At the same time, institutional investors in Asia now view management's ability to deliver as a vital factor in influencing market valuations.

These views are contained in a report by HayGroup Thailand released to its clients this month. The report recommends that companies should hedge against macro-level political uncertainty and weakening consumer confidence by radically clarifying corporate goals and enforcing performance management strategies.

It is a question of "clarity around goals", said Supakorn Nittayananta, a consultant at HayGroup Thailand, which has operated here for more than 10 years.

The research paper entitled, "Managing Performance Through a Culture of Dialogue", advises that after clarifying goals and getting participation in processes, CEOs must not be shy to differentiate rewards. "Make sure that your stars get significantly more than poor performers," Supakorn said. "Rewards should not be spread around like peanut butter."

Research studies estimate that about 35 per cent of a market valuation can be influenced by non-financial and intangible factors. "It's now much more about the execution of corporate strategy and management credibility" said Supakorn.

The report warns that without clarity, employees will lose confidence in management. "We've all been in meetings where team members nod their heads in agreement when new goals are set. But then they go back to their department and carry on exactly as they had before," said Supakorn. "In effect they are sabotaging the plan. That's why gaining buy-in is essential - and I want to emphasise that dialogue is what really makes it happen."

Supakorn said that dialogue in some companies in Thailand was too often stilted by concerns such as protecting budgets and power, fear of losing face and uncertainties over doing something new. If there is a multicultural executive meeting with expatriates involved, cultural factors further complicate matters. Clarity about goals can be lost.

The report warns that employees often want to do the right thing, but are frustrated pursuing this goal because they do not know what the right direction is. Supakorn cites an example of an organisation that came up with a 250-page report that clearly listed key performance indicators. The only problem was that there were 100 indicators and none of them prioritised. The executives of the organisation fixed the problem through narrowing priorities in order to gain more clarity on key objectives. They boiled the list down to five manageable and prioritised goals.

The report also states that goal clarity and participation from shop-floor worker to CEO will still flounder without sound processes of implementation and monitoring.

"Use a graphical, but simple, 'learning map' to show how each department and team are linked to company objectives. Our Hay research shows that managers should also use 'scorecards' where employees agree to five to seven personal goals for the year ahead. The manager and the employee sign the scorecard like it is a contract. From the worker's perspective it is often a defining moment. Scorecards clarify expectations and link day-to-day activity to a company's strategic goals."

The HayGroup believes that the best ideas often come from people doing the job. Good companies capitalise on this in order to cut costs and reduce process cycle time.

The report stresses that in Thailand, as in most countries, managers don't want to deal with confrontation. This makes six-monthly or annual performance management sessions painful. However, managers who are concerned they will demoralise employees or cause them to leave are mistaken.

Supakorn notes: "In fact, the opposite is true. Employees become demoralised when they don't get candid performance feedback. When it comes to annual performance reviews, the issue is not what goes unsaid on the day of the review, but what goes unsaid the other 259 working days of the year. In a true culture of dialogue, feedback is given candidly and consistently in small doses, like an intravenous drip, so that the annual review becomes a non-event."

Performance review sessions must not lead to wrong-headed reward policies, which can bring on disappointing profits, low growth and poor stock performance, particularly at a time when companies in Thailand are facing flattening demand and struggling with rising costs.

The report says that despite all the talk about the importance of rewarding high-performance workers better, companies in Thailand still do not differentiate salary increases enough between 'stars' and average performers.

HayGroup research shows that only a minority of employees believe they'll earn more if they improve their performance. Too often managers want to give stars bigger increases. But they often see rewards as a zero-sum game whereby increasing one group's pay means decreasing another group's compensation. Because there is often no ongoing performance dialogue throughout the year, workers assume that their performance - even when below par - is good enough.

So at the end of the year, rather than confront poor performers with bad news, managers choose the path of least resistance and hand out pay almost evenly - regardless of performance.

If money is too tight for merit increases, reward stars in other ways, the report advises. Clearer lines to promotion or extra training can be used in lieu of salary increases.

"Our advice to companies in Thailand is clear," said Supakorn. "To counter external political and economic factors that are currently quite negative, companies can compensate by creating a culture of high performance through dialogue. Such an approach will increase revenues and shareholder value, and will attract institutional investors. Such an approach also increases employee satisfaction, no matter what the condition of the economy."