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17 October 2011Performance ManagementHelping you make it happen!
Agenda         Current environment for performance management         Client experience & discussion         Summary & sug...
There have always been those who questioned performance management…      “Evaluation of performance, merit rating or annua...
A direct impact           What we’ve known since the ’90’s… is even more important right now                              ...
A direct impactA hospital which appraises 20% more staff and trains 20% moreappraisers is likely to have 1,090 fewer death...
And most of us do it…87% of organisations have formal PM schemes         Annual appraisal and                           85...
External trends: changes in performance management•      74% have been making changes in last 3 years, 48% plan changes•  ...
External trends (cont)     Greater differentiation between outstanding & average performers     Commonest number of rating...
An overfull suitcaseSource: People Management “Performance management: Fine intentions” / 30 August 2011http://www.peoplem...
Factors relating to success include     Clear links to corporate vision & goals     Example set from the top – importance ...
Creating the conditions for people to excelAcross the organisation, we have to get three things right   Accountability for...
Sending the right messages to each type of performer              How do we want each level of performer to feel?         ...
Setting high-reach goals is an important driver of a performance culture  Lower Level of                             Most ...
What do you do now?     Examine your performance management system and process     from different perspectives.     Consid...
Aon Hewitt Global Footprint                              14
More informationDuncan BrownT: +44 (0)207 086 9037E: duncan.brown@aonhewitt.com@duncanbHRJackie WallerT: +44 (0)172 788 83...
Copyright © 2011 Aon Hewitt Limited. All rights reserved.Aon Hewitt Limited, 8 Devonshire Square London EC2M 4PL Registere...
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Performance management - Aon Hewitt

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Performance management - Aon Hewitt

