Performance Management

Andre O’CallaghanOctober 2008

• Since my last report, this employee has Since my last report, this employee has reached rock bottom and shows signs of reached rock bottom and shows signs of starting to dig.starting to dig.

• I would not allow this employee to breed.I would not allow this employee to breed.• Works well under constant supervision and Works well under constant supervision and

cornered like a rat in a trap.cornered like a rat in a trap.

Introduction

• He sets low personal standards and then consistently fails to achieve them.

• This associate is really not so much of a has-been, but more of a definitely won’t be.

Introduction

• 85% have a PMS• 95% have strong commitment of the CEO• 94% have a formal communication strategy• 51% believe employees & managers are

adequately educated & trained in PMS

Some Perspectives

• 37% use the balanced scorecard methodology• 86% allows joint target setting• 91% have clear PMS policies, procedures and

systems• Most companies measure performance using

hard and soft measures• 2001 Deloitte & Touche HCC Survey

Some Perspectives

• What is Performance Management? If 85% of companies apply it, what do they actually do?

• Group Discussion

Define Performance Management

• The process of ensuring individual and team effort support the organisational objectives and to realise key stakeholder expectations and wealth creation in all the identified value drivers of the organisation.

Define Performance Management

• Planning is crucial • Stakeholder expectations are key drivers• Management and employee buy-in and

involvement are paramount• Must be linked to and alignment with strategy

Define Performance Management

• Planning Performance• Maintaining Performance• Reviewing Performance• Rewarding of Performance

Process

Reward Performance:- Link to pay- Results = performance

PERFORMANCE MANAGEMENT

PROCESS

Business strategy, stakeholders, key economic wealth drivers

Reviewing Performance:- Formal reviews- Assess against objectives

Maintaining Performance:- Monitoring performance- Coaching- Feedback

Planning Performance:- Setting objectives- Outlining development plans- Getting commitment

A Model

• 80% of the process• Includes:

– Identifying key value drivers of stakeholders– Defining Key Performance Areas (KPA’s)– Defining Objectives– Defining Targets– Develop a training and development plan

Planning

• With no harbour, no wind will be the right wind.

• Between 92 to 97% of companies have a vision and some strategy statement.

• Only between 3-7% of staff know and work by it.

The Challenge of Alignment

A Model for Establishing/ Building an Aligned Performance Management Process

Deriving key value drivers from Strategic direction and KPA’S

Determining organisational objectives

Measuring & Evaluating performanceagainst organisational objectives

Reassessing and adjusting business strategy

Execution

Review

Determining and assigning KPA’s

Determining and assigning individualobjectives

Measuring, evaluating and rewarding Performance against individual

objectives

Reassessing KPA’s and adjusting Objectives to reinforce strategy

ORGANISATIONAL LEVEL INDIVIDUAL LEVEL

• S = Specific• M = Measurable• A = Agreed/Attainable• R = Realistic / Relevant• T = Time-bound

Setting Objectives

• A measurable component with a beginning and an end

• Starts with a VERB• Not in isolation

Setting Objectives

• Use a good-practice rating scale• Evidence-based• Both managers and employees - active

participants• Mutually agreed• Usually – bell curve

The Measurement

• Integration• Open Communication• Improved Performance• Training and Development• Clarity of Standards/Requirements• Placement of Individuals

Benefits

• Increased Objectivity• Remuneration• Promotability• Career planning

Benefits

• If you are not managing performance, what are you managing?

• Some key building blocks

Competencies Goal Setting Strategy Focus

Review Process

Feedback

Reward & Compensation

Training

Process Design

Success Factors Implementation

• Relevance• Reliability• Discriminability• Freedom from contamination• Practicality• Acceptability• Legal compliance

Success Factors Implementation

• Coaching & mentoring are crucial components of the Maintaining of Performance Phase

Coaching

Business strategy, stakeholders, key economic wealth drivers

Reward Performance:- Link to pay- Results = performance

Reviewing Performance:- Formal reviews- Assess against objectives

Maintaining Performance:- Monitoring performance- Coaching- Feedback

Planning Performance:- Setting objectives- Outlining development plans- Getting commitment

PERFORMANCE MANAGEMENT

PROCESS

Coaching is a formal process:- A day- to-day process - To improve performance and capabilities

Coaching = Give a man a fish a day, and you fed him for a day; teach him to fish, and you feed him for life.

