Case Study 5 Questions 100 Words Each APA Format

Effective performa nce ma nagem ent practices: Ten wa ys to

improv e your results

Wr itte n by : Lori Hols inger , C olleen O'Ne ill D ate: 1 A pril 2003

Convent iona l wisdom says organi zat ions se em genera lly d issa tisfied with th eir p erfor mance management systems. To better under stand the ir p ercept ions and pract ices, Merc er su rveye d over 30 0 N orth Amer ican comp anies . Near ly ha lf of th e companies (46%) operate in more than ten countr ies.

Enhanced performance manageme nt practices

Too m any organi zat ions e rrone ousl y think tha t they w ill have posi tive resu lts by on ly concentra ting o n rev ising “th e appra isal form” or copyi ng th e rat ing schem e used by a “best prac tice” com pany. I n truth, the pe rformance manage me nt practi ces that work for one orga nization may not create val ue in anot her, ev en w ithin the sam e indust ry.

Merc er’s resea rch and exper ience c learly dem onstrat e that t he effect ivene ss of any human res ource pract ice d epends most on its fit within the broa der organ izati onal syst em in which it operates. The most powerfu l human resourc e pract ices ar e firm-spe cific and r espond to an organization’s un ique business and human capital context. Once the “right” perform ance management pract ices a re in place, th ey can operate as a cohes ive sy stem a nd creat e a s ignificant f inancial retur n that com petitors w ill find d ifficult to rep licat e.

Ten ways to get better results

While th ere m ay be no “s ilver bullet ” or qu ick fix for enhanc ing performance m anagement, yo u can take spe cific steps to max imize its effect ivene ss. M erce r’s res earch and i ts consu lting exper ience with top perform ing com panies indicate that the fo llow ing ten des ign pr inciples will lead to bet ter results.

1. Refl ect yo ur company’ s performan ce val ues

• Identify the underlying priorities that should guide decisions about performance. Wha t perfor mance managem ent princ iples do y ou w ant e veryone to un dersta nd? Define your c ompany’s po sition on c ompeting p riorities, suc h as recogniz ing the team vs. the individua l; achieving re sults vs. demonstra ting va lued behaviors; ide ntify ing “A players” vs. motiva ting a nd re taining “B pla yers”; and e ncoura ging m anagement a ccounta bility vs. employ ee self-m anagement.

• Find the ri ght fit with your strategy, structure, a nd culture. The perform ance managem ent proc ess sho uld reinforce the messages tha t the organization w ants to send a bout its bu siness, talent, perform ance, rewards, adva ncement, and c areers.

• Clearly communicate what kind of performance culture y ou are t rying to crea te. For your company values to become mean ingful guidelines for your wo rkforce, you need to comm unicate them clearly as well as have senior leaders model them in their da ily actions.

Ten w ays to get bet ter

performance man agement

resul ts 1. Ref lect your co mpany's performance v alues

2. Get comm itment and ac tive participation of execu tives

3. Focus on the "ri ght" performance m easures

4. Hold managers accountable for performance f eed back a nd differen tiation

5. Estab lish complem entar y roles and r esponsibilities

6. Integrate with other b usiness and hum an r esour ce proce sses

7. Minim ize administ rative bur den

8. Pro vide neces sary communic ation and tr ain ing

9. Mea sure a nd track succes s

10. Engage in c ontinuous improvem ent

2. Ge t co mmitm ent and active participatio n of executives

• Nev er u nderes timate the power o f the w ords and behaviors of the ex ecu tive t eam. Ex ecutives can set an example and build commitment for e ffective perform ance managem ent in le aders at all le vels. Executive s need to m odel de sire d be havior and te ll stories tha t publicize examples consiste nt with t he vis ion of the desire d pe rform ance culture . Build t he busi ness c ase to a ssur e the commitment of to p managem ent a nd key pow er gro ups. Make sure tha t executives un dersta nd the financial return tha t high performance management pra ctices generate. Give the m reason s to d o perform ance managem ent w ell.

• Involve ex ecu tive champions continuously in the design and implementation o f performance management. On e of the key enablers of a succes sful performance management process is the act ive en gagemen t of execu tives. Th e more you can actively enga ge leaders at all levels in the process, the more suc cessful pe rform ance managem ent will be .

3. Focus on the “right” p erformance measures

• Identify the performance t argets that drive value and determine their impact acro ss the organization. The key purpo se of performance management is to foc us pe ople on doing the right t hings. Align y our employ ee perfor mance mode l with your company’s busine ss mode l. Ensure individual and te am perform ance expe ctations a re aligne d w ith orga nizationa l va lues, goa ls, and be haviors c ritical to the orga nization’s s uccess.

