CEOs demanding more from workers to achieve bullish growth

Australian/New Zealand CEOs demanding more from workers to achieve bullish growth in 2011

SYDNEY - 28 June 2011 - CEOs in Australia and New Zealand, as well as around the globe, 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 Hay Group study, Australian and New Zealand businesses are targeting growth of 6 per cent for 2011, compared with the global target average of 5 per cent, a figure that outstrips the IMF's local economic forecast of 3 per cent growth in Australia and 0.9 per cent growth in New Zealand (Source: IMF World Economic Outlook April, 2011).

To achieve this aggressive target, 60 per cent of Australia and New Zealand business leaders are demanding an unprecedented uplift in productivity. Meanwhile, more than half (59 per cent) admit this is a significant challenge, and 37 per cent fear that their employees are already too stretched to deliver current business objectives.

The Hay Group report about Strategic performance management is based on research among 1660 senior decision-makers in large firms across more than 30 countries worldwide.

According to Hay Group's research, a strong majority of business leaders claim that improving individual performance is critical to achieving their growth targets.

Henriette Rothschild, General Manager, Hay Group Pacific commented: "A fresh approach to managing performance is needed if executives are to harness the collective power of their employees and deliver the performance uplift promised to shareholders."

"Despite merger and acquisition (M&A) activity showing signs of reviving, organisations cannot rely solely on acquisitions to achieve growth. Businesses need a step-change in workforce productivity if they are to grow organically," added Ms Rothschild.

Spotlight on performance - A challenge for Australian and New Zealand Business Leaders

In the Australia/New Zealand region, a significant two thirds (66 per cent) of business leaders agree that individual performance management is an important driver of overall business performance.

Also, more than half (55 per cent) of Australia and New Zealand business leaders believe performance management makes a difference to the bottom line. Globally only 43 per cent of leaders shared this view.

Yet despite this local perspective about performance management, the study found only 41 per cent of Australia and New Zealand businesses plan to implement more rigorous individual performance management this year.

Ms Rothschild continued: "Performance management sits at the heart of business success. At a time when productivity is critical to achieving the challenging growth targets that executives have set, business leaders must realise that performance management is their job."

"Business leaders have become too reliant on the cost lever to stay afloat. It's time for them refocus on growth by pulling the performance lever."

Performance mismanagement

Both globally, and in the Australia/New Zealand region, firms are routinely getting performance management wrong, the study found.

Linking individual performance to corporate strategy has long been recognised as a basic component of the performance equation. However, less than a third of organisations in Australia and New Zealand align their performance management approach to company strategy (29 per cent).

The study highlights a further critical success factor for performance management -alignment of performance to company culture and values.

An overwhelming 94 per cent of business leaders in Australia and New Zealand stress that culture has an important influence on its effectiveness. Yet just 17 per cent of Australia and New Zealand organisations tailor performance management to company culture and values, which is considerably lower than the global average (24 per cent).

Despite knowing the importance of connecting performance management to strategy and culture, only an alarming 11 per cent of business leaders in the Australia and New Zealand region actually do both.

Henriette Rothschild commented: "Business leaders have known for over 20 years that performance management must be aligned to company strategy to be effective. But that is not enough. Company culture plays a vital role in driving performance.

"Yet 89 per cent of organisations in Australia and New Zealand are failing to align performance management with their strategy and culture."

More than half of Australia and New Zealand business leaders believe that managers in their organisations fail to use their performance management process effectively (53 per cent) and that they do not actively support the process (36 per cent). While in Australia and New Zealand, a quarter describe their process as a 'tick-box exercise' (25 per cent).

Furthermore, business leaders are unable to dedicate adequate time to managing poor performance: 44 per cent in Australia and New Zealand and 40 per cent worldwide admit spending 10 per cent or less of their time doing so.

Ms Rothschild concluded, "Without an approach to performance management tailored to their strategy, culture and values, firms and business leaders will not be in the right shape to deliver the growth expected of them."

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