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Rusty Lindquist
V P H C M S T R A T E G Y & I P
A T B A M B O O H R
Mykkah Herner
M O D E R N C O M P E N S A T I O N
E V A N G E L I S T A T P A Y S C A L E
The Law of Inertia
We tend to be carried forward
in life by the inertia of our past.
@rustylindquist
Performance Reviews
of performance reviews end up
decreasing employee performance
- Psychological Bulletin
of executives believe their current
program doesn’t result in performance
or engagement. – Deloitte
30%
58%
70% of companies are now
reconsidering their performance
strategy. – Bersin
70%
of companies surveyed think
performance reviews are worth their
time - Deloitte
of HR executives say yearly
evaluations are useful. – Deloitte
6%
2%
of workers are dissatisfied with their
perfpormance reviews. – Deloitte80%
of employees with highest performance
scores aren’t actually the highest
performers - CEB
2/3
-5% improvement in performance is
all managers believe will be
generated in the process. - CEB
3%
“Performance appraisals are perhaps the most
reviled standard practice in all of management”
Performance Appraisals
Peter Cappelli
Wharton School of Management
“Why we love to hate HR” HBR
It’s time to blow up HR and build something new
Rethinking HR
Why we love to hate HR
What will it take to fix HR
It’s time to split HR
HR faces a crisis of credibility in the boardroom
HR is our “favorite corporate punching bag”
A crisis of credibility
A Little History
Performance Problems
“You rate me on ‘Marcus makes decisions quickly’ and
your rating reveals simply whether I make decisions
more quickly than you do.
If you rate me on ‘Marcus is a good listener’ and we learn
only whether I am a better listener than you.
All of these questions are akin to you rating me on
height. Whether you perceive me as short or tall,
depends on how short or tall you are."
Idiosyncratic Rater Effect
Marcus Buckingham
Harvard Business Review
• Overgeneralization
• Random measurement error
• Interpretation error
• Idiosyncratic rater effect
• Recency Bias
• Confirmation Bias
• Faulty memory syndrome
• Quantification of past behaviors is
ineffective
• We tend to let it stand for more than
it should
• Negative psychological impact
(defensive and demotivating)
• Too many variables
• Too often rater is unqualified
(doesn’t understand job)
• Shown to decrease morale
• Found to create infighting
• Leads to “gaming” and politics
• Too subjective
• Too infrequent
• Too much focus on past, not
enough on future
• Too costly
• Takes too much time
• Too despised
Performance Problems
Exodus
“When asked what would shake up the HR world most in
2016, 44% of companies said shifting from traditional
performance reviews in favor of real-time feedback”
—2016 BambooHR Comp Best Practices Report
80,000 hours
2,000 managers
The Result
Employees were:
Less inspired
Less motivated
Turnover Increased
Adobe
Performance Review Process
Adobe (2012)
PROBLEM SOLUTION
Annual performance reviews
were eating up a ton of time.
And it wasn’t giving the
business return for that time.
Stopped doing annual review “in
favor of regular check-ins allowed
Adobe to have a lightweight
process that served—rather than
distracted from—people doing
their best work.”
http://www.businessinsider.com/adobe-abolished-annual-performance-review-2014-4
Accenture (2015)
PROBLEM SOLUTION
CEO Pierre Nanterme said that
sharing only once a year what
you think of your employees
“doesn’t make any sense.”
Performance is an on-going
activity, and people want to
know if they’re doing things right
on an on-going basis. It should
be “instant performance
management.”
Accenture “plans to implement a
more fluid system that would
allow for immediate employee
feedback on an ongoing basis.”
https://www.washingtonpost.com/news/on-leadership/wp/2015/07/21/in-big-move-accenture-will-get-rid-of-annual-
performance-reviews-and-rankings/
GE (2015)
PROBLEM SOLUTION
Removed stacked rankings, firing
the bottom 10 percent each year
(10 years ago). They’re now
removing performance reviews
completely because it “leads to a
tendency for HR to focus
excessively on process over
outcomes.” And doesn’t make
sense for their current workforce,
who want feedback more
“frequent, faster, mobile-enabled.”
