February 8, 2005

Is Employee Performance Management Performing?

Exploring the Latest Findings from the Field

February 8, 2005

February 8, 2005

Mr. Clinton Wingrove

Head of International R&D Performance Management CEO and Principal Consultant

Pilat (North America) Inc.

Dr. Katherine Jones

Research Director Enterprise Applications

AberdeenGroup

Presenters

February 8, 2005

• Duration: 60 minutes

• Dr. Katherine Jones – Research from the Field

• Mr. Clinton Wingrove – Real World Experience

• Questions & Answers

• Download Slide Presentation

Agenda

The Destination of Choice for Actionable Research

Grandstand Performance Management:Managing Employees

for the Performance-Driven Enterprise

Dr. Katherine JonesResearch Director

© 2004 AberdeenGroup • 5

Agenda

• Key Issues in EPM Today: The HR Exec’s Agenda

• Challenges for Improvement

• Moving to Best in Class in EPM

• Next Steps for an Performance-Driven Enterprise

© 2004 AberdeenGroup • 6

The HR Executive’s Agenda on EPM

0 20 40 60 80 100 120

Percentages

Improve data collection in case we ever had aperformance issue leading to the need to

terminate an employee

More accurate record keeping on employees,their skills and their performance

Improved ability to improve an employee’s skilllevels and career path within the organization

Compare employees to their peers forascertaining raises and bonus distribution

Align individual behavior and work with corporategoals or scorecards

Ultimately measure the degree of alignmentbetween the workforce and overall corporate

performance

Link payouts with employee performance

Link payouts to total company revenueacquisition

0 20 40 60 80 100 120

Percentages

Improve data collection in case we ever had aperformance issue leading to the need to

terminate an employee

More accurate record keeping on employees,their skills and their performance

Improved ability to improve an employee’s skilllevels and career path within the organization

Compare employees to their peers forascertaining raises and bonus distribution

Align individual behavior and work with corporategoals or scorecards

Ultimately measure the degree of alignmentbetween the workforce and overall corporate

performance

Link payouts with employee performance

Link payouts to total company revenueacquisition

What KeepsThem Up at Night

1

2

3

© 2004 AberdeenGroup • 7

Prioritized Prioritized Pressures Strategies

• Align individual behavior and work with corporate goals or scorecards (83%)

• Increase ability to improve an employee’s skill levels and career path within the organization (82%)

• Link payouts with employee performance (80%)

• More accurate record keeping on employees, their skills, and their performance (79%)

• Ultimately measure the degree of alignment between the workforce and overall corporate performance (75%)

• Link payouts to total company revenue acquisition (70%)

• Communication of core business objectives across the company (89%)

• Implement a culture of continuous improvement (89%)

• Alignment of employee and department behavior with corporate goals or scorecards (86%)

• Improve employee morale and retention (85%)

• Improve reward structure to retain top performers (84%)

• Delivery of competitive services to better retain employees (65%)

© 2004 AberdeenGroup • 8

Impediments

to be Overcome

0 10 20 30 40 50

No compelling business valueproposition has been developed to

support this

Insuff icient aw areness of the valuepotential of aligned goals to go forw ard

Not considered a strategic initiative or atop business priority

Internally w e are not ready forevaluating performance beyond its

demonstration at the department level

The required organization or potentialprocess change is not w arranted by

the expected benefits

Percentages

© 2004 AberdeenGroup • 9

What Research Tells Us: Status Today

• 90% of the respondents see improved employee performance management as a key to gaining competitive advantage.

• 82% percent say that their employees’ work objectives are tied to corporate goals.

• 64% think employee achievement should be tied to demonstrable revenue outcomes.

• 73% of the respondents feel it is important that employees can articulate the corporate goals that their on-the-job behavior or their role at work influences. – Fewer, however, used the corporate goals to define

individual work objectives.

© 2004 AberdeenGroup • 10

Methods and Frequency of Employee Assessment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Paper forms/interviews

Self-assessment

Multirater/360

Online measurement/record keeping

Objectives linked to corporate goals or balancedscorecard

Cascading goals from the CEO down to allemployees

Once a year

Multiple times a year

On an ongoing basis

© 2004 AberdeenGroup • 11

Issues Identified: Managerial Training

• Training managers to conduct performance evaluations and the ability to tie employee objectives to corporate goals are seen as the biggest issues in managing employee performance.