Confucius

Coaching

• Give feedback • Ask for ideas and suggestions• Discuss • Coaching provides immediate feedback on

performance

Coaching

Coaching vs Mentoring vs Counselling vs Discipline?

Coaching

Group Discussion

Why do Managers Fail to Give Feedback?

• Lack of confidence• Avoiding confrontation• Do not have time• Lacking internal support• Others?

Why do Managers Fail to Give Feedback?

THE BECKS MODEL• Behaviour• Environment• Clarity• Knowledge/Skills

A Model for Performance

• Descriptive and specific• About something that can be changed• Timeous• Tactful• Confirmed

Good feedback is …

• What will other people think?• If you cannot say anything nice, do not say

anything.

Childhood and Feedback

Maximum Impact of Informal Performance Feedback on Employee Performance

0

10

20

30

40

50

Fairness andaccuracy

Managerknowledgable

about employeeperformance

Feedbackabout how todo job better

Emphasis onstrengths

Managervolunteersinformalfeedback

Detailed andspecific

feedback

Immediatefeedback

% change in performance

Impact on Feedback

Traditionalists Baby Boomers

Generation X Millennials

Feedback and Generations

Example Be specific and give actual examples

Effect Explain the impact/effect (positive or negative)

Change Suggest what should change (to improve performance)

Continue Recognise good performance (reinforce positive behaviour)

The ECC Model for Feedback

Example During the last two weeks you made a significant contribution to the customer service targets – you had no complaints and your turn-around time is 6% above target. On Friday you also made a good suggestion to improve customer service in the front-office area.Effect We are doing great and we had very positive

customer feedback in your area because of your inputs and efforts.Continue To focus on customer service and to share ideas around service excellence.

Good Performance Feedback – An Example

Example During the last two weeks you had 5 serious complaints from 3 important customers

regarding follow-ups. You also did not meet the required 5 hour-turn-around time on queries.Effect We are under pressure from 3 major clients who represent a substantial revenue base. Your area is not meeting the required service standard. Your team members are frustrated, because they meet target, but overall the team is below target.Change You will have to focus more on service and customer satisfaction and need to achieve an overall target of X% customer satisfaction for the next three months in order to meet target at the end of the quarter.

Good Performance Feedback – An Example

WelcomeCheck expectations & concerns

Give feedback and use Facts

Get a Response

Ensure buy-in and understanding

Discuss and plan the next period

Identify training requirements

Express confidence

A Good Review

• What do you audit?• How do you audit Performance Management?• What can you expect?

Performance Audits Key Topics

Measures give rewards relevance, and rewards give measures meaning

TB Wilson

Performance and Reward

• What gets measured gets done• What gets rewarded is sustained• The majority of workers want recognition for

achievement• Rewards have a high retention value for

talent

Performance and Reward

Drivers Attraction & Retention of Talent

Dilemma’s in reward: • Objectivity• Transparency• Affordability• Baggage

Performance and Reward

Link to Pay

Why does it often fail?• Lack of objective and quantitative measures• Poor link between pay and performance (no immediate

reinforcement)• The aspects that get rewarded are not linked to strategy• Poor communication re objectives, benefits and

procedures

Why does it often fail?• Level of reward not proportionate to effort• Resistance to change • Union perceptions and involvement

Link to Pay

A Reward MatrixRating 25th Percentile 50th percentile 75th Percentile

5 17% 15% 10%

4 15% 12% 8%

3 12% 10% 6%

2 0 0 0

1 0 0 0

Performance and Reward

• Guaranteed Package

• Short-Term Incentives

• Long-Term Incentives

X X X

X X X

X X

Attra

ct

Reta

in

Perfo

rman

ce

Skills

REMUNERATIONCOMPONENT:

Performance and Reward

VariablePackage

FixedPackage

KEYIMPACT

KEYOBJECTIVE

Motivational DriveBehaviour

• Return on Bottom Line

• Reward specific behaviour/results

HygieneFactors

Competitivein Market

• Internal Equity

• Cost Management

• Flexibility

SECONDARYOBJECTIVES

The Psychology of Incentives

Talented individuals are mobile monopolies with global passports

Ridderstrale & Nordstrom

What is Talent?