They’re transitioning from bell-
curve management to focusing on
their people who are more
motivated by connection,
inspiration and developing people
http://qz.com/428813/ge-performance-review-strategy-shift/
70% of companies are now
reconsidering their
performance strategy
—Bersin
Done Well
THE RIGHT WAY
Frequent Feedback
Increase communication touch points
• Stack ranking
• Annual review cycles
• Encourage ownership
thinking
• Provide frequent
feedback
• Build skills
42% of millennials want feedback every week
Source: Ultimate Software & the Center for Generational Kinetics
Motivating Employees
Preferred Frequency by Generation
https://www.tinypulse.com/blog/difference-in-perception-between-generations
Increase Cycle Time
Intended Direction Actual Direction
Don’t wait till here
Catch them here
And here
Organizational
Waste
Signal to Noise Ratio
THE RIGHT WAY
Ask Simple Questions
1. Given what I know of this person’s performance, and if it were
my money, I would award this person the highest possible
compensation increase and bonus
[measures overall performance and unique value to the organization on a fiv
e-point scale from “Strongly agree” to “strongly disagree”].
2. Given what I know of this person’s performance, I would always
want him or her on my team
[measures ability to work well with others on the five-point scale].
3. This person is at risk for low performance
[identifies problems that might harm the customer or the team on a
yes-or-no basis].
4. This person is ready for promotion today
[measures potential on a yes-or-no basis].
Performance Questions Now Asked By Deloitte
Ask Simple Questions
1. If Allison got a job offer elsewhere I would
a. Do everything I could to keep Allison. We’d be in trouble!
b. Convince Allison to stay. Allison would be difficult to replace
c. Need to think about it. Allison does a decent job.
d. Wish Allison well. I’ll be able to find a better replacement anyway
e. Be relieved. It’s not likely to work out anyway.
2. How engaged is Allison at work?
a. High engagement and a great attitude.
b. Good engagement and a mostly positive attitude.
c. Medium engagement and an okay attitude.
d. Low engagement and is burned out.
e. No engagement and is checked out.
3. What are some things Allison does well?
4. How could Allison improve?
Performance Questions Now Asked in BambooHR
Connecting Performance
with Pay
• Performance management aligned to
business goals & cycles
• Paying for results
• Getting creative about both
performance and pay
Modern
Pay for Performance
• 50.1% based increases on performance
• 61.8%* give individual incentives
• 25.7%* give team incentives
*of those giving bonuses
How are companies linking
Performance with Pay?
“Employees won’t believe there is a
link between pay and performance
unless they can see it.”
— Margaret O’Hanlon
re: Think Consulting
Culture and perks that reward
high performers
Higher increases for top performers
Results-based incentive plan
Performance-based
rewards & recognition
Linking Pay to Performance
• Bonus vs Incentive
• Match incentive cycle to work cycle
• Alignment: individual, team, organization
• Additional structure considerations
• Self-funding – variable costs
• Keep it simple
Incentive Pay
Base pay increases are determined by performance and
position in market-based range using a Merit Matrix
Exceeds
Meets
Does not Meet
Base Pay
Employees and employers are in a
relationship where they agree to things
What’s your Deal?
• Exchange of value
• Mental math – does it add up?
Getting Creative
• Passes to sporting events
• Catered lunches for winning teams
• Days off after big deadlines
• Choice of work assignment
• Development opportunities
• Lunch with the CEO
• Remote work
Get Creative
It’s not a best practice
if it’s not best for
your organization
Thank you!
BambooHR
Receive a free job posting on our ATS and full HRIS for one week.
We will contact everyone within the next few days to set this up.
Download a free ebook around pay for performance.
PayScale
http://bit.ly/29UBsHO
Questions?
