Archive for the ‘Performance Management’ Category
Employee Potential in the Eye of the Beholder – Part 1
Posted by: grandma in Leadership, Performance Management, Succession Planning, Talent Management on July 11th, 2010
One of the challenges companies face today is managing their employee turnover, specifically for key positions in the organization. A key position is defined as a critical role that would adversely affect a company’s operations if it were vacated. These positions are typically leadership or managerial and make up between eight and twelve percent of all positions (Berger, 2004). When an employee vacates a key position, via unexpected leave, retirement or promotion, an organization ideally backfills the position with a cadre of highly-qualified candidates ready to replace that person. Human Resource (HR) departments plan for succession to hedge against the risk of departure. Hence, companies cannot afford turnover of high-potential employees in line for key positions.
Like leadership, potential has as many definitions but is even more ambiguous. These definitions range from “inherent capacity for coming into being” to a “latent excellence or ability that may or may not be developed.” Leaders need to start somewhere; their entrance into the realm of leadership usually begins in a front-line management position. One of the key criterion in selecting a leader is the anticipation of their success to lead their team. In essence, what is their leadership potential? Most organizations measure potential by intuition or “gut feel.” The problem with this informal measurement is that it is often wrong. Society is littered with poor managers hired by people who thought the person had leadership potential. The fallacy in their selection is based on past performance, not on their potential to be a good leader. These are generally the data points that create the ubiquitous “9-box” companies use to slot future stars. Performance is regularly measured, albeit inexactly. Potential is not something that is actively measured and companies do not utilize the proper research instruments to measure it.
A Manager Provides the Right Antecedents for Employee Success
Having the proper antecedents for leadership development will likely produce better leaders. Malcolm Gladwell (2008) extensively analyzes the conditions that make people successful in his book “Outliers.” Date of birth for junior hockey players, affinity relationships for certain professions like law, and native languages assisting math skills for Asian children are all foundations that provide better success. These antecedents are harbingers of success and set the stage to bring out the best in their subjects. Silzer and Church (2009) discovered that an employee’s potential can be stifled by his or her immediate manager by not providing the right antecedents for high performance. Hence, a good manager provides the right conditions for an employee to realize his or her potential.
In part 2 of this post we will look at ways of identifying high-potential outside of past performance based on two predictive attributes: self-efficacy and mindset.
Broaden Your Talent Pool – Lessons from “Undercover Boss”
Posted by: grandma in Employee Development, Employee Engagement, Leadership, Performance Management, Succession Planning, Talent Management on February 8th, 2010
There is an excellent CBS reality series on TV right now called, “Undercover Boss.” Executives from Waste Management and 7-Eleven go undercover and pretend to be entry-level employees. They experience what the front-line employee experiences.
Too often I encounter companies that completely ignore the hourly or salary non-exempt employee in the field when it comes to leadership development. (See previous post) This is easily discovered in the systems they own to enable this process. Companies don’t acquire software for the entire employee population. Sadly, and this really is the true divider, those employees with ready access to the internet get included. This is not a legitimate trigger.
The evolution of Talent Management has not evolved to every employee. This conundrum is often encountered in retail, manufacturing, oil and gas, hospitality and utilities where there is large percentage of skill workers. Most of the workgroups are out in the field, detached from corporate. High-turnover compounds the issue because companies are disinterested to go through the pain of measuring someone who is likely to leave within a year.
– How does a roustabout in an oil field get recognized as a high-potential when no one is looking at him?
– How does the retail employee get recognized when no one measures her?
– How about the hotel clerk who performs exceptionally high for the competencies required for the position?
