Human Resource Management - John Deere – 28th June 2010 –

5th Session

Performance Management System

Performance Management

The process of managing performance all year long to support high performing

employees and counsel and train others.

Headlines – Headlines – Top Corporates Speak out on Top Corporates Speak out on Performance ManagementPerformance Management

““I use Performance Measurement and I use Performance Measurement and Management as a core management Management as a core management tool for myself and my direct reports, tool for myself and my direct reports, and I firmly believe we must all see PM and I firmly believe we must all see PM not just as a year-end review process not just as a year-end review process but as a way to manage our individual but as a way to manage our individual performance and direct it in the most performance and direct it in the most effective and efficient ways.”effective and efficient ways.”

““Performance = Performance = results + results + behaviors”behaviors”

““We have been doing this for 5 years and every year we are getting better at it (and we are light years ahead of the industry).””

““Performance Performance Management is a CEO-Management is a CEO-driven initiative and we driven initiative and we have 98% participation have 98% participation throughout the throughout the organization.”organization.”

Why Performance appraisal should take a back seat

• An annual process will not adequately alert managers to problems in a timely manner.

• If accurate performance information is unavailable or difficult to access, training and development decisions along with project assignment decisions may not be made in the company’s or the individual’s best interests.

• Last, but not least, a lack of proper documentation related to performance may result in legal issues.

Misconceptions

• Frequently when performance management is mentioned, people think of the performance appraisal or review. Performance management, however, involves so much more.

• Properly constructed appraisals should represent a summary of an ongoing, year-round dialogue.

• Focusing only on an annual appraisals leads to misunderstanding and under appreciation of the benefits of performance management.

Why Performance Management?

Performance Management IS on the CEO’s Agenda

• An opportunity for Chief Learning Officer and Talent Management leaders to add critical value

• A powerful, strategic tool for transformation

Why a Performance Management System?

• What gets measured gets done.• If you don’t measure results, you can’t tell success

from failure.• If you can’t see success, you can’t reward it.• If you can’t reward success you are probably rewarding

failure.• If you can’t recognize failure, you can’t correct it.• If you can’t demonstrate results, you can’t win public

support.• (Osborne & Gaebler, 92)

What is PMS

• Performance management is :• Process of creating a work environment or

setting in which people are enabled to perform to the best of their abilities.

• Whole work system that begins when a job is defined as needed.

• “Performance Management” is not a substitution for the traditional appraisal system.

PERFORMANCE APPRAISAL VS PERFORMANCE MANAGEMENT

• Performance appraisal -- setting standards, informing employees, ratings and feedback.

• Performance management -- “all of those processes led by managers to help employees perform as effectively as they can.”

GraphicGraphic HistoryHistory ofof SCMSCM

Annual - One time eventAnnual - One time event

Retrospective AppraisalRetrospective Appraisal

Short TermShort Term

Vague ConclusionsVague Conclusions

Focus on PersonFocus on Person

Correct Past PerformanceCorrect Past Performance

Largely about DeficienciesLargely about Deficiencies

Filling out FormFilling out Form

One-way communicationOne-way communication

Performance Appraisal(the ‘Old’ Way)

OngoingOngoing

Continual FeedbackContinual Feedback

Develop Future PerformanceDevelop Future Performance

Complete ProcessComplete Process

Long TermLong Term

Clear ObjectivesClear Objectives

Focus on BehaviorFocus on Behavior

Incremental ProgressIncremental Progress

Planning & Setting GoalsPlanning & Setting Goals

Two-way communicationTwo-way communication

Performance Management(where we should be going)

Creating SMART Goals

SpecificMeasurableAchievableRelevantTime-bound

What an effective Performance Management can do?

• An effective performance management process enables managers to evaluate and measure individual performance and optimize productivity by:– Aligning individual employee’s day-to-day actions with

strategic business objectives– Providing visibility and clarifying accountability related to

performance expectations– Documenting individual performance to support

compensation and career planning decisions– Establishing focus for skill development and learning

activity choices– Creating documentation for legal purposes, to support

decisions and reduce disputes

GETTING STARTED

• The impetus for creating a better performance management system is the recognition that the current system or process has not met organizational objectives.

• Human resource professionals should start the process by reviewing current practice to ask key questions, the answers to which will determine how to proceed in developing a system that works for the organization.