Rusty Lindquist
V P S T R A T E G I C H R I N S I G H T S
B A M B O O H R
@ r u s t y l i n d q u i s t
r u s t y @ b a m b o o h r . c o m
w w w . l i n k e d i n . c o m / i n / r u s t y l i n d q u i s t
Mykkah Herner
M O D E R N C O M P E V A N G E L I S T
P A Y S C A L E
@ m y k k a h _ h e r n e r
M y k k a h H @ p a y s c a l e . c o m
w w w . l i n k e d i n . c o m / i n / m y k k a h h e r n e r

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Reinventing Performance Management - How to do it right

  • 1.
  • 2. Rusty Lindquist V P H C M S T R A T E G Y & I P A T B A M B O O H R Mykkah Herner M O D E R N C O M P E N S A T I O N E V A N G E L I S T A T P A Y S C A L E
  • 3.
  • 4. The Law of Inertia We tend to be carried forward in life by the inertia of our past. @rustylindquist
  • 5. Performance Reviews of performance reviews end up decreasing employee performance - Psychological Bulletin of executives believe their current program doesn’t result in performance or engagement. – Deloitte 30% 58% 70% of companies are now reconsidering their performance strategy. – Bersin 70% of companies surveyed think performance reviews are worth their time - Deloitte of HR executives say yearly evaluations are useful. – Deloitte 6% 2% of workers are dissatisfied with their perfpormance reviews. – Deloitte80% of employees with highest performance scores aren’t actually the highest performers - CEB 2/3 -5% improvement in performance is all managers believe will be generated in the process. - CEB 3%
  • 6. “Performance appraisals are perhaps the most reviled standard practice in all of management” Performance Appraisals Peter Cappelli Wharton School of Management “Why we love to hate HR” HBR
  • 7.
  • 8.
  • 9. It’s time to blow up HR and build something new Rethinking HR Why we love to hate HR What will it take to fix HR It’s time to split HR HR faces a crisis of credibility in the boardroom HR is our “favorite corporate punching bag” A crisis of credibility
  • 12. “You rate me on ‘Marcus makes decisions quickly’ and your rating reveals simply whether I make decisions more quickly than you do. If you rate me on ‘Marcus is a good listener’ and we learn only whether I am a better listener than you. All of these questions are akin to you rating me on height. Whether you perceive me as short or tall, depends on how short or tall you are." Idiosyncratic Rater Effect Marcus Buckingham Harvard Business Review
  • 13. • Overgeneralization • Random measurement error • Interpretation error • Idiosyncratic rater effect • Recency Bias • Confirmation Bias • Faulty memory syndrome • Quantification of past behaviors is ineffective • We tend to let it stand for more than it should • Negative psychological impact (defensive and demotivating) • Too many variables • Too often rater is unqualified (doesn’t understand job) • Shown to decrease morale • Found to create infighting • Leads to “gaming” and politics • Too subjective • Too infrequent • Too much focus on past, not enough on future • Too costly • Takes too much time • Too despised Performance Problems
  • 14. Exodus “When asked what would shake up the HR world most in 2016, 44% of companies said shifting from traditional performance reviews in favor of real-time feedback” —2016 BambooHR Comp Best Practices Report
  • 15. 80,000 hours 2,000 managers The Result Employees were: Less inspired Less motivated Turnover Increased Adobe Performance Review Process
  • 16. Adobe (2012) PROBLEM SOLUTION Annual performance reviews were eating up a ton of time. And it wasn’t giving the business return for that time. Stopped doing annual review “in favor of regular check-ins allowed Adobe to have a lightweight process that served—rather than distracted from—people doing their best work.” http://www.businessinsider.com/adobe-abolished-annual-performance-review-2014-4
  • 17. Accenture (2015) PROBLEM SOLUTION CEO Pierre Nanterme said that sharing only once a year what you think of your employees “doesn’t make any sense.” Performance is an on-going activity, and people want to know if they’re doing things right on an on-going basis. It should be “instant performance management.” Accenture “plans to implement a more fluid system that would allow for immediate employee feedback on an ongoing basis.” https://www.washingtonpost.com/news/on-leadership/wp/2015/07/21/in-big-move-accenture-will-get-rid-of-annual- performance-reviews-and-rankings/
  • 18. GE (2015) PROBLEM SOLUTION Removed stacked rankings, firing the bottom 10 percent each year (10 years ago). They’re now removing performance reviews completely because it “leads to a tendency for HR to focus excessively on process over outcomes.” And doesn’t make sense for their current workforce, who want feedback more “frequent, faster, mobile-enabled.” They’re transitioning from bell- curve management to focusing on their people who are more motivated by connection, inspiration and developing people http://qz.com/428813/ge-performance-review-strategy-shift/
  • 19. 70% of companies are now reconsidering their performance strategy —Bersin
  • 21.
