Doing Performance Management the Right Way


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ERE Webinar from 8/4/10 presented by Dr. John Sullivan.

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Doing Performance Management the Right Way

  1. 1. DOING PERFORMANCE MANAGEMENT THE RIGHT WAY Changing The Direction of Your Performance Management Effort Webinar August 4, 2010 Dr. John Sullivan © Professor, Author and Advisor to Management
  2. 2. My goal is to… Make you rethink your current approach by: 1. Making you aware of the many current problems with PM 2.  Changing your direction and pointing you toward a superior way… by demonstrating the elements of a world-class PM approach Note: Unfortunately I cannot solve every PM problem in 60 minutes! 2
  3. 3. Topics for today 1.  How well are we doing in PM? 2.  A quick definition of PM 3.  What is wrong with the current approach 4.  Characteristics of WC performance management 5. PM metrics and goals 6.  Best practice firms 7. The elements of a performance culture 8. Some bold things to try 9. More questions 3
  4. 4. Let’s start with… Five quick slides to illustrate how well we are doing in performance management 4
  5. 5. How do most rate performance management? A survey discovered that 90% of employees found performance appraisal feedback inadequate! 2003 5
  6. 6. What is the success % of PM? 1. They went back 2 years… and identified that they had 1,019 people rated #3, “needs improvement” 2. They calculated that they spent an average of $13,090 per year… on their performance management (training, coaching, counseling and manager time) 3. They identified 2 years later… the number that were currently ranked as #1’s 4. That number was: 0 Conclusion – PM had a low ROI at this firm 6
  7. 7. Do performance management and training combined… currently have a measurable impact? If the performance level of a new hire was at the 50th percentile after their 1st year… It will remain essentially unchanged until year 20… when they retire 7
  8. 8. A quick definition of the performance management process 8
  9. 9. Definition of performance management A quick definition  The goal of the process is to improve the productivity of the firm’s workforce  It is an integrated HR process that utilizes all available productivity improvement tools  It quantifies its impact in dollars  It learns from the most productive and innovative employees and shares those practices  It identifies individual and team productivity problems & their causes and then it “fixes them” 9
  10. 10. Unfortunately, performance management currently operates within a limited range   It’s current focus is mostly on building (re- training) troubled employees and occasionally releasing employees that can’t be “fixed”   If it is to increase its overall business impact, Performance Management must learn to expand its range to encompass all six ways of improving workforce productivity >
  11. 11. When managers need increases in performance and productivity… they have six basic choices Buy Build external talent internal talent Move More productive internal talent Make internal talent more productive Release weak Use substitutes and excess labor for labor (Technology or software)
  12. 12. My research has turned up a multitude of problems with typical performance management processes 12
  13. 13. There are significant costs of having weak PM 1. The overall productivity of the workforce suffers 2. Poor performers continue to make costly errors and slow time-to-market 3. Poor performers slow team results 4.  Managers must spend excess time on PM 5.  Top performers quit in frustration 6.  Innovation levels drop because weak performers don’t innovate 7. Top recruits drop out if they meet too many losers 8.  HR’s image is tarnished by a weak product 13
  14. 14. Top 25 problems of performance management 1. The process is widely disliked and not trusted 2.  No data to prove the process improves productivity 3. The process is isolated rather than integrated 4.  A single year snapshot without a long-term multiyear assessment 5.  Focuses on an individual rather than improving the productivity of a position or team 6. Focuses almost exclusively on bad performers 7. Design emphasizes compliance over impact 8. Often done on hire date (no simultaneous team or year end assessment) 14
  15. 15. A long list of problems 9.  It doesn’t count output (instead it mostly identifies behaviors/traits) 10. It is not done often enough 11. Many subjective assessments not fact/data based 12. Words can confuse and obscure (diverse people) 13. Managers don’t spend much time on it 14. It’s “just a form” 15. Little connection with pay/promotion/layoffs 16. No second opinion or appeal available 17. It often disproportionately weighs failures over successes and recent events 15
