Performance Management
description
Transcript of Performance Management
Corporate Leadership Council
Performance ManagementA Preview of Council Findings
Corporate Leadership CouncilPresentation Materials
Building the High-Performance WorkforceA Quantitative Analysis of the Effectiveness of Performance Management Strategies
© 2002 Corporate Executive Board
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Seven Key Themes
The Performance Improvement Challenge
Overview of Our Analysis
The High-Performance Workforce
Road Map for the Presentation
© 2002 Corporate Executive Board 4
Formal Performance
Review• Emphasis on
performance strengths• Emphasis on
performance weaknesses• Emphasis on personality
strengths• Emphasis on personality
weaknesses• Emphasis on skills and
behaviors needed in the future
• Emphasis on specifi c outcomes of formal performance review (e.g., promotions, raises, or bonuses)
• Emphasis on specifi c suggestions for doing the job better
• Emphasis on long-term career prospects within the organization
Organizational Culture
• Coworker involvement• Diffuse decision-making
authority• Risk tolerance• Coworker cohesion• Innovation• Flexibility• Differential treatment
of best and worst performers
• Internal communication• Future orientation
Informal Performance Feedback
• Emphasis on amount of effort put into the job
• Emphasis on performance strengths
• Emphasis on performance weaknesses
• Emphasis on personality strengths
• Emphasis on personality weaknesses
• Emphasis on skills and behaviors needed in the future
• Emphasis on specifi c suggestions for doing the job better
• Fairness and accuracy of informal feedback
• Feedback that helps employees do their jobs better
• Immediate versus delayed feedback
• Manager likelihood to volunteer informal feedback
• Method of delivering informal feedback (e.g., face-to-face, in writing)
• Manager knowledge about employee performance
Performance Management
System• Challenge and
applicability of development plan
• Employees’ accountability for “things that matter”
• Employees’ understanding of how system works
• Employees’ understanding of performance standards
• Extent to which employees receive performance ratings they deserve
• Fairness of performance standards
• Link between performance management system and organizational strategy
• Number of formal reviews received each year
• Presence of 360-degree reviews
• Presence of employee development plan
• Presence of procedures for handling grievances with performance reviews
• System credibility• Use of rank-ordering
Managerial Quality• Breaks down projects into
manageable components• Clearly communicates
expectations• Creates work plans and
time tables• Diffuses unhealthy rivalries
or competition among team members
• Encourages employees to be positive and enthusiastic about work
• Expresses confi dence in employees’ ability to do job
• Helps team get started on a new project
• Helps attain needed information, resources, and technology
• Helps fi nd solutions to problems at work
• Holds people accountable• Identifi es or removes
unnecessary barriers at work (such as unnecessary rules or regulations)
• Inspires others• Listens carefully to views
and opinions• Measures performance and
results• Persuades and encourages
others to move in a desired direction
• Recognizes and rewards achievement
• Translates long-term goals into step-by-step plans
• Makes frequent changes to projects and assignments
On-the-Job Development and Training
On-the- Job Development OpportunitiesOpportunity to:• Spend time with a professional coach • Do challenging and leading-edge work• Experiment and take risks• Have signifi cant accountability and
responsibility• Help launch a new business, initiative,
or program• Help turn around struggling business• Work with a mentor • Be promoted• Work for strong senior executive
team• Work in a different country• Work in a variety of jobs/roles• Work in new business units • Work in new functional areas• Work on the things you do best• Work with a diverse group of peopleTraining• Training content– Business (e.g., accounting, fi nance)– Diversity– IT– Leadership– New employee orientation– People management (e.g.,
communication, team-building)– Process management (e.g., managing
timelines or budgets, resource allocation)
– Product– Quality/Six Sigma– Sales– Technical– Other
Day-to-Day Work• Challenge of projects and
assignments• Connection between
successful project completion and incentives such as:– Size of annual merit increase– Size of annual bonus– Opportunity for higher
performance rating– Opportunity for promotion– Raise in base salary– Opportunity for stock
options• Employees’ infl uence in
selecting projects• Employees’ personal enjoyment
of their work• Employees’ understanding
of connections between day-to-day work and organizational strategy
• Employees’ understanding of how to complete projects and assignments
• Importance of projects to business unit and organization
• Importance of projects and assignments to employees’ long-term careers
• Importance of projects and assignments to employees’ personal development
• Number of projects and assignments
• Time to complete projects and assignments
Potential Performance Management Drivers
Individual Performance
Attitudes of High-Performance• Discretionary Effort • Organizational Commitment • Match with Job • Having Necessary Resources • Team Strength • Job Satisfaction • Intent to Leave
Source: Corporate Leadership Council research.
