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LAST CLASS:
OPEN DISCUSSION
EMBA 60616 September 28, 2012
1 Performance Evaluation (8:00AM – 8:30AM)
Variable Pay (8:30AM – 9:00AM)
Generational Values Differences (9:00AM – 9:30AM)
Managing Derailing Employees (9:45AM – 10:15AM)
Essential Management Skills (if time allows)
Team-Based Leadership (if time allows)
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Performance Evaluation
What are the advantages and disadvantages of
forced ranking performance evaluation systems?
What does the research literature say?
Who in the class has experience with forced ranking
systems?
What are the benefits of forced ranking systems?
Why are they used in your company or others‘ companies?
What are the costs of forced ranking systems?
Why aren‘t they used in your company or others‘ companies?
2
See Stewart, Gruys, and Storm (2010) review, posted on website
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Performance Evaluation 3
Not removing that bottom 10% early in their careers is not only a
management failure, but false kindness as well—a form of cruelty—
because inevitably a new leader will come into a business and take out
that bottom 10% right away, leaving them—sometimes midway through
a career—stranded and having to start over somewhere else.
Removing marginal performers early in their careers is doing the right
thing for them; leaving them in place to settle into a career that will
inevitably be terminated is not. GE leaders must not only understand
the necessity to encourage, inspire and reward that top 20% and be
sure that the high-performance 70% is always energized to improve
and move upward; they must develop the determination to change out,
always humanely, that bottom 10% and do it every year. That is how
real meritocracies are created and thrive.
– Jack Welch
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Performance Evaluation 4
A quarter of Fortune 500 companies use some type of forced ranking system
Little study of forced ranking (―rank and yank‖) systems
Advantages
Eliminates rater errors/biases (severity/leniency)
Before Ford implemented its system, 98% of managers were rated ‗fully meeting expectations‘
Process for eliminating ―sick cats‖ – thus productivity
Helps identify (and thus reward) peak performers
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Performance Evaluation 5
Advantages (continued)
Fosters more candidate communication
How an employee‘s performance compares to others doing similar work; thus provides impetus for change
Short-term motivational benefits
Disadvantages
Ignores objective performance differences (GPA-SAT)
Difficult to sustain (10% Y1; 10% Y2; 10% Y3…)
Undermines teamwork (Survivor mentality)
Disliked by employees
Lawsuits (Microsoft, Ford, Goodyear, Conoco sued)
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Performance Evaluation
What are the advantages and disadvantages of
forced ranking performance evaluation systems?
What does the research literature say?
Who in the class has experience with forced ranking
systems?
What are the benefits of forced ranking systems?
Why are they used in your company or others‘ companies?
What are the costs of forced ranking systems?
Why aren‘t they used in your company or others‘ companies?
6
See Stewart, Gruys, and Storm (2010) review, posted on website
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Variable Pay 7
How well do variable pay (bonus) systems work?
What does the research literature say?
Who in the class has experience with bonus plans?
What are the benefits of variable pay?
Why are they used in your company or others‘ companies?
What are the costs of variable pay?
Why aren‘t they used in your company or others‘ companies?
How does variable pay encourage/discourage risk-
taking?
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Variable Pay 8
Unions generally oppose variable (performance-based) pay
Literature: Variable pay plans are effective
Merit pay is most common variable pay plan
BUT, is merit pay the most effective method VP plan?
Bonus
Gainsharing
Profit-sharing
Stock (executive compensation is a different issue)
Do these work equally well?
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Variable Pay 9
0%
5%
10%
15%
20%
25%
30%
MonetaryIncentives
Goal Setting JobEnrichment
Participation
30%
16%
9% 0.50%
Perc
en
tage Incr
ease
in P
erf
orm
ance
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Variable Pay 10
0%
10%
20%
30%
40%
50%
60%
Survey studies(n=8)
Case studies(n=22)
Experimentalfield studies
(n=4)
All studies
48
.80
%
40
.70
%
50
.30
%
43
.70
%
Increases in Productivity Following Incentive Implementation
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Variable Pay 11
What is the problem with merit pay?
Given accrual over time, dollar increases may reflect
seniority as much as recent performance
Bonus plans are underutilized and effective
Literature on gainsharing is mixed
Literature on profit-sharing and stock options is not
particularly positive
Any of these plans are better than no variable pay
plan and each has merits
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Variable Pay 12
How well do variable pay (bonus) systems work?
What does the research literature say?
Who in the class has experience with bonus plans?
What are the benefits of variable pay?
Why are they used in your company or others‘ companies?
What are the costs of variable pay?
Why aren‘t they used in your company or others‘ companies?
How does variable pay encourage/discourage risk-
taking?
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Generational Values Differences 13
Do values really differ across generations?
What does your experience suggest?
What does the research literature say?
What are the implications for managing?
Are there other age-based differences that are
important to managing and leading?
