AberdeenGroup • 1
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
AberdeenGroup • 2
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
AberdeenGroup • 3
© 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 Upat Night
1
2
3
AberdeenGroup • 4
© 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
Impedimentsto be
Overcome
0 10 20 30 40 50
No compelling business valueproposition has been developed to
support this
Insufficient awareness of the valuepotential of aligned goals to go forward
Not considered a strategic initiative or atop business priority
Internally we are not ready forevaluating performance beyond its
demonstration at the department level
The required organization or potentialprocess change is not warranted by
the expected benefits
Percentages
AberdeenGroup • 5
© 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
AberdeenGroup • 6
© 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.
AberdeenGroup • 7
© 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
AberdeenGroup • 8
© 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
BICAverage
Laggard
AberdeenGroup • 9
© 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
AberdeenGroup • 10
© 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.
AberdeenGroup • 11
© 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 towardwork and thecorporation
Job satisfaction
Revenue generation
Employeesatisfaction with
company in general
Retention
BICAverageLaggards
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Productivity Attitude towardwork and thecorporation
Job satisfaction
Revenue generation
Employeesatisfaction with
company in general
Retention
BICAverageLaggards
AberdeenGroup • 12
© 2004 AberdeenGroup • 23
Determining Best in Class
• Best in class, average and laggard companies were determined by the organizational processes that companies are using to manage Employee Performance. Companies were given a score based on a weighted average of the self assessment answers that the companies provided across the following areas:– Overall processes – Organizational structure and strategy – Data and Knowledge management – Technology utilized to support EPM
• We then examined a company’s overall maturity and placed them in a particular subgroup based on the following:– Top 20% of companies = Best in Class – Middle 60% of companies = Average – Bottom 20% of companies = Laggard
• We then examined additional aspects of EPM (metrics, performance, pressures, etc.) based on these sub-groupings.
© 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.
AberdeenGroup • 13
© 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.
AberdeenGroup • 14
© 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
AberdeenGroup • 15
Unlocking individual and organisational potential
PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Clinton Wingrove, Clinton Wingrove, Head Of International R&D Head Of International R&D –– Performance ManagementPerformance Management
CEO and Principal Consultant,CEO and Principal Consultant,____________
Pilat (North America) Inc.Pilat (North America) Inc.____________
800.338.9701800.338.9701www.pilatwww.pilat--nai.comnai.com
© 2005 Pilat (North America), Inc.
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
• Pilat is a leading global Human Resources Consultancy, Software-house and Services Company, founded in 1974
• Global client base extends to Hong Kong, Switzerland, Saudi Arabia, Germany, Russia, Netherlands, Poland, etc.…
• ~150 professional staff based primarily in USA, Europe and Israel:
Occupational Psychologists – understand people and their behaviorStatisticians – understand data and what it really tells us
Information Technologists – understand the behavioral engineering power of technology
Experienced Managers – understand the bottom line needs
Who We Are…Who We Are…
AberdeenGroup • 16
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Our Vision & Mission…Our Vision & Mission…
VISION• To be the leading supplier of data centric, HR Talent Management
and Performance Improvement solutions
MISSION• To help our clients maximize human performance and realize human
potential by:
– optimizing HR Processes that are proven to underpin superior personal performance and development
– employing the behavioral engineering power of Contemporary Technology, and
– enhancing the quality of decisions through rigorous Data Collection, Analysis, Interpretation, Management, and Usage
Powering Performance & Potential TM
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
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
• Process design, training and implementation
• In-House/ASP services
• Succession Planning
• Talent Management
• Development Management
• Resumes
• Executive Assessment
• Risk Management
• Process design, training and implementation
• In-House/ASP services
• 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 Compensation -- StaffingStaffing
AberdeenGroup • 17
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Our unique blend of in-depth experience:- Our own software house with over 20 yrs experience in Rapid
Application Development- HR process design – a consulting house of international repute
working with governments, Fortune 500 and military clients- HR data analysis/literacy – 25 years experience applying
sophisticated statistical techniques to improve and make sense of HR data.
HR Pulse®
a unique Rapid Application Development toolkitbuilt specifically to meet the ever evolving demands and changing circumstances of HR.
PASRASOur unique ‘Process and System Review and Specification’ workshop.
Our Differentiators
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Performance Management – A Typical Cycle
INFLUENCE
PLAN &
ALIGN
ASSESS
LEAD
Typically givenhigh priority
Typically givenlow priority
AberdeenGroup • 18
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
From Performance Appraisal To Performance Management
In our own dealings, we are seeing Enterprise Performance Management technology used to:- Increase the effectiveness of performance planning- Engineer behavior / enhance performance- Increase data quality- Make useful data more accessible- Manage compliance- Keep processes alive
... but, without effective process design and robust implementation, results fall short of expectations.