  16. 16. A long list of problems 18.  Managers are not trained in assessing or developing individuals 19.  Managers are inherently “chickens” and they evenly spread the ratings “like peanut butter,” while others are reluctant to give below average ratings (olive problem) 20.  Most performance appraisal systems are so subjective that managers can play favorites 21.  The rush to get performance appraisals in on time often causes individuals to “Christmas tree” or merely rehash last years 22.  Some managers never share PA’s with ee’s > 16
  17. 17. A long list of problems Top 25 problems continued 23.  Some managers are always high/low raters making comparisons between dept’s difficult (it might inadvertently drive excess transfers) 24.  Managers often feel reluctant to give low ratings because they know that in reality HR will not allow them to easily fire bottom performers 25.  Managers are not assessed or rewarded for doing it accurately 17
  18. 18. Now let’s shift to the positive side… Characteristics of world class performance management Factors that differentiate the average from the best 18
  19. 19. Characteristics of advanced PM Top 20 strategic characteristics of a WC process 1.  Process goals are clear and measurable 2. Influences the creation of a performance culture 3.  An integrated and coordinated effort 4. Someone is held accountable (but managers own) 5.  Prioritizes positions and business units 6.  Global scope 7.  Can improve a complete team, as well as an individual’s performance 8.  Focus on position performance not an individual19
  20. 20. Characteristics of advanced PM Strategic characteristics of the overall process 9.  Focus on identifying barriers that limit improving performance and productivity 10. Has a best practice/problem sharing process 11. Forecasts, alerts & proactively prevents upcoming problems before they get out of hand 12. Spends more time on top performers (80/20 ratio) 13. Process is tied to bonuses and rewards 14. Develops tools & practices that managers can use 15. When surveyed, managers say they “own” PM 20
  21. 21. Characteristics of advanced PM Top 20 strategic characteristics of a WC process 16. Individual performance is tied to business unit results i.e. the total of the individual performance scores cannot exceed the over-all departmental business results, so that poor performing managers cannot overrate 17. Self-monitoring of one’s performance is possible 18. Technology based – utilizes available technology, social networks, wiki learning etc. 19. Succession and internal movement element 20. Postmortems are done on major failures 21
  22. 22. Now shifting to a lower-level, the operational characteristics of world class performance management 22
  23. 23. Characteristics of advanced PM 20 operational characteristics of WC PM 1.  It does performance counting – it counts actual output and results… and then separately it appraises employees, ability, skills or effort 2.  Frequent – it is done frequently (monthly or quarterly) so employees are never surprised and they have time to improve 3.  Uses multiple performance measures – it gathers multiple forms of feedback and doesn’t rely solely on a supervisor’s opinions > 23
  24. 24. Characteristics of advanced PM Operational characteristics 4.  Rewards for productivity – it measures and rewards individual managers for the productivity of their team, so that they take PM seriously 5.  Distributed metrics – it builds internal competition by distributing to all managers their ranked performance on the PM process 6.  Rewards for helpful feedback – it also rewards managers for providing helpful feedback and when employees say they are satisfied with their performance feedback > 24
  25. 25. Characteristics of advanced PM Operational characteristics 7. Objective criteria – it uses objective assessment criteria wherever possible (numbers) 8. Discloses the criteria – it requires managers to disclose in advance the criteria and the passing score that they are using for assessing performance 9. Forced ranking uses numbers – it forces managers to identify the top 20% and bottom 10%. It forces managers to differentiate. Make sure the rankings are NOT kept secret > 25
  26. 26. Characteristics of advanced PM Operational characteristics 10.  Self monitoring – it allows an employee to count their own performance on a regular basis 11.  Do it as a unit – it conducts the assessment simultaneously (everyone at the same time) as a team) 13. Feedback loop – with every termination and promotion, check to see if the PA scores were accurate predictors 14. Ask employees – involve them in the process of how to best measure and communicate results 26