• Training managers how to coach employees better was the highest rated priority (79%)

© 2004 AberdeenGroup • 12

Report Card: Room for Improvement

• 52% are locked into paper-based evaluations that are conducted yearly and rarely reviewed again.

• 40% report that internally they are not ready to evaluate performance beyond its demonstration at the departmental level.

• Over a quarter felt that revisiting an employee’s progress toward his or her goals more than once a year is unimportant.

• Almost a quarter reported insufficient awareness of the value potential of aligned goals to merit further attention to the matter

• 11% thought that the employee’s ability to explain his or her job’s relationship to corporate goals was not at all important.

© 2004 AberdeenGroup • 13

Top of the Wish List

• A new electronic performance management system (32%)

• Investment in an electronic system to better articulate and manage employee’s individual goals and their achievement (35%)

• 22% of companies participating have budgets in place for new or enhanced employee evaluation practices, procedures, or management systems within this calendar year.

© 2004 AberdeenGroup • 14

Aberdeen Comparative FrameworkThe

Deans‘

List

Laggards

Best in Class

IndustryNorm

© 2004 AberdeenGroup • 15

What Do We Learn from Best in Class Companies?

• Best-in-class companies consider employee evaluation as on-going, with at least monthly discussions between employee and manager.

• Best-in-class companies see employee evaluation as an opportunity to foster employee growth

• Best-in-class companies are more likely to use automation as part of their employee management initiatives

© 2004 AberdeenGroup • 16

Frequency of Employee Evaluation By Competitive Framework

0%10%20%30%40%50%60%70%80%

Never Once aYear

MultipleTimes a

Year

OngoingBasis

BIC

Average

Laggard

© 2004 AberdeenGroup • 17

Bestin

Class

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

No compellingbusiness value

proposition hasbeen developed to

support this

Insufficientawareness of thevalue potential of

aligned goals to goforward

Not considered astrategic initiative or

a top businesspriority

Internally we are notready for evaluatingperformance beyondits demonstration atthe department level

The requiredorganization or

potential processchange is not

warranted by theexpected benefits

Perceived Barriers

BIC

Norm

Laggard

© 2004 AberdeenGroup • 18

Comparisons Between Best in Class and Laggards: Perceived Barriers to a Performance-Driven Organization

0%

10%

20%

30%

40%

50%

60%

70%

BudgetConstraints

Lack of activeexecutivesupport

Lack of acompelling

business case or the benefits

of aperformance-

basedenvironment are

unclear

Lack oftechnologymaturity or

functionality tosupport suchan endeavor

Employeeperformance

management isseen as an HR

initiative

Not feasiblefor a company

our size

BIC

Average

Laggards

© 2004 AberdeenGroup • 19

Best in Class Companies Employ Automation in EPM

36%

38%

26%

Automated (online)performancemeasurement tools

Automated performancemanagement recordkeeping

A performancemanagement program withcascading goals from theCEO down to allemployees

© 2004 AberdeenGroup • 20

Distinctions in Leaders and Laggards

• Over half of the Best in Class companies use technology in managing their workforce to enable both timeliness and consistency

• Best in Class companies exceed the others in viewing employee evaluation as an ongoing process rather than a once a year, one-shot deal.

© 2004 AberdeenGroup • 21

And the Laggards….

• Only laggards conducted no measurement of their workforce whatsoever

• Laggards exceeded the industry norm in viewing performance management as the bastion of HR

• Both laggards and the industry average far exceeded best in class companies in using employee evaluation solely for yearly budgeting, tied to raises and merit increases.

© 2004 AberdeenGroup • 22

Best in Class Companies in EPM Outperform Peers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Productivity Attitude toward

work and the

corporation

Job satisfaction

Revenue generation

Employee

satisfaction with

company in general

Retention

BICAverageLaggards

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Productivity Attitude toward

work and the

corporation

Job satisfaction

Revenue generation

Employee

satisfaction with

company in general

Retention

BICAverageLaggards

© 2004 AberdeenGroup • 24

Key Take-Aways for the Less than Best: Steps for Laggards

• Know why you want to measure an individual’s performance.– If you see no reason to evaluate performance, then don’t

bother. If you do nothing whatsoever with a performance review and it does not influence a worker’s job performance or effect compliance, you may as well not go through the motions at all.