Joe DePinto, CEO of 7-Eleven, encountered a high-potential first hand in Igor Finkler, a midnight fresh food delivery driver in Lewisville, TX. DePinto recognizes him for his energy, positivity, and enthusiasm – he wants more people like Igor working for 7-Eleven. (See the video here)
So how do you measure the potential of an employee like Igor? This is where I think the ERP vendors like SAP and Oracle have major advantages. They have way more touch-points into an employee than a niche talent vendor through core HR, portal, and self-service pages. Since they own the core HR system, they have the largest window from which to measure an employee. Having access to the internet shouldn’t be the gateway into the talent pool. You certainly shouldn’t have to send the CEO undercover to find a high-potential. I hope this series will open executive eyes to the potential of someone in these ranks.
Employee Engagement – Causal effect on Performance and Turnover?
Posted by: grandma in Employee Engagement, Performance Management, Recruiting, Talent Management on January 10th, 2010
Engagement has almost as many definitions as leadership. The one I like best was developed by Kevin Rutherford, principal of PeopleMaxHR, an HR consulting firm: The level of discretionary effort one commits on a consistent basis based on their connection to the job, their peers, their boss, and the organization. Note the modifier here: discretionary effort. This is the amount of “stored” performance to go above and beyond the minimal requirements of a position.
Employee engagement is the one factor that I believe has a causal relationship on performance. Simply put, a disengaged worker will underperform. The Corporate Executive Board did an engagement survey in late 2008 and found that engagement decreased by whopping 18% – this translates into a staggering 3-4% drop in productivity. They also found that 1 in 4 high-potentials planned on quitting their job in 2009. Now more than ever is the time to engage your employees to induce performance.
Engagement effect on Turnover
Kelly Morgan did some great work in an unpublished manuscript on people who abandoned good jobs in thriving companies (Helgesen, 1995). She showed that they are the highest risk of leaving because they can become very frustrated with their manager, peers and the organization. They would rather face the uncertainty of leaving their job than stay in the position that is not autonomous and meaningful. When you are managing your talent pools, you should measure engagement, and compare this data to every high-potential. Every employee that is high-potential should be at risk for leaving the company. Tower Perrin corroborates these findings as well. Their surveys found that a highly engaged employee is less likely to consider other offers than a moderately engaged one (31% to 47%).
Talent Management is littered with strong correlations that demonstrate the benefits of an optimized, integrated system of strategic employee management. Clearly, employee engagement is one factor that should be measured and monitored.
Motivation: Reinforce with Points, Reward with Money
Posted by: grandma in Employee Engagement, Incentive Compensation, Performance Management, Talent Management on June 24th, 2009
Behavior is a function of its consequence. Employees tend to focus their activities on the things with the highest pay-off. For these activities, it is important to show the instrumentality between a goal achieved and reward earned. In other words, what will the employee receive as a result of their achievement? The biggest difference between an employee reward and a reinforcer is the immediacy of the consequence. Rewards tend to be latent and monetary; Reinforcers need to occur daily and shape behavior as it happens. It is much better for the manager/employee to correct problems as they happen instead of waiting for the annual review.
One issue with focal/anniversary reviews is the goal period. Focal reviews tend to measure on a yearly or 6 month basis. The pay-off of the reward is too far in the future. The certainty of getting the reward needs to be present in order for the program to be successful. If your company does not have a history of celebrating successes, then you will be challenged to put forth a credible reward system.
So how do managers motivate their employees?
Your manager needs to ask these 3 questions of his/her employees to motivate them:
1) Do you anticipate your employee being satisfied with achieving the goal? (This is Valence – or anticipated satisfaction) – If this isn’t present than the activity is a non-starter for them.
2) What will he/she receive when it is achieved? (This is Instrumentality) – This is where a point/reward system comes in. What will I get if I achieve? This is the key factor of the 3.
3) Will the effort put forth actually yield achievement of the goal? (This is Effort Expectancy) If the employee knows that extraordinary effort is required for little payback, then they are not likely exhibit behaviors to achieve the goal.