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Generational Values Differences 14
Boomers: 1943-1961
Gen X: 1961-1981
Gen Y: 1982-1999 (Millennials)
The data analyzed here suggest that the popular
view of Millennials as more caring, community
oriented, and politically engaged than previous
generations is largely incorrect
There are increases in individualistic traits and
declines in civic engagement over time
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Generational Values Differences 15
2.50
3.00
3.50
4.00
4.50
5.00
Extrinsic Intrinsic Status Altruism Social Freedom
Boomers
Gen X
Gen Y
Extrinsic job security, salary Altruism making a contribution to society
Intrinsic intellectual simulation, challenge Social good relationships with others
Status influence, recognition, advancement Freedom work-life balance, working hours
Source: Cennamo & Gardner (2008)
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Generational Values Differences 16
0.00 0.20 0.40 0.60 0.80 1.00
Finding purpose and meaning in my life
Being a leader in my community
Being able to find steady work
Having strong friendships
Having a good marriage and family life
Having lots of money
Working to correct social/economic inequalities
Discovering new ways to experience things
Being successful in my line of work
Gen Y Gen X Boomers
Source: Twenge et al. (2012)
Note: Individuals were
surveyed when
in high school
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Generational Values Differences 17 Source: Jin & Rounds (2011)
Change for Work Values across Ages Change for Work Values across Generations
Although work values evidenced small changes in rank-order stability, showing that
individuals generally maintained their positions within a group across the life span,
the results of mean-level change showed that for the whole population, the levels of
importance attached to different work values underwent fairly dramatic increases or
decreases at different age periods.
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Generational Values Differences 18
Do values really differ across generations?
What does your experience suggest?
What does the research literature say?
What are the implications for managing?
Are there other age-based differences that are
important to managing and leading?
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Managing Derailing Employees 19
What does the term derailed/derailing mean?
What percentage of your employees are
derailed/derailing?
How do you manage these employees?
In your experience, can it be fixed? How?
What else is there to be done?
What does the research literature say about
performance management for derailing employees?
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Managing Derailing Employees 20
One of biggest problems with derailing employees
is distorted self-perceptions
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Managing Derailing Employees 21
-0.5 -0.25 0 0.25 0.5 0.75 1
Clarification of Goals and Objectives
Upward Communication
Orderly Work Planning
Organizational Expertise
Facilitating the Work of Others
Performance Feedback
Time Emphasis
Control of Details
Goal Pressure
Delegation/Permissiveness
Recognition for Good Performance
High potential managers Derailing managers
Source: Shipper & Dillard (2000)
Notes: Sample=1,035 middle managers
Rating scale: 1=extremely low extent; 7=extremely high extent
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Managing Derailing Employees 22
What does the term derailed/derailing mean?
What percent of your employees are
derailed/derailing?
How do you manage these employees?
In your experience, can it be fixed? How?
What else is there to be done?
What does the research literature say about
performance management for derailing employees?
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Essential Management Skills 23
What management skills matter most?
AKA: Management competencies, social skills, interpersonal skills
What does the research literature say about performance management for derailing employees?
Surprisingly little data on this issue!
However, several themes: FHIP
Feedback
High standards/goals
Ideas/insights
Planning
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24
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
Sensitive
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iffe
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ake
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ucc
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s Ris
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Use
s Fe
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ack
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usiness
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ort
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Learn
Is O
pen
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back
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lexib
le
Performance
Potential
Predictors of current job performance and
designation of high potential of 1,100
managers in 21 countries
Source: Spreitzer, McCall, & Mahoney
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Essential Management Skills 25
2.5 3 3.5 4 4.5 5
Clarification of Goals and Objectives
Upward Communication
Orderly Work Planning
Organizational Expertise
Facilitating the Work of Others
Performance Feedback
Time Emphasis
Control of Details
Goal Pressure
Delegation/Permissiveness
Recognition for Good Performance
High potential managers Derailing managers
Source: Shipper & Dillard (2000)
Notes: Sample=1,035 middle managers
Rating scale: 1=extremely low extent; 7=extremely high extent
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Essential Management Skills 26
0 0.25 0.5 0.75 1
Clarification of Goals and Objectives
Upward Communication
Orderly Work Planning
Organizational Expertise
Facilitating the Work of Others
Performance Feedback
Time Emphasis
Control of Details
Goal Pressure
Delegation/Permissiveness
Recognition for Good Performance
Difference Between High Potential and Derailing Managers
Source: Shipper & Dillard (2000)
Performance feedback Ability to provide immediate guidance on the accomplishment of goals
Orderly Work Planning Ability to organize work flow
Clarification of Goals/Objectives Ability to communicate what needs to be accomplished and why
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Essential Management Skills 27
What management skills matter most?
AKA: Management competencies, social skills, interpersonal skills
What does the research literature say about performance management for derailing employees?
Surprisingly little data on this issue!
However, several themes: FHIP
Feedback
High standards/goals
Ideas/insights
Planning
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Team-Based Leadership 28
How team-based is the work in your organization?
_____ Total (nearly everything is done in teams)
_____ Extensive (most work products are produced by teams)
_____ Occasional (some work in teams, some independent)
_____ Little (most independent ‗free agents‘)
Does effective leadership vary based on your answer to above question? Why or why not?
What does the research literature say?
Just how pervasive is teamwork in organizations?
Do models of effective leadership differ for team contexts?
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IT‘S BEEN A PLEASURE
AND AN HONOR:
KEEP IN TOUCH!
EMBA 60616 September 28, 2012
29