• The next step is to involve the entire organization in the transformation. • The third is to design a solution that specifically meets the needs of the

organization at this point and time. • The final step is to remove barriers to effective performance

management, or put another way, ‘make it easy’ to use. Therefore, the steps to create a better performance management system are as follows:

• 1. Review current practice• 2. Engage the entire organization• 3. Design a tailored solution• 4. Eliminate barriers to participation

Review• PERFORMANCE FEEDBACK –Managers should periodically meet with employees

to discuss three major issues:1) What is going well with the aim to recognize it, reinforce it, and replicate it!2) What is not going well so that it can be stopped before it is repeated or it mushrooms into larger issues.3) What are possible areas for improvement?

• GOAL MANAGEMENT – Individual performance should be integrated with departmental and organizational goals to ensure that efforts are channeled in the right direction

• TECHNOLOGY –When used properly, technology helps managers and employees track, regulate, and manage performance better, smarter, and faster.

• THE BOTTOM LINEThe indispensable focus of the future for Human Resource Managers is to make contributions to their organizations’ bottom line. A good performance management system improves productivity, and increased productivity leads to increased profits.

Pre-requisites

• ENGAGE THE ENTIRE ORGANIZATION (THE VILLAGE)• Senior Leader Commitment• HR Leadership• Supervisor Engagement• Employee Involvement• REVIEW CURRENT PRACTICE• Interview key constituents• Critique current practice• Define business objectives

PERFORMANCE MANAGEMENT SYSTEM

Consequences of poorly thought out policy

• If individual goals are not aligned with business strategy, then time and resources are wasted.

• Low employee engagement levels may mean that individuals are not performing at their best.

• Inconsistent evaluation criteria and rewards can lead to mistrust, lower productivity and higher attrition.

• If top performers see no differentiation in performance ratings, opportunities and compensation from underperformers, morale can suffer.

• Lack of documentation, visibility, and accountability can negatively affect stakeholders who are demanding more and more transparency.

Optimization of Performance Review Process

• Set Goals Effectively• Begin with Performance Planning• Ensure on going process• Productivity through better goal management• Collect information from various sources• Emphasize on documentation• Train managers and supervisors• Review review review • Connect performance with rewards and appreciation• Encourage participation

Classic HR Performance Management System

Deming’s Principles1. If you develop but don't measure then don't

produce2. If you measure but don’t record then don’t

measure3. If you record but don’t analyze then don’t record4. And if you analyze but don’t act on it then don’t

analyze

•

Conti

nual

Impr

ovem

ent

Conti

nual

Impr

ovem

ent

Best Practices

• Communicate and understand purpose and value of process

• Set goals effectively• Begin with performance planning• Ensure an ongoing process• Gather information from a number of sources• Document, document, document• Adequately prepare and train managers

Best Practices

• Deliver objective reviews that summarize an ongoing process

• Link performance management with other talent management processes

• Evaluate the process and make it easy, efficient and effective to ensure participation

• Consider the benefits of automation to save money and resources and optimize the performance management process.

What do employees want?

• Clear expectations• Positive/constructive

feedback on regular basis

• Understand evaluation criteria

• Involvement in goal setting

• Accurate job descriptions

• Be treated fairly and consistently

• Sharing of info and resources

• Job/career enrichment opportunities

Elements and outcomes

Elements• Listening

• Coaching

• Feedback

Outcomes

• Better performance

• Improved morale, trust, and loyalty

• Commitment

Connecting Goals Connect goals with the organization’s larger

goals..

Eliminate tasks and activities that are unessential to your primary mission and keep looking for ways to add value.

Set goals & objectives that are mutually agreed upon by the employee and the supervisor

Encourage and reward behaviors that are aligned with organizational mission and goals.

Follow through on your commitments.

Beware of These Comments

• Young, solid performer

• I hope we can keep the employee forever

• Has done okay despite being overworked and underpaid

• Has great attitude

• Couldn’t run the department without her

• Not bad for an old timer

• Is attractive and has potential

Working Together

Being busy is not the same as producing results

• Supervisors have conducted performance appraisals for years. Employees have attended training sessions for years. Processes, such as planning, budgeting, sales and billings have been carried out for years in organizations.

• Performance management reminds us that being busy is not the same as producing results. The major contribution of performance management is its focus on achieving results –

• Performance management redirects our efforts away from busyness toward effectiveness.

• Increasing competition has meant that everyone (and everything) in the organization must be doing what they're supposed to be doing to ensure strategies are implemented effectively.

SETTING EXPECTATIONS

• Review organizational and unit goals and individual performance expectations.

• Identify duties,objectives, and projects.• Describe performance measures and

standards.• Identify performance factors.• Develop a monitoring plan.

