerous articles and white papers and has spoken at majorconferences around the world.

AUDREY B. SMITH, Ph.D., is the senior vice president of DDI's Executive Solutions group. Audrey and her team spearhead DDI’s global consulting resources to help organizations identify, develop, and deploy executive-level talent through strategicconsulting, talent assessment, accelerated development, performance management/accountability systems, culture changeconsulting, and other interventions that link strategy to execution. Audrey coauthored Grow Your Own Leaders, acomprehensive and flexible guide for developing extraordinary leaders.

The authors would like to acknowledge the invaluable contributions of Jason Bondra, research associate, in the administrationand project management of this international study. In addition, we would like to thank the many DDI associates around theworld who assisted in the recruitment, administration, and data-summarizing phases of this project.

MICABERSR10

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