Companies Risk Productivity and Profits by Paying for Dead Weight.

PHILADELPHIA -- New Hay Insight Research Shows Public Sector, Manufacturing, Telecom, Healthcare, and High Tech Workers Don't Believe Their Organizations Have Systems in Place for Dealing with Poor Performers

New research by Hay Group, a global organizational and human resources consulting firm, shows that less than half of employees in the manufacturing, telecom, healthcare, and high tech industries as well as the public sector believe their organizations adequately address poor performance.

This compares to more favorable ratings in the pharmaceutical, retail, and insurance industries where more than 50 percent of employees believe their companies have adequate systems in place for dealing with poor performers.

Asking whether employees believe that their company has a fair system for evaluating individual performance, the study found that less than 4 in 10 public sector employees (38%) agreed with the statement. Other notable sectors were financial services and manufacturing (both 42%) as well as telecom (44%).

This research comes from Hay Insight, Hay Group's employee survey group, which maintains a database of approximately 1.2 million employees in over 400 organizations worldwide.

"When companies don't address issues with poor performers and continue to provide them with pay increases, companies send mixed messages to employees at all levels and risk turnover of their top performers," said Tom Agnew, a senior consultant with Hay Insight. "Companies need to consider how much compensation dollars they are tying up in dead weight at the bottom of the performance scale. And if top performers don't receive the recognition they deserve, don't be surprised if they look elsewhere."

Top performing companies believe that well-differentiated rewards - even forced ranking of employees - leads to better execution. Yet, at year-end, rather than confront poor performers with the bad news, many managers choose the path of least resistance, speeding through performance reviews and spreading merit pay out almost evenly - like "peanut butter."

Reward Programs

Even with tight budget constraints, many leading companies give above-average pay increases to top performers and provide nominal or no increases to those who do not perform adequately. When combined with a sound performance management program, reward programs can be effective in attracting and retaining the staff in a way that best supports organizations to grow their businesses.

Performance Management

More than ever, businesses need the tools and processes to identify the under-achievers. Rigorous performance planning, coaching, assessment, and reward programs help ensure that a company's top people are motivated and engaged in the organization.

During the fourth quarter, many companies will look at year-end bonuses and pay increases for their employees. As managers discuss with their staff the past year's performance, goals for the coming year, and pay increases, these should be just one of several conversations during the year discussing performance.

"Ideally, supervisors are having performance-related discussions throughout the year," said Agnew. This should be an ongoing dialogue so that there should be no surprises regarding the employees evaluation and bonus.

About Hay Insight and Hay Group

Hay Insight (www.hayinsight.com) Hay Group's survey research division, is a global leader in employee and customer opinion research. Through customized survey programs focused on organizational objectives, we help organizations attract and retain talent, improve operating efficiency, manage change more effectively, and enhance customer loyalty and business performance.

Over the last 30 years, Hay Insight has assisted more than 4,000 organizations. The breadth of our experience enables us to identify best practices for our clients, not only within their own industries but also across industries.

Hay Group (www.haygroup.com) is a global organizational and human resources consulting firm that helps its clients -- Boards, CEOs, Executives, and HR Managers -- on virtually all aspects of their people-related business issues. Founded in 1943, Hay Group has over 2,200 employees working from 79 offices in 78 cities and 44 countries.

Our areas of expertise include:

--Design and analysis of organizations and jobs;

--Talent management through assessment, selection, and development of executives, managers, and teams;

--Compensation, benefits, and performance management;

--Executive remuneration and corporate governance; and

--Employee and customer attitude research.

Hay Group works with nearly three-quarters of FORTUNE's top-50 Most Admired Companies, as well as many mid-sized and non-profit corporations, public institutions, and governments.