Creating Performance Based Culture through proper people management

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Creating Performance Based Culture through proper people management

  1. 1. CREATING A PERFORMANCE-BASED CULTURE SESSION 2: THROUGH PROPER PERFORMANCE MANAGEMENT OF PEOPLE CNI’s Journey, Mistakes, and Lessons Learned Kenny Ong CNI Holdings Berhad
  2. 2. Contents <ul><li>Key Workforce challenges to achieving organization performance </li></ul><ul><li>Managing Performance through People: Support and Philosophy </li></ul><ul><li>How to really manage Performance </li></ul><ul><li>Managing Performance through Incentives </li></ul><ul><li>Employee Distinctions through Relative Performance </li></ul><ul><li>Managing Team performance – collaboration, innovation </li></ul>
  3. 3. Workforce Challenges <ul><li>Key Workforce Challenges in Achieving Organizational Goals (Extremely Simplified Version): </li></ul><ul><li>Right Person, Wrong Job (5%) </li></ul><ul><li>Wrong Person, Right Job (20%) </li></ul><ul><li>Wrong Person, Wrong Job (1%) </li></ul><ul><li>Right Person, Right Job, Managed Wrongly (74%) </li></ul>
  4. 4. Managing Performance through People: Support and Philosophy
  5. 5. Alignment: 4-Wheels Model Philosophies Corporate Objective Performance Objectives Structure Resources Leadership Person
  6. 6. Alignment: Framework <ul><li>Equal / Fair </li></ul><ul><li>Happy / Productive </li></ul><ul><li>Performance vs Potential </li></ul><ul><li>Retention / Engagement </li></ul><ul><li>Activities / Results </li></ul><ul><li>Leading / Lagging </li></ul><ul><li>Macro / Micro </li></ul>Philosophies
  7. 7. How to really manage Performance
  8. 8. <ul><li>Beating a Dead Horse </li></ul>
  9. 9. Most Common Desperate Performance Improvement methods <ul><li>Send for more Training </li></ul><ul><li>Enforce more Incentives (positive/negative) </li></ul>
  10. 10. Mager and Pipe <ul><li>Analyzing Performance Discrepancies </li></ul>
  11. 11. Managing Performance through Incentives
  12. 12. Incentive Problems <ul><li>Problem with Incentives in managing performance: </li></ul><ul><li>Most people are confused or unsure about compensation tools </li></ul><ul><li>Some people misuse compensation tools </li></ul>
  13. 13. What to Pay? <ul><li>Pay for Service </li></ul><ul><li>Pay for Job </li></ul><ul><li>Pay for Performance </li></ul><ul><li>Pay for Competency </li></ul>
  14. 14. Performance and Incentives <ul><li>Internal Equity </li></ul><ul><ul><li>Internal Job Rates </li></ul></ul><ul><ul><li>Performance differentials </li></ul></ul><ul><li>External Competitiveness </li></ul><ul><ul><li>External Job Rates - Benchmarking </li></ul></ul><ul><ul><li>Demand & Supply </li></ul></ul>
  15. 15. What’s the Difference? <ul><li>Increment </li></ul><ul><li>Bonus </li></ul><ul><li>Promotion </li></ul>
  16. 16. Compa Ratio Table <ul><li>Use this if your company: </li></ul><ul><li>Pays for Performance , and </li></ul><ul><li>Pays for Job rates </li></ul><ul><li>Def: </li></ul><ul><li>Mid-Point = Mid Point of Pay Grade </li></ul>Grade E2 Min RM2,000 MID RM2,500 Max RM3,000
  17. 17. Compa Ratio Table 1 2 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  18. 18. Compa Ratio Table 1 2 5% 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  19. 19. Compa Ratio Table 0 1 2 2 3 4 5% 7 9 3 7 4 9 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  20. 20. Compa Ratio Table 0 0 0 2 4 1 0 1 2 4 6 2 3 4 5% 7 9 3 3 5 7 9 12 4 7 8 9 12 15 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  21. 21. Dangers of Direct Incentives <ul><li>lessen internal motivation, </li></ul><ul><li>switch to mercenary mode, </li></ul><ul><li>do something and do not do something else, </li></ul><ul><li>bribe and fraud culture, </li></ul><ul><li>easier for competitors to recruit, </li></ul><ul><li>lessen teamwork & helpful culture, </li></ul><ul><li>less and less impact for same value, </li></ul><ul><li>mockery of base salary and employment contract, </li></ul><ul><li>rebellion from non-incentivised staff, </li></ul><ul><li>end up incentivising everyone for everything?, </li></ul>
  22. 22. Employee Distinctions through Relative Performance
  23. 23. Employee Distinction? 1 2 3 4 5 1 2 3 4 5 6 2 3 4 5% 6 7 3 4 5 6 7 8 4 5 6 7 8 9 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  24. 24. Employee Distinction? 0 0 0 0 0 1 0 0 1 1 1 2 3 4 5% 7 9 3 3 5 9 12 18 4 5 8 12 15 20 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  25. 25. Employee Distinction 0% 1.0 0 1 ≤ 1.3 0.9% 1.8 0.5 2 > 1.3 – 2.3 2.1% 2.8 0.75 3 > 2.3 – 3.3 4.2% 3.5 1.2 4 > 3.3 – 4.1 8.4% 4.2 2 5 > 4.1 Example Increment Example Rating Multiply Factor Rating Average Rating