© 2002 Corporate Executive Board 5
Formal Performance Review
The Corporate Leadership Council’s Model of Individual Performance Improvement
Informal Performance Feedback
Organizational Culture
Day-to-Day Work
On-the-Job Training and Development
Individual Performance
Managerial Quality
Performance Management System
Attitudes of High-Performance
• Discretionary Effort
• Organizational Commitment
• Match with Job
• Having Necessary Resources
• Team Strength
• Job Satisfaction
• Intent to Leave
Source: Corporate Leadership Council research.
© 2002 Corporate Executive Board
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Thinking About Performance ImprovementPerformance Improvement: Same Workforce, Better Performance
Number of Employees
Defi nition
• Steady, quantifi able improvement
• “Right shift” in curve
• Same person, better performance
• Same workforce, better performance
Performance
Source: Corporate Leadership Council research.
Percentage Improvement in Performance Ranking
30%
© 2002 Corporate Executive Board 7
With Sincere Thanks…Partnering with the Membership, the Council Surveyed Over 19,000 Respondents
from 34 Companies, Seven Industry Groups, and 29 Countries
Entertainment and Media
Consumer Products and Retail Health CareChemical and
Energy Manufacturing
Financial Services Technology
IADB
Source: Corporate Leadership Council 2002 Performance Management Survey.
© 2002 Corporate Executive Board 8
Not All Created Equal
Defi ning Relative Impact on Performance
Source: Corporate Leadership Council 2002 Performance Management Survey.
(50.0)
0.0
50.0
(50.0)
0.0
50.0
A-Level B-Level C-Level D-Level
Level of Performance DriverA-Level ≥25B-Level 15 to 24.9C-Level 0 to 14.9D-Level <0
© 2002 Corporate Executive Board
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Seven Key Themes
1. The Performance Management System: The Singular Power of Clarity
2. Performance Culture: The Freedom to Innovate, Communicate, and Tolerate Risks
3. Role of the Manager: Solutions Enabler
4. Formal Review: The Delicate Balance Between Praise and Critique
5. Informal Feedback: The Primacy of Fairness and Accuracy
6. Day-to-Day Work: An Evolving Social Contract
7. Job Opportunities: High Profi le, Good Fit
© 2002 Corporate Executive Board
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Potential Performance Drivers
Performance Management System
• Challenge and applicability of development plan
• Employees’ accountability for “things that matter”
• Employees’ understanding of how system works
• Employees’ understanding of performance standards
• Extent to which employees receive performance ratings they deserve
• Fairness of performance standards
• Link between performance management system and organizational strategy
• Number of formal reviews received each year
• Presence of 360-degree reviews
• Presence of employee development plan
• Presence of procedures for handling grievances with performance reviews
• System credibility
• Use of rank-ordering
Source: Corporate Leadership Council 2002 Performance Management Survey.
Questions Regarding the Impact of the Performance
Management System on Performance
1. Do 360-degree reviews improve performance?
2. Is it important to performance to be held accountable for things that matter?
3. Does rank-ordering improve performance?
The Performance Management System
© 2002 Corporate Executive Board
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45.0
36.1
5.8 5.2 4.6 3.7 3.6 3.0 2.0
8.1
1.4 0.2(0.1) (1.6)
Performance Drivers: Performance Management System
Connection and Understanding Are More Important Than Actual Components of the System
Maximum Impact of Performance Management System on Employee Performance
Change in Performance
High
Low
ContentMean = 1.6
Connection and UnderstandingMean = 12.9
Fairness and CredibilityMean = 3.1
* Total effects below traditional levels of statistical signifi cance (t < 2.0).
