There is also a significant gap between organisational goals and individual goals of performance management, compared with companies in Hong Kong, Indonesia, the Philippines, Singapore, Sri Lanka and Thailand.

The reseach, conducted by the School of Management at Curtin University of Technology, Western Australia, found only 2.4 per cent of the 992 Australian respondents acknowledged the setting of performance objectives as a reason for implementing performance management systems.

“This is a damning statistic which shows where the vast majority of Australian companies are getting performance management wrong,” said Lyle Potgieter, CEO of human capital firm IXP3.

“Unless the performance management process is clearly tied to specific, measurable and time-bound organisational objectives, appraisals are reactive, arbitrary and unlikely to deliver bottom-line benefits.”

Performance management is potentially the most powerful of all the available HR management processes, according to Alan Nankervis, associate professor and author of the report.

However, it is also the most problematic. “Whilst it can theoretically and symbolically form the bridge between organisational and individual goals and objectives, act as a potent motivational and culture reinforcement technique, and provide a comprehensive evaluation of all other HRM processes, its practice has often been far removed from any of these,” the report said.

The research mirrors anecdotal industry evidence in suggesting that many organisations and their senior managers still regard performance management as a mechanistic annual ritual, which is a necessary evil, but has little relevance to profits.

“Australian business is lagging behind its Asian counterparts in making the connect between individual performance goals and the strategic objectives of the organisation as a whole,” Potgieter said.

Research cited in the Harvard Business Review suggests organisations which utilise effective performance management systems are more likely to be financially competitive than those which do not, although such causal relationships are difficult to establish accurately.

Melinda Finch is the Deputy Editor of Human Resourcesmagazine, Lawyers Weekly’s sister publication.