1、Executive Human Resource ProgramThe Promise of Performance ManagementHay GroupBoston The Current Challenge of Performance ManagementThe HR processn Is completely unrelated to other key business processesn Is dreaded by managers and employees aliken Does not result in any meaningful feedbackn Does no
2、t differentiate performance or payn Is a focus for only one or two daysor hoursper yearThe Promise of Performance ManagementImagine a system that couldn Increase the likelihood that your strategy is effectively executedn Harness and direct the 1060 minutes a day of discretionary effort that every on
3、e of your employees hasn Rationalize and focus the number of goals that anyone in your organization hasn Improve the decisive dialogue that occurs in your organizationn Reward performance in a way that it is motivating and engages peoplen Differentiate performance in ways that make line managers fee
4、l good about their decisionsPerformanceNumber of EmployeesSource:Hay/McBerOptimizing the performance of your people will have a positive impact on business performanceImproving Performance Management Improves Business ResultsPercentage of variation in change in company performance accounted for by m
5、anagerial practices19%2%1%1%6%18%3%1%1%8%0%10%20%30%40%ProfitabilityProductivityHRMStrategyQualityTechnologyR&DSource:Sheffield Effectiveness ProgrammeHuman Resource Management Practices Drive Profitability and ProductivityHighly Successful Companies are defined as havingn5-year sales growth=17.5%pe
6、r yearn5-year profit growth=10.8%per yearnAnnual equity growth=16.7%per yearn5-year dividend growth=13.4%per yearSource:D.Karvetz,The Human Resources RevolutionClear Employee GoalsParticipative StyleAttention to DevelopmentEncourage CreativityPerformance-Based RewardsHighly SuccessfulCompaniesLess S
7、uccessfulCompanies80%70%67%62%86%26%4%27%10%30%High-performing companies are better at managing,motivating,and rewarding employeesImproving Performance Management Improves Business ResultsSource:Mavrinac&Siesfield,Measuring Intangible InvestmentStrategy Execution Matters to ShareholdersThirty-five p
8、ercent of an institutional investors valuation of a company is attributable to nonfinancial information that gauges the ability of the management team to deliver results:nStrategy Execution:Can management make tough decisions and seize opportunities quickly?nManagement Credibility:Does the company k
9、eep its commitments?nStrategy Quality:Is managements vision of the future likely to optimize value creation in a volatile,globalized,and connected economy?nInnovativeness:How readily does this company adapt?nAttracting and Retaining Talent:Is turnover higher or lower than key competitors?Do new hire
10、s surpass leavers in skills and experience?nManagement Experience:What skills and experiences does the management team bring to the table?nCompensation:Do compensation policies support the firms strategic intent?35%improvement in human-capital systems resulted in 10%20%gain in shareholder valueAlign
11、ment and Integration of HR System“Human Capital”Enhancements290310330350370390020406080100Quintile Improvements in Strategic Market Value per Employee(000)Source:Huselid and Baker,1995Human Capital Systems Increase Shareholder ValueImproving Performance Management Improves Business Resultsn High-per
12、formance companies define Performance Management in its broadest sense:it is critical to executing and implementing strategyn Performance Management is now widely recognized as delivering more returns and delivering more competitive advantages than other HR investments n Performance Management is th
13、e key to“raising the bar”in an organization,for all levels of performancen Organizations with a high-performance orientation and strong management capability have higher revenue,profits,and market valuations Performance Managementn Performance Management is about improving business performance by im
14、proving team and individual performance,and ensuring that the companys strategy is executed and implemented.It islA process that ensures that people execute the strategy of the organizationlA process for establishing a shared understanding of what is to be achieved and howlA process for ensuring tha
15、t decisive and constructive dialogue occurslA process of managing self and others so that people do achievelA process for ensuring that people are doing the right things in the most effective ways,to the best of their abilityPerformance Management StagesDesign ParameterPerformance AppraisalPerforman
