2014 performance-managment

SHRM Survey Findings: HR Professionals’ Perceptions

About Performance Management Effectiveness

In collaboration with and commissioned by the National

Center for the Middle Market (NCMM)

October 21, 2014

• How often do organizations conduct formal employee performance appraisals? Almost three-

quarters (72%) of organizations conduct performance appraisals annually, and 16% semi-annually.

Only 3% of organizations reported they did not conduct formal performance appraisals.

• How much of a priority is performance management compared with other business issues? Nearly

one-third (30%) of HR professionals reported that performance management would be a top priority

at their organizations in the coming year, and two-thirds (65%) indicated that some attention and

resources would be given to performance management, though other business issues were a

higher priority.

• From the perspective of HR professionals, are organizations doing a good job managing

performance? More than one-half (53%) gave their organizations a grade between C+ to B, another

one-fifths (21%) chose a C, and only 2% gave an A in performance management to their

organizations.

• Are managers pulling their weight in performance management? Although almost one-half (46%) of

HR professionals said they agreed with the statement that managers at their organizations “did an

effective job of differentiating between poor, average and strong performers,” about one-third (32%)

had some level of disagreement with this statement. Similarly, although two-fifths (42%) agreed that

managers at their organization were “willing to ‘make the tough calls,’” another 38% disagreed.

SHRM/NCMM: Perceptions About Performance Management Effectiveness ©SHRM 2014 2

Key Findings

Annually72%

Semi-Annually

16%

Do not conduct 3%

Other 8%


Key Findings

30%

65%

Top priority

Some attention and resourcesgiven

Frequency of performance

appraisalsPriority organization places on

performance management

Managers at my organizations did an effective job of differentiating between poor, average and strong performers.

46%

agree

32%

Disagree

Managers at my organization are willing to “make the tough calls”.

42%

agree

38%

Disagree

C21%

C+ to B53%

B+ to A12%

Grades given for the

effectiveness of performance

management

• HR professionals’ opinions are mixed regarding the effectiveness of performance management in

their organizations, although the vast majority did say that performance management would either

be a top priority or receive some attention in the coming year. And although there has been

increased scrutiny lately on the benefit of conducting annual performance appraisals for employees,

identifying strengths and weaknesses among workers has become particularly important for

compensation strategies.

• Research has shown that many employers are placing less emphasis on blanket merit salary

increases for their staff and are now channeling more resources toward incentive programs and

variable pay structures in order to reward top performers who consistently meet goals. Conversely,

low performers are seeing smaller increases in pay. Performance management analysis has

consequently become a key component of compensation reviews.

• Overall, the data suggest that many more firms should make performance management a priority

and ensure that their HR capabilities are developing at a pace that can keep up with the growth of

their business.

• Even those organizations that currently report high levels of satisfaction with the way their

performance management systems are working will need to continuously monitor and assess their

effectiveness to stay ahead of the competition.


What do these findings mean for the HR profession?

Typically, how often do employees within your organization undergo

formal performance appraisals?


Note: n = 391. Percentages do not total 100% due to rounding.

2%

72%

16%

3%

0%

2%

0%

0%

1%

3%

Every other year or less frequently

Annually

Semi-annually (twice a year)

Quarterly

Monthly

As needed (e.g., when individualperformance problems arise)

By request of employee or his/her supervisor

Ad hoc

Other

My organization does not conduct formalemployee performance appraisals

If you were to give your organization a “grade” based on its overall

effectiveness with performance management, what grade would you

give?


n = 359

2%

10%

27%

26%

21%

10%

3%

1%

A

A-/B+

B

B-/C+

C

C-/D+

D

F

How much of a priority will performance management be in the coming

year compared with other business issues?


n = 332

30%

65%

5%

Performance management will be a top priorityat our firm

Some attention and resources will be given toperformance management, but other business

issues are a higher priority

Performance management will not be a priorityin the coming year at our firm

If you were to give your organization a “grade” based on its overall

effectiveness with performance management, what grade would you

give?

Performance Management ©SHRM 2014 8

Note: Only statistically significant differences are shown.