  27. 27. Characteristics of advanced PM 20 operational characteristics 15.  A multiyear comparison – an overview of the last 3-5 years is included 16.  Benchmark comparison numbers – the best, average and worst comparison numbers are always included, to show their relative position 17.  Linked to next job – it does not just provide a historical perspective. In addition, it is forward looking and also assesses them for their “next job” 27
  28. 28. Characteristics of advanced PM 20 operational characteristics 18. “Right job fit” movement is considered – when the individual would likely thrive if they were in a different place, they are moved to their “right job” 19. Separate objective performance measurement – clearly separate performance data… from subjective trait assessment 20. Customize the delivery format – performance feedback is provided in a format that is customized to fit the employee and the job 28
  29. 29. Integration is important 29
  30. 30. Functions that can be coordinated with PM Processes that need to work closely with PM  Compensation and rewards  Training, learning and development  Employee engagement and satisfaction surveys  Internal movement and redeployment  Promotion processes  Succession planning  360° feedback  Competency development  Career planning  Coaching and mentoring  Employee relations  On-boarding  Retention  Recruiting  Workforce planning 30
  31. 31. Success metrics and goals for the overall performance management process 31
  32. 32. Metrics and goals to consider 1.  Improvement of overall workforce productivity 2.  The % of those on PM that are “fixed” 3.  Faster “fixing” or release of problem employees 4.  Improved management and employee satisfaction with the process 5.  Correlation between performance appraisal scores and pay increases/promotion 13. Manager time spent on adminstration. 14. % PA’s that are accurate, on time and completed 15. Evidence of a performance culture 32
  33. 33. Benchmark firms 33
  34. 34. Benchmark firms to learn from The best firms to study include: GE Intel KLA Tencor Sun DaVita Healthcare Quaker Apple Professional sports teams 34
  35. 35. What are the elements of a performance culture? 35
  36. 36. A definition of a performance culture?  A performance culture is where an organization has a singular focus on business results  This focus permeates every value and operational aspect of the organization  As a result, all people-management processes including hiring, retention, development, rewards, recognition and metrics are aimed at producing measurable business results  In addition, all business processes including goal setting, budgets, resource allocations and communications also encourage business results 36
  37. 37. The Nine HR elements of a performance culture (GE model) 1. Constant communication of the need for perform 2.  Differentiated rewards/ recognition for results 3. Extensive metrics & reporting on performance 4. Rapid learning, sharing & problem confrontation 5. Rewards for innovation & calculated risk taking 6.  Hire the best based on their capabilities/results 7.  Retain the best and release the bottom 8.  Individualized motivation and communication 9.  Reward cooperation while punishing bureaucracy and bad behavior 37
  38. 38. And finally… Some bold actions to consider 38
  39. 39. If you really feeling bold, try these 1.  Find your own assessors – Sun 2.  Fire the bottom x % – GE 3.  100% objective – Quaker 4.  Try a split sample 5.  Have a lawyer review your PM files 6.  Identify barriers to productivity > 39
  40. 40. Identifying barriers to productivity Consider a barrier survey which includes:  “We need you to increase your productivity by 25%... what are the barriers that would prevent you from doing that?”  A “we need your help statement” (Who knows better than you)  Provide examples of what you mean by “barriers to productivit”" on the form  Put limits on the request to ensure that the barriers can be removed within a short period time 40
  41. 41. Identifying barriers to productivity Ask them to identify:  Barriers to increasing output volume  Barriers to increasing quality and innovation  Any no money, “low hanging fruit” ideas?  Things the org could stop doing with little impact  Where a little money could return huge benefits?  Ways to increase competitive advantage 41
  42. 42. Try this – A “How am I doing?” chart 42
  43. 43. Try this – A “multi-year trend” chart 43
  44. 44. Did I make you think? Provide you with some new ideas? Do you have any additional questions? Subscribe to our free VP-of-HR newsletter at 44