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
Key Findings
• How often do organizations conduct formal employee performance appraisals? Almost threequarters (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.
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Key Findings
Frequency of performance
appraisals
Do not
conduct 3%
Priority organization places on
performance management
Other 8%
Top priority
30%
Some attention and resources
given
SemiAnnually
16%
65%
Annually
72%
46%
agree
Managers at my
organizations did an
effective job of
differentiating
between poor,
average and
strong performers.
32%
Disagree
Grades given for the
effectiveness of performance
management
42%
agree
Managers at my
organization are
willing to “make
the tough calls”.
21%
C
53%
C+ to B
12%
B+ to A
38%
Disagree
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What do these findings mean for the HR profession?
• 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.
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Typically, how often do employees within your organization undergo
formal performance appraisals?
Every other year or less frequently
2%
Annually
72%
Semi-annually (twice a year)
Quarterly
Monthly
As needed (e.g., when individual
performance problems arise)
16%
3%
0%
2%
By request of employee or his/her supervisor
0%
Ad hoc
0%
Other
1%
My organization does not conduct formal
employee performance appraisals
3%
Note: n = 391. Percentages do not total 100% due to rounding.
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If you were to give your organization a “grade” based on its overall
effectiveness with performance management, what grade would you
give?
A
2%
A-/B+
10%
B
27%
B-/C+
26%
C
21%
C-/D+
10%
D
F
3%
1%
n = 359
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How much of a priority will performance management be in the coming
year compared with other business issues?
Performance management will be a top priority
at our firm
30%
Some attention and resources will be given to
performance management, but other business
issues are a higher priority
Performance management will not be a priority
in the coming year at our firm
65%
5%
n = 332
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If you were to give your organization a “grade” based on its overall
effectiveness with performance management, what grade would you
give?
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).
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%)
Some Attention and Resources Will Be Given to Performance Management
C grade (80%)
>
A-/B+ grade (36%)
Note: Only statistically significant differences are shown.
Performance Management ©SHRM 2014
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Managers’ role in performance management
2%
Managers in my organization do an effective
job of differentiating between poor, average
and strong performers
30%
Managers in my organization are willing to
“make the tough calls”* as appropriate
22%
34%
19%
43%
3%
38%
4%
4%
Strongly disagree
Disagree
Neither disagree nor agree
Agree
Strongly agree
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.
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Demographics
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Demographics: Annual Revenue
Less than $1 million
4%
$1 million to less than $5 million
19%
$5 million to less than $10 million
11%
$10 million to less than $20 million
11%
$20 million to less than $50 million
13%
$50 million to less than $100 million
12%
$100 million to less than $500 million
$500 million to less than $1 billion
$1 billion or more
13%
4%
14%
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.
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Demographics: Organization Industry
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%
Note: n = 338. Percentages do not sum to 100% due to multiple response options.
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Demographics: Organization Industry (continued)
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%
Note: n = 338. Percentages do not sum to 100% due to multiple response options.
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Demographics: Organization Sector
Publicly owned for-profit
17%
Privately owned for-profit
48%
Nonprofit
15%
Government
Other
16%
4%
n = 336
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Demographics: Organization Staff Size
1 to 99 employees
23%
100 to 499 employees
31%
500 to 2,499 employees
21%
2,500 to 24,999 employees
25,000 or more employees
16%
9%
n = 332
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Demographics: Other
Does your organization have U.S.-based
operations (business units) only, or does it
operate multinationally?
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%
n = 255
n = 355
What is the HR department/function for
which you responded throughout this
survey?
Corporate (companywide)
70%
Business unit/division
16%
Facility/location
14%
n = 250
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?
Multi-unit headquarters determines HR
policies and practices
55%
Each work location determines HR policies
and practices
2%
A combination of both the work location and
the multi-unit headquarters determines HR
policies and practices
43%
n = 249
SHRM/NCMM: Perceptions About Performance Management Effectiveness ©SHRM 2014
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SHRM Survey Findings: Perceptions About Performance
Management Effectiveness
In collaboration with and commissioned by the National
Center for the Middle Market (NCMM)
Survey Methodology
• 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
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About SHRM Research
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About SHRM
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
affiliated chapters within the United States and subsidiary offices in China, India and
United Arab Emirates. Visit us at shrm.org.
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About the National Center for
the Middle Market
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PRACTIONER
RESEARCH
EDUCATION AND
OUTREACH
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Market Growth
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and Sales; Finance and
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EVENTS
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Events
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