  26. 26. Employee Distinction Group I (Talent Pool) <ul><li>Identify </li></ul>2 3 4 5 PERFORMANCE 2 3 4 5 POTENTIAL
  27. 27. Employee Distinction Group I (Talent Pool) Group II (  Potential) Group III (  Performance) Group IV (Counseling) 2 3 4 5 2 3 4 5 PERFORMANCE POTENTIAL <ul><li>Identify </li></ul>
  28. 28. Curse of the Bell Curve ‘ A’ Staff ‘ B’ Staff ‘ D’ Staff ‘ E’ Staff ‘ C’ Staff
  29. 29. Managing Team performance – collaboration, innovation
  30. 30. Managing TEAMS <ul><li>Identify the right ‘levers’ </li></ul><ul><li>Set KPIs for the right ‘levers’ </li></ul><ul><li>Manage the ‘levers’ through performance systems </li></ul><ul><li>Balance Individual vs. Team priorities </li></ul><ul><li>Manage conflicting KPIs, but don’t eliminate them </li></ul>
  31. 31. TEAM levers C.O.R.E. ÷ W.L.
  32. 32. Possible TEAM-type KPIs and incentives <ul><li>Recognition for exceptional success (usually not in cash) </li></ul><ul><li>Individual role considered in normal merit increase process </li></ul>Functional <ul><li>Recognition for exceptional individual or team successes in spot awards or share increases </li></ul><ul><li>Venture profit sharing </li></ul>Network/ Partnerships <ul><li>Recognition for exceptional individual contributions in spot wards or salary increases </li></ul><ul><li>Project / programme Phantom Stock or Profit Sharing </li></ul>Project/ Time-based <ul><li>Team competencies recognised in pay for proficiency approach </li></ul><ul><li>Gainsharing or operational progress incentives </li></ul>Process Possible Incentive Type Team Type
  33. 33. Team Incentive Models <ul><li>1. Fixed Salary Proportion (Fixed Personal, Variable Team) </li></ul>Performance Incentive = Fixed Quantum + (Balance Sum In Bonus Pool ÷ Headcount)
  34. 34. Team Incentive Models <ul><li>2. Two-tier Multiplier (Variable Personal, Variable Team) </li></ul>Performance Incentive = Personal Target Achievement + (Personal Target Achievement x Team Performance Multiplier)
  35. 35. Team Incentive Models <ul><li>3. Team Ratio Plan (Variable Personal, Fixed Team) </li></ul>Performance Incentive = Team Ratio x Personal Target Multiplier
  36. 36. <ul><li>Product Leadership </li></ul><ul><ul><ul><li>Reduce time to market </li></ul></ul></ul><ul><ul><ul><li>Commercialize new products fast </li></ul></ul></ul><ul><ul><ul><li>Ensure that ideas flow </li></ul></ul></ul><ul><ul><ul><li>Reuse what other parts of the company have already learned </li></ul></ul></ul><ul><ul><ul><li>Ensure there are multiple sources of funding </li></ul></ul></ul>Possible Innovation levers
  37. 37. Innovation Levers? <ul><li>Add 10 value increasing properties to each product or service every 90 days </li></ul><ul><li>Reduce jointly held inventories and lead time required by 90% in 24 months </li></ul><ul><li>Reduce new-product/service development cycle time by 75% in next 2 years </li></ul><ul><li>Copy 10 ideas every 60 days form competitors and noncompetitors </li></ul><ul><li>Target % Revenue from New Products (previous 24 months ) - start with 50% </li></ul>Source: The Innovation Challenge, “ Thriving on Chaos” , by Tom Peters; Alfred A. Knopf Inc.
  38. 38. Managing People performance: A Summary
  39. 39. More Problems…. <ul><li>cost of evaluation vs. gains of evaluation </li></ul><ul><li>defer achievements of a good year to next </li></ul><ul><li>barely achieve so that next target is not high </li></ul><ul><li>spread improvements over several years </li></ul><ul><li>value reducing actions to increase performance </li></ul><ul><li>most ratings are 4 or 5, new people are 3 </li></ul>
  40. 40. Contents <ul><li>Key Workforce challenges to achieving organization performance </li></ul><ul><li>Managing Performance through People: Support and Philosophy </li></ul><ul><li>How to really manage Performance </li></ul><ul><li>Managing Performance through Incentives </li></ul><ul><li>Employee Distinctions through Relative Performance </li></ul><ul><li>Managing Team performance – collaboration, innovation </li></ul>
  41. 41. Before I forget… <ul><li>Re-train Appraisers </li></ul><ul><li>Train new Appraisers </li></ul>
  42. 42. Alignment: 4-Wheels Model Philosophies Corporate Objective Performance Objectives Structure Resources Leadership Person
  43. 43. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

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