Kill Your Performance Ratings With David Rock Aug 2015

8/12/15

© NeuroLeadership Ins6tute 2015. Not to be shared without permission. SCARF is a registered trademark of NLI. 1

© 2015 NeuroLeadership Institute 1

Rethink Performance Management

Dr. David Rock, Director, NeuroLeadership Institute


NLI’S VISION

Transform Leadership Through Neuroscience


A NEW LANGUAGE FOR LEADERSHIP

Research • Education • Solutions


THREE PRACTICES

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HOW WE PARTNER


© 2015 NeuroLeadership Institute 7 © 2015 NeuroLeadership Institute 8

8/12/15


© 2015 NeuroLeadership Institute 9 © 2015 NeuroLeadership Institute 10

Kill your ratings


PERFORMANCE MANAGEMENT CONTINUUM

To

Coach Coaching and development Frequent conversations Shared responsibility Enterprise contribution Minimal paperwork Growth mindset Manageable threat

Performance Scores No Performance Scores

Forced Ranking

Ratings Based on

quantitative results (i.e. 1-5)

Structured

conversations

Guided conversations

From: Judge Competitive assessment Annual event Top down Individual contribution Significant paperwork Fixed mindset Overwhelming threat

To:

The

line

of c

oura

ge


TREND OR FAD?

•  Fewer than five firms made major changes in 2010

•  43 - 60 large companies have radically altered PM

•  50 - 70% of firms considering major changes

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REINVENTED PERFORMANCE MANAGEMENT


WHY THE CHANGE?

•  Long cycles and complexity is reducing agility

•  Inhibiting collaboration, which reduces customer focus

•  Not connected to how work gets done: fast and in teams

•  Too complex for the return it provides


THE DATA WAS NEVER ANY GOOD ANYWAY

• Two thirds of rated top performers not the top performers (CEB, 2012)

• Under 25% of performance ratings correlate to performance (Scullen et al, 2000)

• 90% of performance systems are a failure

(SHRM, 2009)


Actual performance

21%

Organizational perspective

6% Idiosyncratic rater biases 62%

Random measurement

error 11%

“Ratings were stronger reflections of raters.” Scullen, Mount, & Goff (2000)

THE DATA WAS NEVER ANY GOOD ANYWAY

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TRULY WEIGH UP THE COSTS

Visible benefits Sense of certainty

Feeling of control

Perception of fairness

Invisible costs Over 40% of employees less engaged

Strong threat from all angles

Reduction in collaboration

Drop in trust across the board


DELL STUDY: HEART OF THE CHALLENGE?

•  50% were surprised by their rating

•  87% negatively surprised

•  Correlates to 47,850 employees

•  Many surprised were the better performers. They expected‘best’ and got a‘great’or‘great’and got‘good’

•  Link to 23% lower engagement than those not surprised


THREE RESEARCH IDEAS

1.  Foster a Growth Mindset to encourage continual improvement

2.  Minimise Threat to have candid and honest conversations

3.  Facilitate Insight if you need people to positively embrace change


TWO MINDSETS Fixed mindset

A belief that intelligence and talent are static and can’t be changed in any meaningful way

Leads to a desire to look smart •  Feedback can be a setback

•  Stretch goals are risky

•  Motivation comes from approval

•  Focus on what you are good at

•  Other’s success can be a threat

Growth mindset

Believing that intelligence and talent can be developed

Leads to a desire to learn •  Feedback is a chance to learn

•  Stretch goals are helpful

•  Motivation comes from mastery

•  Focus on where you can develop •  Other’s success is something to learn

from

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TWO MINDSETS Fixed mindset

A belief that intelligence and talent are static and can’t be changed in any meaningful way

Leads to a desire to look smart •  Feedback can be a setback

•  Stretch goals are risky

•  Motivation comes from approval

•  Focus on what you are good at

•  Other’s success can be a threat

Growth mindset A belief that intelligence and talent can be

developed

Leads to a desire to learn •  Feedback is a chance to learn

•  Stretch goals are helpful

•  Motivation comes from mastery

•  Focus on where you can develop •  Other’s success inspires learning


SHIFTING MINDSETS

Fixed Mindset “Prove”

Growth Mindset “Improve”


FIXED MINDSET: LEARN LESS FROM MISTAKES

Mangels et al. (2006), SCAN

Negative Feedback:

Individuals with a “fixed” mindset show an enhanced neural response to negative feedback on making errors. They also show less memory-related neural responses given information about correcting future mistakes.

Positive Feedback:


GROWTH MINDSET: LEADERSHIP CONFIDENCE

Hoyt, Burnette, & Innella (2012), PSPB

When asked to think about a leadership role model, individuals with a “growth” mindset (“leaders are made”) gained leadership confidence, compared to those with a “fixed” mindset (“leaders are born”).

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IMPACT OF THE TWO MINDSETS Fixed mindset

Prove yourself

Demonstrate your skills

Perform better than others

Internal dialogue:

“Am I able to do this? Maybe I just don’t have the talent…”

“It’s not my fault. It was someone else’s responsibility.”

Growth mindset

Improving yourself

Developing your skills

Performing better than you did in the past

Internal dialogue:

“I’m not sure I can do this right now but I will give it a go.”

“If I don’t take responsibility, I can’t fix it. I need to listen and learn.”


IMPACT OF THE TWO MINDSETS Fixed mindset

Prove yourself

Demonstrate your skills

Perform better than others

Internal dialogue:

“Am I able to do this? Maybe I just don’t have the talent…”

“It’s not my fault. It was someone else’s responsibility.”