(abridged from Organizational Behavior, Securing Competitive Advantage, John Hollenbeck and John Wagner, 2005)
So how do you reinforce behaviors that will accomplish your motivational techniques? Here is one system that your company can implement:
Establish a Company-wide Point System
Establish a point budget. Just as monies are allocated for budgets, management should set a point budget based on the available rewards. These allocations happen just as a budget for merit increases would. Points can be allocated using your incentive compensation/salary planning solution. Give each of your front-line managers a bank of points, much like a merit budget, to be used to divvy up among employees. Points should be given based on the employee performance for the month. Increasing the frequency of the consequence will lead to daily/weekly performance improvements.
Be as creative as you want here. Assign a point total to each reward. Since reinforcement and rewards are highly individualistic, you may want to give managers the flexibility to create their own. As employees accumulate rewards, they can cash them in for one of the services provided in your reward point catalog:
• Cooking classes
• Golf membership for one year
• Free Spa day
• Gym membership for one year
• Titanium DirecTV package
• Housecleaning for one year
• Dog boarding for one year
• Daycare for one year
• Lease on an exotic car
• Manicure/Pedicure
• First class upgrade on all business flights
• Free car wash
• 2 round-trip airline tickets
• Day-off with pay
• Week off with pay
• Lunch with the CEO
• Golf with the CEO
etc….
I think you get the picture. You should also create rewards that have no added cost to the company. Steve Kerr, former GE SVP of HR, has written extensively on cost-neutral rewards. He advocates that these types of rewards should be visible making them highly powerful. Monetary awards don’t give companies that luxury.
Unions, EFCA and Company Performance – Part 2
Posted by: grandma in Compensation, Employee Engagement, Goals, Performance Management, Talent Management on March 27th, 2009
One fundamental issue with anniversary or focal performance reviews is how often the frequency of behaviors are measured. For unions, the frequency of measurement should naturally go way up, but for the wrong reasons. These measurements will tend to reflect whatever negative behavior occurred. There is less incentive for the manager to reward good behavior because he/she can’t – that particular employee gets lumped into a group where discretionary effort is not rewarded properly. So how do companies improve performance in a union environment without a proper reward system?
Here are 3 techniques that managers in union environments can utilize to improve performance in their work group:
1. Aligned Goals
2. Grandma’s Law
3. Reward Point System
Aligned goals are one way to unite unionized workgroups. Missions of both the union and the employees should be the same. These goals elements should be the primary leverage points in an employment contract. Always ask how union demands align with the goals and the core values of the company. If they don’t, the demand is a non-sequitor. Aligned goals will make the employee feel their activities are part of the overall strategy. They also erase the divide between the competing interest of management and unions.
Managers can use techniques like Grandma’s Law to influence behavior. Watch what activities your employees do when given a choice. Make those activities contingent upon the completion of tasks that are necessary for their position. Aubrey Daniels has some great examples of this in his book on performance management. You will find that production will go way up when an employee knows they have to complete Task A in order to move on to the more enjoyable Task B.
Utilize a point system versus monetary incentives – some would argue that point systems do way more to shape behavior than any other reinforcer. Money tends to be a reward for something but generally isn’t a reinforcer of behavior. Earning points for many people is a badge of honor. Look no further than an airline point system – anyone that has flown over a million miles on American has bragged about it. There are several companies that offer merchandise and experiences based on a point system – it is also easy to create your own but be sure you have the individual in mind when doing so.
Unions , EFCA, and Company Performance – Part 1
Posted by: grandma in Goals, Performance Management, Talent Management on March 15th, 2009
Last week marked the first debate on the polarizing bill, Employee Free Choice Act or EFCA. This bill basically makes it easier for employees to unionize. If it passes, America will likely see a surge in the number of unions. Unions counter many of the benefits that a best practices talent management system would provide. One of those benefits is the increase in performance from an aligned goal-setting and performance process. Unions normalize high performers and hide the dead wood in organizations. Poor performers are rewarded just the same as high-performers. Unions are the antecedent that makes management behave antagonistically. There is one major reason to have a performance management system in a union environment: compliance.