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Increasing The Effectiveness Of Performance PlanningSupporting different planning processes:
- push down cascade – manager issues objectives, directions, etc- pull down cascade – individuals take the lead from managers
e.g. look at or copy their managers’ goals- individual creation – individual creates own objectives and feeds
upwards- matrix management – matrix managers engages in the process- “Spider Planning” – (project teams, service roles) 1-to-1 contracting
Managing holistic performance plans:- WHAT (Goals/objectives that will be achieved)- HOW (Competencies that will be deployed, and how)- GROWTH (Learning/development to support on-job performance or
preparation for future roles)Managing alignment of goals/objectives:
- links to Vision, Mission and Strategy- links to Corporate, Divisional, Departmental, and other higher goals- links between Goals, Competencies, and Development
Validating plans- referring plans for approval
AberdeenGroup • 19
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Engineer Behavior / Enhance Performance
Technology is now a behavioral engineering tool:– Triggering desired critical behavior through timely e-mails (new
and reminders)– Triggering desired behavior through alerts and advisories– Guiding process behavior through conditional Help &
Information, Tutorials and system responses (e.g. “Based on this input you need to speak with <name>”)
– Reinforcing behavior using responses and enabling access to new features
– Engaging ‘significant others’ to approve, guide or reinforce total performance (What, How and Growth):e.g. Direct Reports - “How was it for you?” surveys)e.g. Coaches – to engage with the individual re development
– Integrating processes such as performance planning, development and career/succession planning
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Increase Data Quality
HR and Managers need data that is:– valid– reliable– differentiating– useful
Technology can help to increase data quality by:- delivering conditional training and tutorials e.g. based on bio-
data, access history, or actions taken- validating input using pick lists or validation rules- referring input for validation/approval- providing real-time feedback e.g. rater feedback- providing aggregate feedback e.g. average ratings by division- computing de-biased indices
AberdeenGroup • 20
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Make Useful Data Accessible
Support mass user access and involvement- Employees, managers, executives, coaches, HR, etc.
Provide search tools- Individuals meeting certain criteria- Plans meeting certain criteria- Assessments meeting certain criteria
Provide analysis and reporting tools- Performance dashboards / scorecards- Process compliance- Aggregate analyses e.g. rating distributions- Engagement / activity levels- Data quality- Individual data / profiles- Indices e.g. “Probability of Success”- Trend analyses
Unlocking individual and organisational potential
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Keep Processes Alive
Any system is likely to work the first time – the project team make sure, the vendor makes sure but, typically, the energy and excitement wane after implementation
For processes and systems to be kept alive, they must:– Cater for changing individual demands and circumstances
(e.g. process for changing employees’ objectives)– Adapt to changing organizational demands
(e.g. new acquisition, new process for part of the organization)– Provide for increasing process integration
(e.g. integration with Recruitment, Succession/Talent Management, Development Management, Feedback)
– Increase in sophistication as the organization learns(e.g. provision of aggregate feedback, more comprehensive development management tools)
– Promote increased usage through applied motivation theory(e.g. extended Maslow’s hierarchy of needs, and Herzberg’sHygiene and Motivator factors)
AberdeenGroup • 21
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
Manage Compliance
Involve the people for whom the process was designed– Great processes only add value if implemented by those who
need to follow them yet, typically: – “The keen do”, and – “Those who need the processes avoid them”
Technology can:- detect non compliance - escalate continued non-compliance- report aggregate compliance / non-compliance- identify non-compliance cause and effect relationships- report aggregate non-compliance consequences
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PERFORMANCE, TALENT and DEVELOPMENT MANAGEMENT · COMPENSATION · ORGANIZATIONAL MEASUREMENT· STAFFING
The Real Challenge
HR is responsible for ensuring that the Performance Management processes and systems provided for Line Management to use are:- the best available- the most appropriate for the organization at any point in time, taking account of,
for example line input, management commitment, and organizational readiness- regularly and frequently re-evaluated
Line Management is responsible for:- providing input into the design and evaluation- implementation / compliance
HR and Managers need to demonstrate courage:- HR to fight for what is needed; to insist that processes are either followed or
scrapped; but not ignored- Managers to ensure that employees have truly challenging performance plans,
and that objective assessments and feedback are provided- Managers and HR to provide realistic and differentiating reward and recognition
to those who deserve it; not diminishing it for fear of the effect on the less-than-good performers
- HR and Managers to manage and ensure compliance – it is OK to do so!
AberdeenGroup • 22
February 8, 2005
Questions & Answers
Thank you for your participation.