As more organizations ditch the annual performance review, they expect managers to do more coaching to boost the job performance and career development of employees. Yet many managers lack the ability to coach, and too often executives don't value and champion performance management. Those are among the findings in a new report by Bersin & Associates, a research and advisory firm in Oakland, California. The survey of nearly 275 managers and human resources leaders, High-Impact Performance Management: Designing for Effectiveness, found that 70 percent of organizations have abandoned competitive assessments in favor of a “coaching and development model” of performance management. That's up from 60 percent in a similar survey Bersin conducted in 2008. The influx of younger workers from the millennial generation is driving interest in coaching because they tend to crave frequent feedback and one-on-one interaction with managers and mentors. Multinational companies also have stepped up their use of coaching to bolster the skills of frontline managers in emerging global markets. The main reason for increased coaching is the need to motivate employees who aren't getting salary increases or bonuses. “Organizations have less money to compensate people, so they're looking at coaching and development as a way” to boost engagement and retention, says Stacia Sherman Garr, a Bersin analyst and the report's author. At the same time, companies want to be sure employee goals match organizational objectives. Goal alignment ranked as the second-most important driver of performance management—trailing employee evaluations—in the new study. In 2008, goal alignment ranked fourth. Kelly Services Inc. typifies the changing attitudes toward performance management. In 2009, the Troy, Michigan-based staffing company took a “radical” step when it abolished performance ratings for its 8,000 employees. Rather than foster performance-based career discussions, the process filled employees and managers with dread, says Terry Hauer, Kelly's senior manager of talent management and leadership development. So, Kelly Services decided to give employees greater control over the process. Now, they are expected to initiate discussions with their managers: one at the start of the year to establish goals and a follow-up at midyear on career development and training. Managers “play an important new role as accountability managers,” Hauer says. Freed from agonizing over ratings, they meet at least once a month with employees to coach and help them stay on track. But the transition to a coaching-driven performance model is not easy. “The No. 1 challenge is that managers don't have the skills to coach,” Garr says. Bersin ranked performance management challenges using a seven-point “severity” index, with 7 being the worst. Managers' coaching ability was pegged at 5.1. Training managers to coach isn't a new issue, Garr says, but “it's never been this acute of a challenge.” Most managers want to become proficient coaches, says E. Michael Norman, a senior vice president in Los Angeles for Sibson Consulting, a division of Segal Co. The problem they face is a “slash and burn” recession mentality. “Supervisors are willing to spend more time on coaching, but they get sucked into a vortex of day-to-day firefighting,” Norman says. Although managers may sense the need for more training, top executives apparently aren't making the connection between improved coaching and performance management. Four of the top five obstacles listed stem from poor executive support, Garr says. Senior leaders think the performance-management process is too “time-consuming,” and they don't understand its link to organizational success. Of those organizations with very frequent executive engagement in performance management, 81 percent showed strong business results, the report concludes. Only 35 percent of organizations whose executives showed infrequent support posted similar results. Workforce Management, August 2011, p. 6 -- Subscribe Now!