  • 24. • Stack ranking • Annual review cycles • Encourage ownership thinking • Provide frequent feedback • Build skills 42% of millennials want feedback every week Source: Ultimate Software & the Center for Generational Kinetics Motivating Employees
  • 25. Preferred Frequency by Generation https://www.tinypulse.com/blog/difference-in-perception-between-generations
  • 26. Increase Cycle Time Intended Direction Actual Direction Don’t wait till here Catch them here And here Organizational Waste
  • 29. Ask Simple Questions 1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a fiv e-point scale from “Strongly agree” to “strongly disagree”]. 2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on the five-point scale]. 3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis]. 4. This person is ready for promotion today [measures potential on a yes-or-no basis]. Performance Questions Now Asked By Deloitte
  • 30. Ask Simple Questions 1. If Allison got a job offer elsewhere I would a. Do everything I could to keep Allison. We’d be in trouble! b. Convince Allison to stay. Allison would be difficult to replace c. Need to think about it. Allison does a decent job. d. Wish Allison well. I’ll be able to find a better replacement anyway e. Be relieved. It’s not likely to work out anyway. 2. How engaged is Allison at work? a. High engagement and a great attitude. b. Good engagement and a mostly positive attitude. c. Medium engagement and an okay attitude. d. Low engagement and is burned out. e. No engagement and is checked out. 3. What are some things Allison does well? 4. How could Allison improve? Performance Questions Now Asked in BambooHR
  • 32. • Performance management aligned to business goals & cycles • Paying for results • Getting creative about both performance and pay Modern Pay for Performance
  • 33. • 50.1% based increases on performance • 61.8%* give individual incentives • 25.7%* give team incentives *of those giving bonuses How are companies linking Performance with Pay?
  • 34. “Employees won’t believe there is a link between pay and performance unless they can see it.” — Margaret O’Hanlon re: Think Consulting
  • 35. Culture and perks that reward high performers Higher increases for top performers Results-based incentive plan Performance-based rewards & recognition Linking Pay to Performance
  • 36. • Bonus vs Incentive • Match incentive cycle to work cycle • Alignment: individual, team, organization • Additional structure considerations • Self-funding – variable costs • Keep it simple Incentive Pay
  • 37. Base pay increases are determined by performance and position in market-based range using a Merit Matrix Exceeds Meets Does not Meet Base Pay
  • 38. Employees and employers are in a relationship where they agree to things What’s your Deal? • Exchange of value • Mental math – does it add up?
  • 40.
  • 41. • Passes to sporting events • Catered lunches for winning teams • Days off after big deadlines • Choice of work assignment • Development opportunities • Lunch with the CEO • Remote work Get Creative
  • 42. It’s not a best practice if it’s not best for your organization
  • 43. Thank you! BambooHR Receive a free job posting on our ATS and full HRIS for one week. We will contact everyone within the next few days to set this up. Download a free ebook around pay for performance. PayScale http://bit.ly/29UBsHO
  • 44. Questions? Rusty Lindquist V P S T R A T E G I C H R I N S I G H T S B A M B O O H R @ r u s t y l i n d q u i s t r u s t y @ b a m b o o h r . c o m w w w . l i n k e d i n . c o m / i n / r u s t y l i n d q u i s t Mykkah Herner M O D E R N C O M P E V A N G E L I S T P A Y S C A L E @ m y k k a h _ h e r n e r M y k k a h H @ p a y s c a l e . c o m w w w . l i n k e d i n . c o m / i n / m y k k a h h e r n e r