• Keep performance cri teria simple. Focus on the “mission-critical” performance meas ures. In our deman ding, fast-paced envir onm ents, people need help in pri oritizing a ppro priately. A good i ndividua l performance pla n should de fine the sm all se t of results and behaviors that are cr itical to business succes s and are al igned to the co mpany’s values. Mak e sure the performance criteria ar e simple enough for managers to use succes sfully and apply. Th e performance criteria should be supported by wo rk evidence t hat can be eas ily collected through available sources of information on em ployee performance.

• Calibrate performance s tandards . Spe nd tim e ensuri ng a common pe rform ance voc abula ry and a c alibra ted se nse of perform ance succes s am ong leaders at all levels. A lack of co mm on perform ance standards i nvites em ployee confusi on about expe ctations a nd un dermines em ploy ee confi dence in the fairne ss of t he proc ess. Althou gh performance criteria must b e legally compliant a nd c ulturally relevant a cross your di fferent ge ographic loc ations a nd busi ness u nits, managers sho uld maintain consi stently demanding pe rform ance standa rds w ithin and across bu siness u nits. Calibra tion ensures a consis tent s uccess pro file and pr oduces consis tent re sults be tween raters.

4. Hol d man agers acc ountabl e for pe rform anc e fe edbac k and differen tiation

• Req uire managers to seek, g ive, and obtain honest feed back. People perfor m better when the y have clear perform anc e targets and receive regular pe rform ance feedback. C onsequently, giving and r eceiving perform ance feedback should be a core capability o f those who m anage people . Ma nagers s hould be selected, eva luated, re warded, and de veloped ba sed on t he qua lity of their performance feedbac k skill s.

• Equip m anage rs to diffe rentia te between high a nd l ow perform ers. Provi de managers w ith the guidelines, resou rces, and too ls to di stinguish le vels of e mploy ee perfor mance across the ir bus iness units o r departm ents. Pre pare managers to re liably diffe rentiate performance eithe r in a bsolute terms (i.e., c ompared to e stablishe d standa rds of performance) or in r elative terms (i.e., r elative contribution compared to others). Teach senior lead ers, immed iate managers, and HR s pecialists the requisite decision-mak ing and proc ess fa cilita tion skil ls. Whe n using forced ranking, employ reliable and va lid m ethods fo r establishi ng c omparator g roups, as well as for c omparing e mploy ees’ re lative contri butions a nd fina lizing ra nkings.

• Moti vate manage rs to c onduct valid appr aisals. There are many forc es workin g against m anagers c ond ucting va lid appra isals. Managers ty pically set unc lear performa nce targets, re ceive little training and, i n order to be liked, a void t ough c onve rsation s. Managers will be moti vated to c onduc t valid a ppraisals whe n the y are give n the skil ls a nd t ools to c ollect valid pe rformance data and w hen the y are held a ccounta ble, thr ough a ppropriate measurement and fe edba ck, for m aking v alid pe rform ance dec ision s.

5. Est ablish co mplementary ro les an d re sp onsib ilities

• Encourage em ploy ee involve ment. Take ste ps to e nsure employ ees and m anage rs sha re accounta bility for pe rformance managem ent. Re quire em ploy ee partic ipation in g oal setting as well as in tra cking a nd m onito ring performance. Encoura ge employ ees to re gula rly assess the ir pe rformance prog ress. Don’t a llow em ploy ees and managers to a dopt t he role s of “victims and victimizers.”

• Expect manage rs to “o wn” the outc omes and H R to “o wn” the process. Perform ance managem ent is a core busin ess proc ess; i t helps a n organization effective ly manage its w orkforce by pla nning w ork and d evelopi ng a nd m otivating pe rform ance. The role of the hum an resourc e func tion should be to provide the workforce with the necessary perform ance, deve lopm ent, training, and reward tool s to e ffective ly implem ent pe rform ance managem ent.

6. In tegrate with othe r b usiness and human reso urce pro cess es

• Align e nterprise and in divid ual perform ance planni ng. Synchro nize busi ness a nd i ndividua l pe rformance managem ent c ycles. Align bus iness planning with goa l se tting f or individua ls a nd te ams.

• Create inte grated talent m anagem ent processes. Talent ac quisi tion, talent de velopm ent, performance managem ent, and re wards systems shoul d be aligned and in tegrated. In o rder to m axim ize perform ance and e ncourage em ployees at all le vels to “p ull i n the same dire ction, ” talent m anagem ent pro cesses shou ld re inforce the sam e messages about performanc e excellence. If ta lent managem ent proc esses are not we ll inte grated, the y will not ope rate as a cohe sive system and the y will no t achieve the high performance desire d.

