2. Agenda
Current environment for performance management
Client experience & discussion
Summary & suggestions for how to get things right
1
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. 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 Performance
Difference 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. A direct impact
A hospital which appraises 20% more staff and trains 20% more
appraisers is likely to have 1,090 fewer deaths per 100,000 admissions
120
100
Mortality
80
60
40
20
0
Low Sophistication of HR Practices High
Source: West et al 4
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 link
CIPD, n = 506
5
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. 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. An overfull suitcase
Source: People Management “Performance management: Fine intentions” / 30 August 2011
http://www.peoplemanagement.co.uk/pm/articles/2011/08/performance-management-fine-intentions.htm
8
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. Creating the conditions for people to excel
Across 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 needs
Sustainable high performance requires manager capability in these essentials
10
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. 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. 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
16. More information
Duncan Brown
T: +44 (0)207 086 9037
E: duncan.brown@aonhewitt.com
@duncanbHR
Jackie Waller
T: +44 (0)172 788 8394
E: jackie.waller@aonhewitt.com
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