• Proactively articulate a plan for a performance-driven culture.– Assuming improving the workforce is indeed a priority, enlist

top management behind a move to improve employee performance by defining what it should be.

• Begin communicating with your workforce. – Moving to a performance-driven environment is an exercise in

change-management. Prepare for it early; a change in how or why an employee is to be evaluated is frightening.

© 2004 AberdeenGroup • 25

Key Take-Aways for the Less than Best: Steps for the Average Companies

• Put your money where your mouth is.– Create a culture where on-going evaluation is part of corporate

life; and managerial time is allotted to and rewarded for that endeavor.

• Train managers who are responsible for performance evaluation.– Evaluation of performance and the follow-on coaching to improve

it both require training. In addition, managers report discomfort at discussing performance with employees, especially that which needs improvement. A performance-driven culture requires open discussion of individual performance from the top down – and that requires training at all levels.

• Evaluate automated performance tools. – Eliminate manual, paper-based processes, and consider

automated solutions that employ sharable planning worksheets, workflow, electronic record retention, Web-based record access, e-mail, and corporate-wide goal alignment.

© 2004 AberdeenGroup • 26

Key Take-Aways for the Best: There is Always Room for

Improvement• View performance management as a business process worthy of

investment.– Foster a corporate culture and business processes oriented around

high performance. This takes an ongoing commitment to enterprise-wide communication.

• Create valid measures for employees’ performance.– Articulate distinctions between the A, B, and C players. Ensure that

these are quantifiable and that rewards based on performance distinguish between the results of these performers. Remember that you need to retain the B players as well as the super-stars!

• Drive toward corporate goal alignment.– Measure performance based on proximity to achieving corporate

business goals while remaining realistic about what employees actually have within their power to achieve and accomplish. An individual cannot be held accountable for goals he or she is powerless to successfully impact.

• Evaluating and improving workforce performance requires ongoing attention to managerial training.– Increase managerial training on employee management, evaluation,

coaching, and mentoring. This is not a one-shot event; it is an ongoing business process of managerial growth in itself.

© 2004 AberdeenGroup • 27

Aberdeen Conclusions• It is hard to improve what you cannot measure; it is

impossible to measure outcomes if you cannot articulate not only the outcomes desired but the degree of quality required for those outcomes as well.

• Performance management can only be a good as the manager’s ability to set objectives clearly, articulate goals and their relative value, define the levels of performance expected and explain how the employee is to achieve those levels. This requires training and commitment.

• The success of a corporation’s workforce management endeavors will not be determined solely by technology: this research demonstrates that commitment of top executives to a performance-driven enterprise and the requisite interest, training, and dedication by middle level managers to the effort is paramount.

www.aberdeen.com

Unlocking individual and organisational potential

PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT · STAFFING

Clinton Wingrove, Clinton Wingrove, Head Of International R&D – Performance ManagementHead Of International R&D – Performance ManagementCEO and Principal Consultant,CEO and Principal Consultant,____________

Pilat (North America) Inc.Pilat (North America) Inc.____________

800.338.9701800.338.9701www.pilat-nai.comwww.pilat-nai.com

© 2005 Pilat (North America), Inc.

© 2004 AberdeenGroup • 30

© 2004 AberdeenGroup • 31

Talent Talent ManagementManagement

Performance Performance ManagementManagement

Development Development ManagementManagement

Organizational Organizational Surveys & Surveys & ResearchResearch

• Auditing & Benchmarking

• Employee Surveys

• Data Analysis

• 360º Feedback

• Qualitative & Quantitative Research

• Action Planning and Follow Through

• Process design, training and implementation

• ASP services

• Goal Setting

• Goal Alignment

• Competencies

• 360º Feedback

• Performance Review and Appraisal

• Development Management

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• In-House/ASP services

• Succession Planning

• Talent Management

• Development Management

• Resumes

• Executive Assessment

• Risk Management

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• Development Planning

• Development Tracking and Review

• Competencies

• Coaching Management

• Teambuilding

• Interactive e-Learning

• Executive Assessment

• Executive Coaching

• Process design, training and implementation

• In-House/ASP services

Pilat HR SolutionsPilat HR Solutions

Compensation - StaffingCompensation - Staffing

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February 8, 2005

Questions & Answers

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