Performance Management Will Be a Top Priority

A-/B+ grade (61%)

B grade (35%)> C grade (14%)

A-/B+ grade (61%) > C-/D+ grade (16%)

Comparisons by Priority of Performance Management

• HR professionals who indicated that performance management would be a top priority at their organizations (see Slide 5) were more likely to give a higher grade (i.e., A or B grade) when assessing their organization’s overall effectiveness with performance management. HR professionals who indicated that that some attention and resources would be given to performance management, but other business issues would be a higher priority at their organizations were more likely to give a lower grade (i.e., C grade).

Some Attention and Resources Will Be Given to Performance Management

C grade (80%) > A-/B+ grade (36%)

Managers’ role in performance management


Note: n = 358-361. Percentages may not total 100% due to rounding.

*e.g., giving a low/no increase for poor performance, firing a poorly performing employee, etc.

4%

2%

34%

30%

19%

22%

38%

43%

4%

3%

Managers in my organization are willing to “make the tough calls”* as appropriate

Managers in my organization do an effectivejob of differentiating between poor, average

and strong performers

Strongly disagree Disagree Neither disagree nor agree Agree Strongly agree


Demographics

Demographics: Annual Revenue


Note: n = 247. Participants who answered "don't know" or “prefer not to say” were excluded from the analysis. Percentages do not total 100% due to

rounding.

4%

19%

11%

11%

13%

12%

13%

4%

14%

Less than $1 million

$1 million to less than $5 million






$500 million to less than $1 billion

$1 billion or more

Demographics: Organization Industry


Note: n = 338. Percentages do not sum to 100% due to multiple response options.

Percentage

Professional, scientific and technical services 22%

Government agencies 16%

Health care and social assistance 12%

Manufacturing 12%

Finance and insurance 11%

Educational services 9%

Retail trade 5%

Transportation and warehousing 5%

Administrative and support and waste management and remediation services 4%

Construction 4%

Wholesale trade 4%

Utilities 3%

Demographics: Organization Industry (continued)


Note: n = 338. Percentages do not sum to 100% due to multiple response options.

Percentage

Accommodation and food services 2%

Information 2%

Mining, quarrying, and oil and gas extraction 2%

Real estate and rental and leasing 2%

Religious, grant-making, civic, professional and similar organizations 2%

Repair and maintenance 2%

Agriculture, forestry, fishing and hunting 1%

Arts, entertainment and recreation 1%

Personal and laundry services 1%

Other industry 10%

Demographics: Organization Sector


n = 336

17%

48%

15%

16%

4%

Publicly owned for-profit

Privately owned for-profit

Nonprofit

Government

Other

Demographics: Organization Staff Size


n = 332

23%

31%

21%

16%

9%

1 to 99 employees

100 to 499 employees

500 to 2,499 employees

2,500 to 24,999 employees

25,000 or more employees

n = 355

Demographics: Other


U.S.-based operations only 74%

Multinational operations 26%

Single-unit organization: An organization in

which the location and the organization are

one and the same.

30%

Multi-unit organization: An organization that

has more than one location.70%

Multi-unit headquarters determines HR

policies and practices55%

Each work location determines HR policies

and practices2%

A combination of both the work location and

the multi-unit headquarters determines HR

policies and practices

43%

Is your organization a single-unit organization or a

multi-unit organization?

For multi-unit organizations, are HR policies and practices

determined by the multi-unit headquarters, by each work

location or by both?

Does your organization have U.S.-based

operations (business units) only, or does it

operate multinationally?

n = 255

n = 249

Corporate (companywide) 70%

Business unit/division 16%

Facility/location 14%

n = 250

What is the HR department/function for

which you responded throughout this

survey?

17

SHRM Survey Findings: Perceptions About Performance

Management Effectiveness

• Response rate = 13%

• 391 HR professionals from a randomly selected sample of SHRM’s membership participated in this

survey

• Margin of error +/- 5%

• Survey fielded August 11-29, 2014

In collaboration with and commissioned by the National

Center for the Middle Market (NCMM)

Survey Methodology

SHRM/NCMM: Perceptions About Performance Management Effectiveness ©SHRM 2014

For more survey/poll findings, visit shrm.org/surveys

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shrm.org/customizedresearch

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About SHRM Research

http://www.shrm.org/surveys

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Founded in 1948, the Society for Human Resource Management (SHRM) is the

world’s largest HR membership organization devoted to human resource management.

Representing more than 275,000 members in over 160 countries, the Society is the

leading provider of resources to serve the needs of HR professionals and advance the

professional practice of human resource management. SHRM has more than 575

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2014 performance-managment