Vision

• PMS has been talked about for long. • However a lot depends on the vision of the

company to implement it realistically. • Without the vision it is mere jargon to be used

and misused

Core Values• Knowledge• Building a deep understanding of our customer and domains• Applying creative / breakthrough ideas for business improvement

and growth opportunities• Action• Execution - meticulous planning and follow through• Passionate about delivering outstanding results• Entrepreneurial – continuously exploring business improvement

and growth opportunities• Care• Commitment to our internal and external customers’ results• Create opportunities for personal and professional growth by

developing themselves and others

Management processes

• Management processes :• An open culture• Participative management practices• Innovation • Continuous improvement • Speedy response• Empowerment of individuals • Enjoyment of one’s job and

Development Philosophy

Ongoing Interactive Dynamic Competencies / Capability Results Focused

Performance Development is:

Development Philosophy

Ongoing Interactive Dynamic Competencies / Capability Results Focused

Performance Development is:

Some issues

• Managers reluctant to provide candid feedback and have honest discussions with employees for fear of damaging relationships with the very individuals they count on to get work done.

• Employees feel that their managers are unskilled at discussing their performance and ineffective at coaching them on how to develop their skills.

Some issues

• Many complain that performance management systems are cumbersome, bureaucratic and too time consuming for the value added.

• Leads both managers and employees to treat performance management as a necessary evil of work life that should be minimized

• Not treated as an important process that achieves key individual and organizational outcomes.

Possible Outcomes from Effective Performance Management

• Possible Outcomes from Effective Performance Management

• Clarifying job responsibilities and expectations.• Enhancing individual and group productivity.• Developing employee capabilities to their fullest extent

through effective feedback and coaching.• Driving behavior to align with the organization’s core

values, goals and strategy.• Providing a basis for making operational human capital

decisions (e.g., pay).• Improving communication between employees and

managers

Design and Implementation• We have found that the following principles are helpful in the

design and implementation of effective performance management systems.

• Though organizations vary in their character, goals and strategies, these principles seem to be useful across such variation.

1. The goal of the performance management system is improved individual and organizational performance.

2. The system must be simple. It should be easy to understand and use, and favor efficiency over comprehensiveness.

Design and Implementation3. The process should ensure clarity of goals and expectations and accountabilities for achievement/success.

4. Goals need to be set at flexible enough levels that they are able to be adapted or modified to meet changing priorities and business challenges.

5. Feedback should focus on specific expectations and behaviors that are related to job requirements and organizational goals.

6. The delivery of feedback should be continuous, contain a distinct informal element, and utilize input from multiple sources.

Design and Implementation7. Informal feedback should be real-time. “Saving up” performance issues (good and bad) for discussion at a later date is detrimental to individual and corporate health.

8. The process should provide direction for individual development and career planning.

9. Numerical ratings and forced distributions of performance measures work against the primary goals of performance management. These should be avoided.

10. Accountability mechanisms must be built into the system to ensure that positive performance-related interactions occur and are conducted in a manner that achieves their intent.

OBSTACLES TO SUCCESSFUL IMPLEMENTATION

• Lack of commitment from the top• Overselling the program• A program excessive in paperwork and

administrative requirements• Failing to train and retrain appraisers• Changing the system• Failing to monitor the program and deal with

non-compliance

Performance Management: Benefits and Concerns

•

1. PM focuses on results, rather than behaviors and activities• A common misconception among supervisors is that behaviors and activities are the same as

results. Thus, an employee may appear extremely busy, but not be contributing at all toward the goals of the organization.

• 2. Aligns organizational activities and processes to the goals of the organizationPM identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization.

• 3. Cultivates a system-wide, long-term view of the organization. Richard A. Swanson, in Performance Improvement Theory and Practice (Advances in Developing Human Resources, 1, 1999), explains an effective performance improvement process must follow a systems-based approach while looking at outcomes and drivers.

• 4. Produces meaningful measurementsThese measurements have a wide variety of useful applications. They provide consistent basis for comparison during internal change efforts. They help ensure equitable and fair treatment to employees based on performance.

• Carter McNamara, MBA, PhD

Benefits of Performance Management

• Performance Management (PM): 1. Helps you think about what results you really want. 2. Depersonalizes issues, focus on behaviors and results, rather than personalities.3. Validates expectations. 4. Equitable treatment of employees - appraisals are based on results.5. Cultivates a change in perspective from activities to results.

7. Performance reviews are focused on contributions to the organizational goals, "What organizational goal were contributed to and how?"8. Supports ongoing communication about organizational goals. 9. Performance is seen as an ongoing process10. Provokes focus on the needs of customers, whether internal or external.

A Final Thought

The conventional definition of management is getting work done through people, but real management is developing people through work.

- Agha Hasan Abedi