Source: Corporate Leadership Council 2002 Performance Management Survey.
Level of Performance DriverA-Level ≥25B-Level 15 to 24.9C-Level 0 to 14.9D-Level <0
© 2002 Corporate Executive Board
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Costs and Benefi tsPower of the Performance Management System by Diffi culty and Cost
Diffi culty and Expense of Formal Performance Management System Characteristics, in Order of Impact on Performance
Diffi culty Ratings:XXXX 75th to 100th percentile in diffi culty
XXX 50th to 75th percentile in diffi culty
XX 25th to 50th percentile in diffi culty
X Bottom 25th percentile in diffi culty
Expense Ratings:$$$$ 75th to 100th percentile in expense
$$$ 50th to 75th percentile in expense
$$ 25th to 50th percentile in expense
$ Bottom 25th percentile in expense
Overall Rank (Impact on
Performance)Formal Performance Management System Characteristics,
In Order of Impact on Performance Diffi culty Expense
1 Employees’ understanding of performance standards X $
2 Presence of 360-degree review XX $$$$
3 Employees’ accountability for “things that matter” XX $$
4 Employees’ understanding of how system works X $
5 Link between performance management system and organizational strategy XX $$
6 Extent to which employees receive performance ratings they deserve XXX $$$
7 Fairness of performance standards XXX $$$
8 Grievance procedures XX $$
9 System credibility XXX $$$$
10 Presence of employee development plan XX $$
11 Challenge and applicability of development plan XX $$
12 Use of rank-ordering XXXX $$$$
13 Number of formal reviews received each year XXXX $$$
Source: Corporate Leadership Council 2002 Performance Management Survey.
Corporate Leadership CouncilPresentation Materials
Closing the Performance GapDriving Business Results Through Performance Management
© 2002 Corporate Executive Board
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Inability to Guarantee Performance Improvement
Root Cause #2:
Don’t Know How to Operationalize What Matters
Most to Performance
Root Cause #1:
Don’t Know What Matters Most
to Performance
Source: Corporate Leadership Council research.
The Other Half of the Problem
© 2002 Corporate Executive Board
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Distance Between Aspiration and OperationProblems Impeding Performance Management Effectiveness
Problem #1:Insuffi cient
Manager Skills
Problem #2:Inadequate
Manager Focus
Problem #3:Narrowly Defi ned
Ownership
Problem #4: Disconnect
with Strategy
Problem #5:Failure
to Execute
Source: Corporate Leadership Council research.
© 2002 Corporate Executive Board
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Source: Andersen Human Capital Group, Rethinking Performance Management, September 2001: 3; Axelrod, Beth, et al., “War for Talent, Part Two,” The McKinsey Quarterly, 22 March 2001; Lester, Tom, “It’s Time to Appraise Our Methods of Appraisal,” Financial Times, 19 March 2002; Corporate Leadership Council research.
Problem #1: Insuffi cient Manager Skills
Role of the Manager in Performance Management
Assessment Feedback Corrective Action
Managers struggle with assessing the right performance criteria.
Signifi cant gap between employees
who want feedback and those who receive it.
Managers are unable to defi ne appropriate
consequences.
Assessing the Right Criteria, 2001
Importance of Feedback, 2001
Consequences of Performance, 2001
Percentage of Respondents Who Say Their Performance Management System Measures the Right Criteria
Percentage of Employees Who Believe
Candid Feedback Is Important
Percentage of Employees Who Have Received Candid
Feedback
17% 17%
89%
39%
Percentage of Respondents Who Say Their Performance Management Process
Identifi es the Right Consequences for Low or High Performance
© 2002 Corporate Executive Board
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Source: Corporate Leadership Council research.
Problem #2: Inadequate Manager FocusManagers are often not owning the
performance management process…
Percentage of Managers Indicating That They Would Be Pleased if Their Companies
Moved More Aggressively on Low Performers
…often for good reason…
List of Manager Reasons for Not Doing Performance Management
Source: Axelrod, Beth, et al, “A New Game for C Players,” Harvard Business Review (1 January 2002).