• Expected to produce superior performance

• Talent apply knowledge, skills and creativity

• Focus on personal growth

• Challenge: To spot talent

What is Talent?

PROFIT

PASSION

PERFORMANCE

POTENTIAL

Why is it important?

Review

Key Elements

Link to Training & Development

Desired performance

Actual performance

Measurement

Development

VisionMissionStrategyValue Drivers

Key Challenges:• Strategy not always clear, defined or

formalised• Decisions are not taken to lower levels

(“family business” syndrome)

SMMEs

Key Challenges:• There often are:

– Little time– Few resources and finances– Little support– Not adequate skills– The “we do fine” syndrome

SMMEs

Challenges organisation’s face

Balanced Scorecards (BS)

9 out of 10 companies fail to execute and track

strategy

Management Barrier

85% of executive teams spend less than one hour/month

discussing strategy

People Barrier

Only 25% of managers have incentives linked to strategy

60% of organisations don’t link budgets to strategy

Resource Barrier

Vision Barrier

Only 5-10% of the work force understand the strategy

Challenges Faced by Organisations Making a Case for a Balanced Approach

At the highest conceptual level, the Balanced Scorecard is a framework that helps organisations translate strategy into Operational objectives that drive both behaviour and performance.

What is Balanced Scorecard?

The Balanced Scorecard converts strategy into an Integrated System defined across Four Business Perspectives

FINANCIAL FOCUS

CUSTOMER FOCUS EXTERNAL

INTERNAL PROCESSES

PEOPLE FOCUS INTERNAL

Profitability, Growth, Sales & Cash Flow

Retention, Market Share, Service, Etc

Response time, Costs, Effecient,Productivity

Skills, Learning,Development,Sustainability

Four Perspectives of a BS

VISION, MISSION &

VALUES

• Scorecards drive performance at all levels• Scorecards facilitates strategy• Scorecards focus on the right measures• Scorecards encourage balanced

performance

Reasons: Scorecard Approach

• Scorecards point out what’s missing• Scorecards encourage good management• Scorecards communicate - they tell the story

Reasons: Scorecard Approach

• “Balances” people, performance and processes

• Links historical, current and future objectives• Brings intangibles into the performance

equation• Enhances focus on strategy and

performance culture

The Balanced Scorecard

An Example of a BSFinancial: Shareholder

Objectives:Realise stakeholder expectations/ liaison,Pricing, Resource utilisation, Optimise business opportunities: Optimise existing revenue sourcesTargets:Dividends, Sustained/contained tariffs,Benchmarks, Managed costs (resource utilisation)

Customer

Value Drivers: Price, Customer Care, Reliability

Objectives:Market-related pricing, Customer liaison (stakeholder engagement), Appropriate Customer services, Instilling a customer care cultureTargets:Surveys, Quality and frequency of contact, Identify and address customer needs

Processes

Value Drivers: Sustainability and Growth

Objectives:Optimise operational processes, Market segmentation, Identify new business opportunities in ports, Develop and grow infrastructureTargets:Benchmarked/best practice, Improvement, Worth of industries in Ports and Syncrolift

Learning & Growth

Value Drivers: Salary & Benefits, TrainingObjectives:Control and manage top management, Aligned HR strategy to Business Strategy, Benchmarking and best practice, Policies & procedures in place, Attraction of suitable skillsTargets:Established Performance Management, Potential assessment and development Plans, Skills Development Plan, Succession and Career Planning

Vision & Strategy

A Competency: SkillsKnowledgeTraits/Behaviours

Foundational Practical Reflexive

Skills Audit

Competencies

• Define competencies and a rating scale• Make it part of the PM process and

procedure (360o?)• Reward and recognise the desired

competencies

Competencies

Challenge 1:No alignment and a paper-driven exercise

Challenge 2:Inadequate links between pay and performance

Challenges

Challenge 3:Link consequence management and performance Challenge 4:Managerial capacity and capability

Challenges

Thank YouQuestions