Study: Performance Management System Increase Review Effectiveness

June 20, 2003 ( - If you are looking for the edge over your competition, a new study says strong performance management systems could be the answer.

Organizations with strong performance management systems are nearly 50% more likely to outperform their competitors. In fact, 91% of organizations surveyed are using performance management systems, and they have been in place for about 4.5 years, according to Managing Performance: Building Accountability for Organizational Success a recent study by Development Dimensions International (DDI).

With the increased use of performance management system, managers are able to focus on more skill-building topics during performance reviews and away from talk of compensation. In fact, pay usually is not discussed during performance reviews, with 68% of organizations discussing compensation at a time other than the performance review meeting and, as a result, performance reviews were more focused.

Further, companies are conducting reviews more frequently, allowing employees to measure their progress more often. In 1997, 78% of all organizations conducted performance reviews annually. In 2003, while 50% continue to conduct annual reviews, 40% conduct them at least twice a year.

Managers apparently appreciate this approach, since this group is still being held more accountable for the effectiveness of the performance management system. More than 50% of those surveyed said that training, development planning and accountability were moderately effective practices in management support of employee performance reviews.

Techno Tweaking

However, 40% of those with the systems said they intend to make significant changes in the next two years, with one-third of those polled planning to integrate online- or software-based performance management systems. Currently, 20% of those surveyed use online or software delivery.

Additionally, input from both the employees and managers, a process known as 360-degree assessments, is still not that common. Less than one in five (19%) of the organizations surveyed frequently use this method.

“This demonstrates that organizations are still struggling with the best way to implement it, and with transforming performance management from an HR initiative to a system that drives business results,” said DDI president Bob Rogers.