Despite the Best Intentions
“Managers come to us for training and get so enthusiastic about performance management by the time they leave. However, we know that they all go back to their business units, things get busy, and performance management just stops being a priority for them.”
Senior HR Executive Fortune 500 Company
Source: Corporate Leadership Council, Exploring the Measurement Challenge, Washington: Corporate Executive Board, Fall 2001.
…and often without any repercussions
Percentage of Organizations Tracking Managers’ Track Records for Developing Employees
Percentage of Companies
Actually Tracking
• “I do not have time.”
• “I don’t get paid to do performance management.”
• “The performance management system doesn’t impact performance.”
• “I won’t risk alienating an employee who can come back and sue us.”
Percentage of Companies
Considering It “Important” or “Very Important” to Track
96%
80%
13%
© 2002 Corporate Executive Board
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Source: Corporate Leadership Council research.
Problem #3: Narrowly Defi ned Ownership Managers “own” the performance of employees
but may not be the most advantaged to do so
Multiple Roles Affecting Individual Performance
Then Now
Representative Project Life Cycle 6 months 6–8 weeks
Nature of Work Function-Specifi c Project-Based
Alignment of Goals Vertical Vertical and Horizontal
Need for Organization-Level Performance Transparency
Medium Very High
Whose Performance Is It Anyway?“There are now areas of my work that I have a greater specialty in and know more about than my manager does. How can he be expected to realistically assess my performance on these areas when he doesn’t really understand some of them?”
Technology Manager, Financial Services Company
Changes in the Performance Environment1995—2002
Formal Manager
Employee
Mentor HRBusiness or
Division Leader
Customer Peer
Project Manager Coach
© 2002 Corporate Executive Board
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Source: Corporate Leadership Council research.
Problem #4 : Disconnect with StrategyInsuffi cient focus on business drivers
Typical Performance Management Stages
Current Performance Management Characteristics Result
Reward
Appraisal
Monitoring and Feedback
Goal Setting
• “Peanut Butter” Approach—”A Little Spread Everywhere”
• Loss of High-Return Talent
• Over-Retention of Low-Return Talent
• Inaccurate or Undifferentiated Evaluation
• Unclear Sense of Employee’s Value to the Organization
• One-Size-Fits-All Feedback • Low Incidence of Performance Improvement
• Over-Emphasis on Short-Term Objectives
• Long-Term Objectives at Risk
© 2002 Corporate Executive Board
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Source: Corporate Leadership Council research.
Problem #5: Failure to ExecuteTraditional performance management fails to provide for systematic goal achievement
Name of the Game“There is no silver bullet. It really is a game of execution.”
Michael Dell Chairman and CEO Dell Computer Corporation
“Cheerleading” Not Enough
Case-in-Point: Aspire Corporation*
Aspire Corporation’s goal cascade…
* Pseudonym.
…and as a result, targets were missed (by a larger and larger margin) each year
Aspire* Sales Targets
…provided little guidance as to how to realize goals…
Guidance to Sales Force on Goal Execution
“GO!”
Target
Actual
1997 2000 2001
Executive Team Strategy Session Business Goals
BU BU BU
Individual Goals
Sales Team
Obstacles to Goal Realization
• Annual process too infrequent to respond to emerging performance issues.
• Performance goals based on incremental achievement rather than overall strategy.
• Business unit level of performance planning overlooks cross-unit opportunities/confl icts.
• Performance goals fail to provide clear steps for action.
© 2002 Corporate Executive Board 21
I II III IV VUpskilling Managers
at Performance Improvement
Establishing Performance Management
as a Manager Priority
Expanding Lines of Performance Accountability
Focusing on Business Drivers
Managing for Employee Goal
Realization
Emerging Toolkit
Rater Calibration Training
Personal Board of Directors
Causes of Underperformance
Diagnostic
Line-Based Performance Management Champions
Dual Performance Rating
Parallel Performance Management Systems
Development Group Leader
Contribution-Based Segmentation
Customer-Driven Performance Assessment
Goal-Strategy Task Force
Goal Alignment Cascade
Closing the Performance GapDriving Business Results Through Performance Management
Source: Corporate Leadership Council research.* Pseudonym.
Sherwood Company**