Growth mindset

Improve yourself

Develop your skills

Perform better than you did in the past

Internal dialogue:

“I’m not sure I can do this right now but I will give it a go.”

“If I don’t take responsibility, I can’t fix it. I need to listen and learn.”


WE ARE EASILY PRIMED

“Good job, you must be talented at this.”

versus

“Good job, you really applied yourself here.”

Chiu, Hwong, & Dweck (1997)


SCARF® model THE SCARF® MODEL

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THREE RESEARCH IDEAS

1.  Foster a Growth Mindset to encourage continual improvement

2.  Minimise Threat to have candid and honest conversations

3.  Facilitate Insight if you need people to positively embrace change


THE TRANSFORMATION JOURNEY

•  Six to 12 months

•  Philosophy: Business case, 3 objectives, mindset shift, branding

•  Dialogue: Define ‘quality conversations’ robustly

•  Evaluation: Link to your objectives


EARLY TRENDS

•  Goals setting is getting more attention

•  Everyone wants to lift the quality (and regularity) of conversations

•  It helps to have a separate process for very poor performers

•  There is no one-size-fits-all model for every firm


EARLY TRENDS

1.  Will pay for performance diminish? Pay differentiation is widening, increasing fairness

2.  Will managers talk to their teams less? Managers are talking to their teams more

3.  Will people be less motivated? Overall engagement is increasing when removing ratings

4.  Will top performers will be dissatisfied Early results show those with top rewards had same or increased satisfaction

5.  Will wrongful termination legal costs increase? Some companies are finding higher rate of self selection out for non performers

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“[We] removed obstacles to some key behaviors.”

Objectives

•  Deliver results differently via teamwork

•  Feedback that helps you learn, grow,

deliver results

•  Reward contributions to business impact From To

4 point rating / Forced distribution No ratings, no documentation

Formal year-end reviews Frequent performance conversations

Top-down administration Manager discretion

MICROSOFT

Performance & Development


Grow. Perform. Succeed.

“There’s no real change in performance as a result of ratings.”

Objectives

•  Raise bar on performance

•  Adopt a growth mindset company-wide

•  Increase manager accountability

•  Increase frequency of conversations

•  Strengthen link between reward and

business performance

•  Sharpen focus on team contribution

From To

4 point rating / Forced distribution Qualitative performance standard

Formal year-end reviews Monthly performance conversations


THE GAP


THE GAP


Rewards

•  Manager discretion •  Reward performance against the standard

Separate year-end rewards conversation from performance conversations

“Touch Base”

•  Monthly performance conversations + •  Frequent informal feedback Set and review goals against the standard SCARF®-based framework:

1. What did you do well? 2. Where did you get stuck? 3. What would you do differently next time?


“We’re not walking away from pay for performance at all. Instead, they’re getting paid for

a much broader definition of performance.”


“Stack ranking is a soul-less and soul crushing exercise.”

Objectives

•  Inspire and motivate high performance

•  Increase agility of organization

•  Leverage feedback to drive innovation

•  Create shared employee-manager

responsibility for conversations

•  Foster genuine, meaningful conversations

From To

4 point rating / Forced distribution Qualitative performance feedback

Formal year-end reviews Weekly/Monthly performance conversations


ADOBE

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“Rewards Check-in”

•  Manager discretion based on performance and market conditions

•  Annual compensation planning No fixed guidelines, no grid, no percentages

“Performance Check-in”

•  Ongoing performance-focused feedback •  Manager/employee autonomy for timing Clarify and update expectations throughout year Growth and development-based framework:

1. What are you going to do? 2. How are you going to do it? 3. What have you learned or achieved?

“I have seen and experienced the reaction to the review process being a primary driver

in driving good people from the company.”

ADOBE


“We did not set out to remove ratings, but we found that it made sense for Cargill in order to make conversations more engaging.”

Objectives

•  Simplify process and requirements

•  Focus on communication, ongoing

feedback, building trust

•  Strengthen manager capabilities

•  Help employees learn and grow

•  Increase employee alignment, focus,

agility, and engagement

From To

Rating / Forced distribution Frequent, high-quality conversations

Events-based year-end reviews Everyday performance management

Judge focus Coach focus

CARGILL

Everyday Performance Management



Rewards

•  Performance as continuum •  Pay for performance, but also for

•  Skills •  Past + future performance •  Potential •  Market •  Competitiveness

Check-Ins

•  Candid daily conversations •  Monthly performance feedback Reflection and goal-focused dialogue:

1.  What did you accomplish this quarter? 2.  What do you plan to accomplish next quarter? 3.  What do you feel most proud of? 4.  What was your biggest challenge? 5.  What did you learn? 6.  What will you do differently next time? 7.  How can I help you?

CARGILL

“Cargill increased the frequency and quality of performance conversations by holding managers accountable

for the outcomes of performance activities—not just their occurrence.”


PERFORMANCE MANAGEMENT CONTINUUM

To

Coach Coaching and development Frequent conversations Shared responsibility Enterprise contribution Minimal paperwork Growth mindset Manageable threat

Performance Scores No Performance Scores

Forced Ranking

Ratings Based on

quantitative results (i.e. 1-5)

Structured

conversations

Guided conversations

From: Judge Competitive assessment Annual event Top down Individual contribution Significant paperwork Fixed mindset Overwhelming threat

To:

The

line

of c

oura

ge

8/12/15



REINVENTED PERFORMANCE MANAGEMENT


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Neuroscience updates on: •  Empathy •  Persuasion •  Insight •  Behavior change

8/12/15


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Kill Your Performance Ratings With David Rock Aug 2015