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UK CEOs are demanding higher staff productivity but a minority align performance management to business strategy

UK CEOs have set bullish growth targets for 2011, and are demanding significant increases in workforce productivity to meet them, according to research published yesterday by global management consultancy Hay Group.

According to the study, UK firms are targeting an average 5% growth for 2011. This outstrips the latest IMF growth forecast for the UK economy of just 1.7%.

Two thirds of UK business leaders admit this is a significant challenge - which will demand an unprecedented productivity uplift from already stretched workforces - but that they lack the effective performance management required to deliver this.

More than half (55%) of UK business leaders intend to ask more of their workforces to meet their targets. On average, executives claim they will need to increase employee productivity by 6%.

Yet close to half (46%) fear that their employees are already too stretched to deliver current business objectives.

The majority (83%) of UK business leaders agree that individual performance management is an important driver of overall business performance. Two in five (39%) believe it makes a difference to the bottom line.

But less than a quarter (22%) of firms align their performance management approach to company strategy, whilst more than a third (36%) of business leaders describe their performance management process as a mere 'tick-box exercise'.

And whilst almost all business leaders in the UK (96%) stress that culture has an important influence on its effectiveness, just a quarter (26%) of firms tailor performance management to company culture and values.

Only 17% tailor performance management to both strategy and culture.

Just over a quarter of UK business leaders claim that managers in their firm fail to use their performance management process effectively (26%), and that they do not actively support the process (27%).

Matt Crosby, associate director at Hay Group, said: "Employee performance management sits at the heart of business success - yet too often is seen by senior managers as a chore. At a time when productivity is critical to achieving growth, leaders must realise that performance management is their job.

"CEOs have set challenging targets, and are demanding more from their workforces to deliver them. This means engaging and inspiring employees to get behind their growth ambitions.

"Firms need to manage performance for growth to achieve the targets promised to shareholders.

"CEOs cannot achieve their targets without harnessing the collective power of their workforce. Yet this sort of productivity improvement is a big ask from employees who have worked hard to help their firms through three difficult years since the financial crisis.

"Aligning performance management to culture is an opportunity for business leaders to communicate what their firms stand for, and unite their workforce behind that vision and their ambitions.

"Without an approach tailored to their strategy, culture and values, firms will not be in the right shape to deliver the growth expected of them."

The Hay Group Strategic performance management report is based on research among 1,660 senior decision-makers in large firms across more than 30 countries worldwide, including 100 in the UK.