Is Employee Performance Management Performing?

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


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


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%)


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


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.


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


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%)


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


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.


Aberdeen Comparative FrameworkThe

Deans‘

List

Laggards

Best in Class

IndustryNorm

AberdeenGroup • 8


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


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


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


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


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


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.



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.


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



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.


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.



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.


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.



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 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.


30


• 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…



31


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


32


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


• In-House/ASP services

• Succession Planning

• Talent Management

• Development Management

• Resumes

• Executive Assessment

• Risk Management



• Development Planning

• Development Tracking and Review

• Competencies

• Coaching Management

• Teambuilding

• Interactive e-Learning

• Executive Assessment

• Executive Coaching



Pilat HR SolutionsPilat HR Solutions

Compensation Compensation -- StaffingStaffing



33


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


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Performance Management – A Typical Cycle

INFLUENCE

PLAN &

ALIGN

ASSESS

LEAD

Typically givenhigh priority

Typically givenlow priority



35


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.


36


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



37


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


38


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



39


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


40


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)



41


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


42


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!


February 8, 2005

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Is Employee Performance Management Performing?