Firms in the United States are targeting 4.9 percentgrowth in 2011, and a new study from Hay Group finds they're goingto demand an increase in work force productivity to meet thatgoal.

The study, released Tuesday, reports global growth goals inmost cases, outstrip International Monetary Fund (IMF) localeconomic forecasts for GDP growth. The U.S. growth target is wellabove the U.S. economic growth forecast of 2.8 percent reported inthe latest figures released by the IMF.

“U.S. business leaders face a significant challenge as they workto achieve aggressive growth targets with a workforce that isalready stretched thin,” said Katie Lemaire, vice president at HayGroup. “To fully harness the power of their employees, executivesneed to take a fresh look at how performance is really managed toensure people are enabled to drive organizational performance.”

Hay Group's study is based on research among 1,660 seniordecision-makers in large firms across more than 30 countriesworldwide. In the U.S., 250 senior decision-makers participated inHay Group’s research.

The performance challenge

A strong majority of U.S. business leaders – two-thirds (66percent) – admit their growth targets present a challenge. Toachieve these growth targets, U.S. business leaders say they needto increase productivity by 6 percent on average, with the majority(69 percent) intending to ask even more from their workforces.

Meanwhile, more than half (54 percent) fear their employees arealready too stretched to deliver current business objectives.

“In response to the economic downturn, U.S. business leadersfocused solidly on controlling costs,” added Lemaire. “Now, as theylook to improve business results and get more discretionary effortfrom their people, it’s time for them to shift their focus toperformance management.”

Spotlight on performance

U.S. business leaders understand that improving individualperformance is critical to achieving their growth targets. Themajority (68 percent) plan to implement more rigorous individualperformance management this year.

More than two-thirds (68 percent) of U.S. business leaders agreethat individual performance management is an important driver ofoverall business performance. And more than half (56 percent)believe it makes a difference to the bottom line.

Performance mismanagement

However, most companies don’t practice what they preach – lessthan a quarter of firms align their performance management systemto company strategy (13 percent).

At the same time, while the majority of U.S. business leaders(93 percent) stress that culture has an important influence on theeffectiveness of performance management, only a quarter (27percent) of firms align their performance management strategy tocompany culture and values.

And despite this clear misalignment in performance managementprograms, 27 percent of business leaders admit to spending 10percent or less of their time managing poor performance.

“Businesses that want to improve performance management don’tneed to throw out their existing systems,” added Lemaire. “Rather,they need to think about how to enhance their current system byhaving leaders provide more direction and clarity, so thatemployees know how their efforts tie into the broader strategy andimpact results. It’s also critical that leaders create a culture ofdialogue throughout the year, rather than relying on a once-a-yearconversation about performance. However, the power of anorganization’s culture as a whole should not beunderestimated.”

Nearly two in five U.S. business leaders believe managers intheir firms fail to use their performance management processeffectively (36 percent) and do not actively support theperformance management process (40 percent). Almost a quarterdescribe their process as a ‘tick-box exercise’ (23 percent).

“Most organizations view performance management as a process forcontrolling compensation. Leading organizations treat it as amanagement process that empowers employees to drive performance andcreates discretionary effort.”