• Clearly define the link between performance a nd pay. Define and c learly communic ate the “rule s of t he game.” Make sure managers a nd em ploy ees unde rsta nd what aspects of pe rformance determine pay decisions (e .g., incentive awards ba sed on ly on fina ncial results b ut salary inc reases based on o verall pe rformance ratings ). Also, clearly establish a nd o penly communic ate whether em ploy ees’ re lative contri butions or a bsolute performance against sta ndards w ill determine pay dec isions.

7. Mi nimize admi nistrative burden

• Autom ate administr ation. Leveraging ava ilable technology can minim ize adminis trative bur den and m axim ize pa rtici pation and sup port. Toda y’s ne w web-ba sed softw are makes it ea sy for m anagers a nd em ploy ees to c ascade and c alibra te goa ls, access onli ne performance doc ume nts, a nd ga ther multi-s ource comm ents and a pprova ls. I ntegrated talent ma nageme nt softwa re systems, suc h as Mer cer’s HRS uite™, ar e al so available. Th ese systems allow co mpanies to align and integrate their selection, developmen t, performance management, and re wards sy stems.

• Strea mline process steps. Don’t ju st a utom ate an ove rly complicated proc ess. Look f or opportunities to stre amline your p rocess steps and s implify administra tive requirements.

8. Pro vide nece ssary co mmuni cat ion and trainin g

• Enha nce perform ance managem ent “sk ill” and “will.” Training should e nhance the range of re quired performance managem ent skil ls, inc luding perform ance pla nning, feedba ck, evaluation, and de velopment. H owever, sinc e many managers re sist a ccepting th e full range of t heir perform ance manageme nt re spo nsibilities, the y will a lso ne ed to be taught the reasons t o do perform ance managem ent we ll. Make sure tha t managers un dersta nd the fina ncial return t hat high performance managem ent pra ctices generate.

• Teach all stak eholders the necessar y skills. Perform ance managem ent tra ining is n ot just for supe rvisors. To effective ly manage workforce p erformance, co mpanies need to address the training need s of all process stakeholders, including em ployees, participants in the process, manage rs w ho fa cilitate the proc ess f or ot hers, leaders w ho re view the perform ance managem ent de cisions of o ther managers, and H R specialists w ho s upport the proc ess.

• Sup por t the process thr ough ongoing communic ation. Effective perform ance managem ent is a n ongoing proc ess that requires a complex se t of skil ls from bot h m anagers a nd e mploy ees. Provide all sta keholders w ith o ngoing or refreshe r training and communic ation on performance management.

9. Me asure and track su ccess

• Tra ck your succes s in implementation. The right m etrics will allow you to track the su ccess of your im plem ented perf orm ance managem ent pra ctice s. You c an assess im plem entation s uccess by asking que stions s uch as: Is t he perform ance managem ent proc ess a ctually being f ollowe d as designe d? Are sta keholders sa tisfied with the qua lity of delive ry? Are performance reviews being done on tim e? Are perform ance appra isal pra ctices diffe rentia ting performance levels, as expected? Do reward and developm ent de cisions a ppropr iately refle ct perform ance?

• Mea sure t he busines s impact. An a ssessm ent of the business im pact can help to pr ioritiz e performance manageme nt a ctivitie s. Impact can be determined by asking questions such as: What performance mea sures optimize b usiness performance? Ho w d o we maxim ize busine ss performance by adjusting performance managem ent pra ctice s? Are the capabilities and c ontributions of those identified as high pe rformers in line with fut ure business re quirements? Wha t is the impact of de velopm ent pro grams on performance?

• Analyze what people say, bu t al so what the y do. A combination of qua litative and qua ntita tive diagnos tic too ls can ide ntify optimal perform ance manageme nt pra ctices tha t will e nga ge em ploy ees and c reate econom ic value. Perception s (what pe ople say) can be ide ntifie d through e xecutive interviews and e mploy ee sensin g. Behavior a nd o rganizationa l pr actices (what pe ople do) c an be obse rved thr ough sta tistic al mode ling of w orkforce dynamics and sta tistical mode ling of links b etween perform ance managem ent pra ctice s and bus iness outc omes. Comparing a nd c ontrasting obje ctive measures – a ctual pe rform ance managem ent practices and their impact – with a p erceptual assessment of these meas ures, provides important insights. Th e “true” p erformance man agement system can be considerably d ifferent than the system perceived to be in place.

10. Eng age in co ntinuo us im provement

• Chan ge with the business. Perform ance managem ent is a n ongoing proc ess that sho uld reflect the current and e merging busi ness challenges, as wel l as the co mpany’s values about performance an d car eers. As the business and wor kforce ch ange, modify the performance management proc ess. Ensure tha t the perform ance managem ent proc ess a nd to ols re main c ongr uent w ith orga nizationa l va lues and pr iorities.

• Implement prioritized, targeted interv entions. Consta ntly assess a nd im prov e as nee ded, but re sist the temptation to change everything every ye ar.

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