Performance Management for compliance is one business reason that companies should conduct performance reviews. Having this system will mitigate the risk of a lawsuit for wrongful termination. Companies that don’t conduct these reviews are at a steep disadvantage if they cannot track poor performance or incidents of insubordination. This isn’t a great reason to ramp this up because you are basically buying a performance system to reduce your insurance premium.
Here are two recent cases for wrongful termination where the judgment against the company was greater than $100,000.
1) Former County Health Clerk
2) Former Recreation Manager
This would easily justify the cost of an automated performance management solution.
Make Your Goals “Attainable”
Posted by: grandma in Goals, Performance Management on March 8th, 2009
The acronym SMART (Specific, Measurable, Attainable, Realistic, and Time-Base) is pretty handy when creating goals. To me, realistic and attainable are interoperable. The “A” and the “R” are basically the same thing. SMART sounds better than SMAT so I propose we can change the “R” to “Rewarded”. The instrumentality of the goal should be built into the goal – “If I do this, what will I receive in return?” (see Grandma’s Law) The biggest mistake you can make when setting goals is to make them unattainable. The best mistake that you can make is to set goals too low. Here is a great article touting this practice. Setting a goal too high will actually decrease performance because the end is too far in sight. This is tantamount to a “stretch goal”. It indicates that there is discretionary effort to obtain the goal. A manager will want to get the best effort out of his or her employees – do they really want them to hold something back?
There has been a lot of press lately about the downside of goals. Here is a recent Harvard Business Review article titled “Goals Gone Wild”. The major item that the author failed to address is the root cause of a poorly designed goal setting process. Organizations as a whole don’t do a good job of this. Goal-setting should be embedded in a company culture and how to set goals should be required learning activity by all employees. Too often, required learning centers on compliance versus development.
Transactional Performance is True Performance
Posted by: grandma in Compensation, Incentive Compensation, Performance Management on February 14th, 2009
If your retail manager put $500 on the table and told you it was yours if you picked up his dry-cleaning, you would probably sprint to your car. Pure-play talent management vendors like Success Factors, Authoria, and Halogen sell performance management software that manages an employee’s focal or anniversary review. There are a lot of advantages to this, but I don’t think these types of reviews truly improve performance like a transactional system would.
Why? Call it PIC.
Aubrey Daniels has done some great research on motivation and consequences in his book, Bringing out the Best in People. Daniels uses the above abbreviation – Positive, Immediate, and Certain – in the context of a positively motivated consequence. Conversely, he argues that the same behavior can result when a negative motivator, NIC, is applied. “I will fire you if you don’t get my dry-cleaning in the next 10 minutes.” Daniel’s research shows that NIC will work to get results, but only in the short-term. You’ll get pretty tired of your boss if he continually brow beats you to death.
There are several companies that sell transactionally based performance management systems, but they do not classify them as such. Callidus, Xactly, Synygy, and Oracle all sell systems coined Sales Incentive Management (SIM). Oracle at one time called it Enterprise Incentive Management (EIM), but these niche vendors and Gartner defined the market differently so SIM stuck. I bet it will go back to EIM in the near future. These incentive systems apply to many workgroups beyond just sales. The biggest difference between a reward and a reinforcer of behavior is the immediacy of the consequence. To me, these vendors have products that enable “Pay-for-Performance” because they do it transactionally.
Why?
1) Subjectivity is left out – how many credit card applications did you sell today?
2) Ratings of employees are not inflated – “meets standards” doesn’t have a negative connotation when what you produce really matters.
3) The frequency of the behavior is measured more often. Focal reviews tend to measure no more frequently than quarterly or yearly in most cases.
Let’s look at “I”
“I” is for immediate. The $500 would be paid on the spot after the employee returned the boss’ dry-cleaning. He could have been fired as well if he didn’t get it (NIC). The converse of this is “Future”. Much like focal performance reviews, a raise in 12 months doesn’t exactly motivate someone to do something in the present. Ask your commissions only sales force if the want to be paid immediately and I doubt any of them would say no. MaryKay is a great example because they pay their independent consultants when the transaction is conducted.
