Academic journal article Journal of Accountancy

Want Higher Profits? Try Managing Job Performance

Academic journal article Journal of Accountancy

Want Higher Profits? Try Managing Job Performance

Article excerpt

Companies with programs to manage their employees' job performance did better on a number of financial and productivity measures than those without such programs, according to The Impact of Performance Management on Organization Success, a study of 437 publicly traded companies by Hewitt Associates, a Lincolnshire, Illinois, consulting and actuarial company. Basically, companies that rewarded improved employee job performance significantly improved their financial position.

The survey compared 205 companies that adopted such programs with 232 that did not and showed that in the former "financial performance, relative to industry averages, was significantly stronger than in those companies without performance management." The following financial measures were reported as significantly higher:

* Profitability (return on assets and on equity, profits per employee and profit margin).

* Cash flow (cash flow and real return on investment).

* Stock market performance (total shareholder return and stock return relative to market index).

* Value of stock (price-to-book value of capital ratio).

* Productivity (sales per employee). Performance management, Hewitt noted, is a year-round process in which managers and employees work together on setting expectations of what is to be done, when, how and with what results; informally discuss progress; and meet formally once a year to discuss results, expectations and improvements. …

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