16、ce ManagementPerformance OwnershipHuman Resources“Check the box”compliance-orientedManage poor performersPassiveReport card(retrospective)Managers and Human ResourcesEvaluation reward emphasisManage the tails of bell curveJoint ownership for goal-setting/reviewBarometer of progress(periodic)Employee
17、s,managers,and leadershipStrategic clarity,coaching,dialogueRaise performance of organizationShared accountability for resultsDialogue(continual)FunctionRole of EmployeeFocusEmphasesOwnershipPerformance AppraisalPerformance ManagementManaging PerformanceHighLowLowHighImpact on ResultsLevel of Organi
18、zational CommitmentImproved business results require organizational commitmentCommitment to achieve company goalsGood setting and reviewMerit increases efficiently allocatedPerformance Management Stages thisThe performance management model is not new,but the way in which leading organizations do it
19、is very different&DialogueDialogueDialogueDialogueBest PracticesBest PracticesWhats Different?There are four differentiators of best practice:n Clear Strategy Translation Processn Integrated Performance Processesn Culture of Dialoguen Multiple and Differentiated Rewards Strategy Translation ProcessA
20、 Definition:“Early in the history of the company,while thinking about how a company like this should be managed,I kept getting back to one concept:if we could simply get everyone to agree on what our objectives were and to understand what we are trying to do,then we could turn everybody loose and th
21、ey would move along in a common direction.”Dave PackardStrategy Translation ProcessChecklist:o Are all top team members unified and focused on the“must-win”battles of the organization?o Are the interdependencies clear between the top-team members?o Are the middle managers clear on the“must-win”battl
22、es?o Do employees know what they need to do for the organization to be successful?lFinancial goals,operational goals,behaviorsIntegrated Performance ProcessesA Definition:“Leaders must see to it that the organizations social operating mechanismsthat is,the executive committee meetings,budget and str
23、ategy reviews,and other situations through which people do businesshave honest dialogue at their center.These mechanisms set the stage.Tightly linked and consistently practiced,they establish clear lines of accountability for making decisions and executing them.”Ram Charam,HBR 4/2001Integrated Perfo
24、rmance ProcessesChecklist:o Do the goals of the organization reflect interdepartmental objectives?o Are the financial,operational,and people processes integrated?o Is the information from these processes used to make business decisions?o Are the processes efficient and effective?Culture of DialogueA
25、 Definition:“A leader should be constructing his appraisal all year long and giving his appraisal all year long.You have 20,30,60 opportunities a year to share your observations.If,at the end of the year,someone is truly surprised by what you have to say,that is a failure of leadershipBy failing to
26、provide honest feedback,leaders cheat their people by depriving them of the information that they need to improve.Critical feedback is the“heavy lifting”of leadership”EDSs Dick BrownTypically a new employees productivity curve increases quickly,then levels offWithout reinforcement and feedback the l
27、evel stays the same or may fall offSporadic,inappropriate,or general feedback without reinforcement has a distinctive effect on motivation and performanceConsistent,specific feedback and dialogue build self-esteem and performanceFeedbackFeedbackFeedbackFeedbackCulture of DialoguePerformance Coaching
28、/Feedback Is CriticalCulture of DialogueChecklist:o Are managers(and employees)trained in and good at performance dialogue?o Are managers selected and held accountable for performance coaching?o Are coaching behaviors“lived”by the leaders of the organization?o Is the dialogue open,informal,and candi
29、d,and does it provide closure?The better my performance,the better my total compensation will beMultiple and Differentiated Rewards35%27%38%0%10%20%30%40%AgreeNeutralDisagreeWhen most employees,even the stars,get the same pay,it reduces clarity about what good performance looks likeSource:Hay GroupM