  1. 1. 17 October 2011Performance ManagementHelping you make it happen!
  2. 2. Agenda Current environment for performance management Client experience & discussion Summary & suggestions for how to get things right 1
  3. 3. There have always been those who questioned performance management… “Evaluation of performance, merit rating or annual review is a deadly disease of management.” (W. Edwards Deming) “Rarely in the history of business can such a system have promised so much and delivered so little.” (Keith Grint) “A dishonest annual ritual.” (Armstrong & Murlis) 2
  4. 4. A direct impact What we’ve known since the ’90’s… is even more important right now Difference in Productivity of High vs. Profits Realised if One Employee Average Performers by Complexity of Job Moves from Average to High PerformanceDifference in Productivity of High Performers 125% 120% 100% Avg. Base, Profitability Gain/ Bonus + Headcount $ Saved $ Spent Net Profit per Job Complexity Benefits (000’s) Reduction (000’s) (000’s) Top EE (000’s) 75% Low $53.7 19% $10.2 ($4.3) $5.9 50% 48% Moderate $96.4 32% $30.9 ($11.6) $19.3 25% 32% High $173.5 48% $83.3 ($27.8) $55.5 19% High—Sales $175.8 120% $211.0 ($34.8) $176.2 0% Low Moderate High High-Sales Complexity of Job One technology company’s recent projections J.E. Hunter, et al., “Individual Differences in Output Variability as a Function of Job Complexity,” Journal of Applied Psychology, 1990 3
  5. 5. A direct impactA hospital which appraises 20% more staff and trains 20% moreappraisers is likely to have 1,090 fewer deaths per 100,000 admissions 120 100Mortality 80 60 40 20 0 Low Sophistication of HR Practices HighSource: West et al 4
  6. 6. And most of us do it…87% of organisations have formal PM schemes Annual appraisal and 85% objective setting Integrating individual and 84% organisational goals Personal development 71% focus Performance related 31% pay linkCIPD, n = 506 5
  7. 7. External trends: changes in performance management• 74% have been making changes in last 3 years, 48% plan changes• Issues include unclear objectives, over-complexity and poor management Past Changes Past Changes Future Changes Future Changes 11 Competencies inclusion Competencies inclusion Enhance link to pay Enhance link to pay 2 Enhancing pay link Streamline the performance Streamline the performance 2 Enhancing pay link management process management process More regular meetings / / More regular meetings Provide more coaching / /development 33 Provide more coaching development feedback feedback for appraisers for appraisers 44 Simplification Simplification Review / /improve ratings process Review improve ratings process Link performance management Link performance management 55 More regular feedback to strategic business goals to strategic business goals More regular feedback Source: E-reward. Rankings are based on the % of organisations with performance management systems planning changes 6
  8. 8. External trends (cont) Greater differentiation between outstanding & average performers Commonest number of ratings still five Over half rate ‘how’ as well as ‘what’ & a quarter rate potential as well as performance Simplified & clearer processes e.g. competencies. Development of line managers – mandatory training & coaching Focus on ‘the conversation’, more investment in employee communication & training Greater employee involvement Move to more frequent but shorter meetings 7
  9. 9. An overfull suitcaseSource: People Management “Performance management: Fine intentions” / 30 August 2011http://www.peoplemanagement.co.uk/pm/articles/2011/08/performance-management-fine-intentions.htm 8
  10. 10. Factors relating to success include Clear links to corporate vision & goals Example set from the top – importance of process emphasised & reinforced Competent & trained managers Investment in communication Moderation & comparative processes Rated & valued by employees Does what it says on the tin! 9
  11. 11. Creating the conditions for people to excelAcross the organisation, we have to get three things right Accountability for the Everyone working on what’s important, getting it right results done, and playing by the rules Trust earned one The people we depend on feel valued and person at a time confident, ready to give their best Opportunity for impact Skill-building in every assignment and job, and growth guided by business needsSustainable high performance requires manager capability in these essentials 10
  12. 12. Sending the right messages to each type of performer How do we want each level of performer to feel? Motivated Successful Special High Performers X X X Solid Contributors X X Under Performers X This is where the action is… and where most performance systems fall short 11
  13. 13. Setting high-reach goals is an important driver of a performance culture Lower Level of Most Goals Highest Level of Challenge Should Be Here Challenge• Is achievable with performance • The level of performance that • Achievement is very risky and will at last year’s level. an organisation’s targets require extreme effort and / or skill. require.• Represents little new challenge. • Represents a significant • A realistic challenge – a high challenge and breakthrough• Existing skills may be minimally reach that’s achievable given accomplishments. challenged and new skills are not strong effort. required. • Requires significant development of a • Existing skills are challenged new skill or many new skills.• Existing technology, tools and and new skills may be processes are applied or • Requires significant innovations in required. adapted. work methods and / or technology. • Innovation may be required in• Requires limited coordination • Requires extensive coordination and work methods and / or and cooperation from others. technology. cooperation from many different stakeholders. • Requires a focus on coordinating and cooperating with others. 12
  14. 14. What do you do now? Examine your performance management system and process from different perspectives. Consider what you’re trying to deliver with your performance management approach – is it too much? Are the goals clear? Consider all the players in the process: are they engaged, prepared and willing to deliver what’s required? 13
  15. 15. Aon Hewitt Global Footprint 14
  16. 16. More informationDuncan BrownT: +44 (0)207 086 9037E: duncan.brown@aonhewitt.com@duncanbHRJackie WallerT: +44 (0)172 788 8394E: jackie.waller@aonhewitt.comClick on the images for related research
  17. 17. Copyright © 2011 Aon Hewitt Limited. All rights reserved.Aon Hewitt Limited, 8 Devonshire Square London EC2M 4PL Registered in England & Wales No. 4396810To protect the confidential and proprietary information included in this material, it may not be disclosed or provided toany third parties without the prior written consent of Aon Hewitt Limited.Aon Hewitt Limited does not accept or assume any responsibility for any consequences arising from any person, otherthan the intended recipient, using or relying on this material.Authorised and regulated by the Financial Services Authority.

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