Let’s look at “C”
“C” is for certain. The employee knew he was going to get the money because it was laid out in front of him. The converse to this is obviously uncertain. Most companies give an average annual raise of 2.8%. No one is going to bust their butt for a nominal raise like that. Additionally, companies don’t exactly cascade merit increases down to the individual. Most do it by group, equally, so the pot of money is only so big for high performers.
Where does this leave pure-play Talent Vendors? They still measure competencies better than everyone else, and the EIM vendors can’t touch them on this functionality. A bank teller won’t have any transactional goals, so how can they improve the teller’s performance? Measure him or her on competencies instead. Who wants a teller that gives you your money fast but is a curmudgeon in the process?
Note: An interesting observation Aubrey Daniels’ book and his other on Performance Management is that Human Resources is never mentioned. Performance Management should be owned by management and enabled by HR.
Don’t Ignore the Skill Worker
Posted by: grandma in Employee Development, Employee Engagement, Performance Management, Succession Planning, Talent Management on February 11th, 2009
I’ve consulted with 100’s of companies on their talent management system and the majority have one thing in common when it comes to the scope of their project: they ignore the skill worker. Typically the only workgroup in scope for the talent project are the salaried employees or corporate employees. Let’s remember one of the key reasons why we do a performance review: to improve the relationship between the manager and employee. Let’s take a retail company. Retail is very heavy on the skill or hourly worker. Most retail companies have turnover in excess of 50% annually. This is one of the reasons corporate ignores this group in the talent process. Why should we pay attention to them if they always leave? To me, this is a very poor excuse not to look at the root cause of problem. Everyone knows that turnover is a huge cost to an organization so shouldn’t you do the things necessary to reduce this?
• Why don’t you have these employees fill in their Talent Profile to see their skills beyond their hourly position?
• Why don’t you do employee development to improve engagement? At least you will convey to them that their development is important and that you care about their career path – at your company or elsewhere.
• Why don’t you rate them on the competencies required for the position? What affect does it have on the overall business if 50,000 retail employees moved from a meets to exceeds rating on “Interpersonal Versatility”?
Talk to your IT department on how to address the worker that doesn’t have access to the on-line Talent System. There are plenty of ways to get their information into the system – not the least of which is a document management system (to lift the ratings of competencies or to pull answers yes/no questions to career questions), outsourced data entry, or kiosks. Make sure your manager is involved face-to-face in the talent process.
10 Things Wrong with Focal/Anniversary Reviews – Part 2
Posted by: grandma in Performance Management on February 8th, 2009
6. Stack ranking and performance distribution – This is probably the worst feature of any performance management technology. Stack ranking employees will immediately send collaboration into a downward spiral. High-performance between two employees is not mutually exclusive. If you do stack rank, then do it at the director level or above (assume 1 manager manages 10 managers). Out of 1,000 people, you’re likely to have some dead wood in the talent pool.
7. To many steps in the workflow – Anything beyond 8 steps in a workflow will make the process too cumbersome. Workflow would be defined as anything that would change hands in a manual process. Make sure that most steps are between employee and manager.
8. Conducted on-line and not in person – In one of the companies I used to work for, they actually calculated ROI for an on-line performance management based on time reduction of this process (i.e. going from an hour to 15 minutes). This was their pitch to try and push this through internally. This is actually a ridiculous calculation because the most meaningful thing about a performance review is the manager/employee interaction. Will your CFO really buy off on this reduction in time? No way – this would be the ultimate soft ROI.
9. The “Recency” Affect of ratings – In my experience, most companies don’t set goals and don’t measure employees based on these. And if they do, they set and measure them at the end of the fiscal year. What good is that? This is performance management because HR says you have to do it. This is a Fundamental Attribution Error.
10. Any peer review that would affect an employees score – I think this is well understood by HR but not by the business. Peer reviews should only be done for development purposes. They should be done anonymously because the feedback will be honest if there is no retribution.