30、ultiple and Differentiated RewardsApproaches:n Increase dialoguen Use multiple currenciesn Review use of ratingsn Use forced rankingsn Find new ways to differentiate meritDifferentiated RewardsSeparate means from endsTactics/StrategiesBehaviorsTrainingTrainingTrainingTrainingTactics/StrategiesBehavi
31、orsTrainingTrainingObjectivesEnablersConduct analysis of why OT is so high;develop strategy to reduce OT;implement strategyImplement 3 programs aimed at increasing customer satisfaction:begin training programs;upgrade call center software;establish a monitoring programSet high goals for yourself and
32、 for the team:try to reduce from 50 to 30 per month;communicate to team what needs to be done;“own”this processIdentify customer issues:think about and act on opportunities to address these issues;act as a role model to subordinatesshow them how to work with customers;improve call-center software sy
33、stemTrainingTrainingTactics/StrategiesBehaviorsDevelop a plan to meet with each of your subordinates and get the“pulse”on how they are doing(re:jobs,projects,expectations);develop career-pathing plans with each of your subordinates;develop ideas around nonmonetary rewardsCoach consistently:deliver t
34、imely and constructive feedback;address issues immediately;make sure others contribute and have what they need to do the jobTactics/StrategiesBehaviorsBusiness ObjectivesCareer Development ObjectivesImprove consistency of customers delivery(evidenced by 98%customer satisfaction)Goals set for yearImp
35、rove employee retention in department by 50%Goals set for next 8 monthsReduce overtime from 150 to 50 hours/month(cost not to exceed$12,000)Goals set for yearExtent ofDifferentiation1.Company wide success measures Company revenue Profit ability measures None None2.Business unit success measures Unit
36、 revenue Profitability measures Other measures Annual incentive Some,based on individual contribution3.Success measurescurrent role Contribution to unit/company measures Salary increase Little4.Requirementscurrent role Meet“current”job description Live the values None None5.Success measuresfuture ro
37、les Demonstration of success competencies/behaviors Achievement of development goals Future earnings Salary Annual incentive Long-term incentive Recognition Significant,based on potentialMeasuresFirst-Level ManagersRewardLinkage1.Company-wide success measures Company revenue Profitability measures L
38、ong-term incentive Annual incentive Some,based on role Some,based on role2.Business unit success measures Unit revenue Profitability measures Other measures Annual incentive Significant,based on unit performance3.Success measurescurrent role Contribution to unit/company measures Annual incentive Som
39、e discretionarycomponent4.Requirementscurrent role Meet current job description Live the values None None5.Success measuresfuture roles Demonstration of success competencies/behaviors Achievement of development goals Future earnings Salary Annual incentive Long-term incentive Recognition Significant
40、,based on potential Salary increase tied to market movement LittleMeasuresExecutivesRewardLinkageExtent ofDifferentiationExtent ofDifferentiationDifferentiated RewardsDont double-count!In Summary:Two ExamplesPerformance Aligning ProcessesPerformance Coaching/FeedbackDifferentiated RewardsnSignifican
41、t emphasis on management processes on integrated talent managemente.g.,two-day detailed evaluation of business with managers being color-codednCEO models desired behaviorslTeaches/coacheslMentors/counsels high performersnSignificant investment in training/developing people to be good coachesnBusines
42、ses ranked at multiple levels and information is publicly sharednHeavy use of incentives(up to 50%,even for first-level managers)nStrong financial and operational processeslCEClSession ClS1/S2nSignificant movement of star talentnOpen,candid dialogue that stretches individuals and organizationsnFrequ
43、ent conversations about performance and developmentnSignificant investment in training/developing people to be good coachesnPerformance measured at multiple levelsl20-70-10 plan launched in 1996lForced ranking systemlTop 20%rewarded so likely few leavelBottom 10%given opportunity to improvelApplies at all levelsThe PrerequisitesnAspirational missionnClear strategynHighly decentralized organizationnEVP“Super jobs for super people”nAspirational missionnPortfolio strategynTough,stretch targetsnHighly decentralizedPepsiCoGEOrgani-zation
