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Performance Management Andre O’Callaghan October 2008
Introduction • Since my last report, this employee has reached rock bottom and shows signs of starting to dig. • I would not allow this employee to breed. • Works well under constant supervision and 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 hasbeen, but more of a definitely won’t be.
Some Perspectives • • 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
Define Performance Management • 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
Process • • Planning Performance Maintaining Performance Reviewing Performance Rewarding of Performance
A Model Reward Performance: - Link to pay - Results = performance Planning Performance: - Setting objectives - Outlining development plans - Getting commitment PERFORMANCE MANAGEMENT PROCESS Reviewing Performance: - Formal reviews - Assess against objectives Maintaining Performance: - Monitoring performance - Coaching - Feedback Business strategy, stakeholders, key economic wealth drivers
Planning • 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
The Challenge of Alignment • 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.
A Model for Establishing/ Building an Aligned Performance Management Process ORGANISATIONAL LEVEL INDIVIDUAL LEVEL Deriving key value drivers from Strategic direction and KPA’S Determining and assigning KPA’s Determining organisational objectives Determining and assigning individual objectives Execution Measuring & Evaluating performance against organisational objectives Measuring, evaluating and rewarding Performance against individual objectives Reassessing and adjusting business strategy Reassessing KPA’s and adjusting Objectives to reinforce strategy Review
Setting Objectives • • • 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
The Measurement • Use a good-practice rating scale • Evidence-based • Both managers and employees - active participants • Mutually agreed • Usually – bell curve
Benefits • • • Integration Open Communication Improved Performance Training and Development Clarity of Standards/Requirements Placement of Individuals
Benefits • • Increased Objectivity Remuneration Promotability Career planning
Success Factors Implementation • If you are not managing performance, what are you managing? • Some key building blocks Feedback Reward & Compensation Competencies Training Review Process Goal Setting Process Design Strategy Focus
Success Factors Implementation • • Relevance Reliability Discriminability Freedom from contamination Practicality Acceptability Legal compliance
Coaching • Coaching & mentoring are crucial components of the Maintaining of Performance Phase Planning Performance: - Setting objectives - Outlining development plans - Getting commitment Reward Performance: - Link to pay - Results = performance PERFORMANCE MANAGEMENT PROCESS Reviewing Performance: - Formal reviews - Assess against objectives Maintaining Performance: - Monitoring performance - Coaching - Feedback Business strategy, stakeholders, key economic wealth drivers
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 vs Mentoring vs Counselling vs Discipline?
Why do Managers Fail to Give Feedback? Group Discussion
Why do Managers Fail to Give Feedback? • • • Lack of confidence Avoiding confrontation Do not have time Lacking internal support Others?
A Model for Performance THE BECKS MODEL • Behaviour • Environment • Clarity • Knowledge/Skills
Good feedback is … • • • Descriptive and specific About something that can be changed Timeous Tactful Confirmed
Childhood and Feedback • What will other people think? • If you cannot say anything nice, do not say anything.
Impact on Feedback
Feedback and Generations Traditionalists Baby Boomers Generation X Millennials
The ECC Model for Feedback 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)
Good Performance Feedback – An 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 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 hourturn-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.
A Good Review Welcome Check 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
Performance Audits Key Topics • • • What do you audit? How do you audit Performance Management? What can you expect?
Performance and Reward 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
Drivers Attraction & Retention of Talent
Performance and Reward Dilemma’s in reward: • Objectivity • Transparency • Affordability • Baggage
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
Link to Pay Why does it often fail? • Level of reward not proportionate to effort • Resistance to change • Union perceptions and involvement
Performance and Reward A Reward Matrix Rating 25 th Percentile 50 th percentile 75 th Percentile 5 17% 15% 10% 4 15% 12% 8% 3 12% 10% 6% 2 0 0 0 1 0 0 0
• Guaranteed Package • Long-Term Incentives X X Skills Performance X Short-Term Incentives • Retain REMUNERATION COMPONENT: Attract Performance and Reward X X X
The Psychology of Incentives KEY IMPACT Fixed Package Variable Package Hygiene Factors Motivational KEY SECONDARY OBJECTIVES • Internal Equity Competitive • Cost in Market Management • Flexibility Drive Behaviour • Return on Bottom Line • Reward specific behaviour/ results
What is Talent? 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
Why is it important? PERFORMANCE PROFIT PASSION POTENTIAL
Key Elements Review
Link to Training & Development Desired performance Measurement Actual performance Development Vision Mission Strategy Value Drivers
SMMEs 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
Balanced Scorecards (BS) Challenges organisation’s face
Challenges Faced by Organisations Making a Case for a Balanced Approach Vision Barrier Only 5 -10% of the work force understand the strategy People Barrier Only 25% of managers have incentives linked to strategy 9 out of 10 companies fail to execute and track strategy 60% of organisations don’t link budgets to strategy Resource Barrier Management Barrier 85% of executive teams spend less than one hour/month discussing strategy
What is Balanced Scorecard? 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.
Four Perspectives of a BS VISION, MISSION & VALUES Profitability, Growth, Sales & Cash Flow FINANCIAL FOCUS CUSTOMER FOCUS EXTERNAL INTERNAL PROCESSES PEOPLE FOCUS INTERNAL Retention, Market Share, Service, Etc Response time, Costs, Effecient, Productivity Skills, Learning, Development, Sustainability The Balanced Scorecard converts strategy into an Integrated System defined across Four Business Perspectives
Reasons: Scorecard Approach • • 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
The Balanced Scorecard • “Balances” people, performance and processes • Links historical, current and future objectives • Brings intangibles into the performance equation • Enhances focus on strategy and performance culture
An Example of a BS Customer Value Drivers: Price, Customer Care, Reliability Objectives: Market-related pricing, Customer liaison (stakeholder engagement), Appropriate Customer services, Instilling a customer care culture Targets: Surveys, Quality and frequency of contact, Identify and address customer needs Financial: Shareholder Objectives: Realise stakeholder expectations/ liaison, Pricing, Resource utilisation, Optimise business opportunities: Optimise existing revenue sources Targets: Dividends, Sustained/contained tariffs, Benchmarks, Managed costs (resource utilisation) Vision & Strategy Learning & Growth Value Drivers: Salary & Benefits, Training Objectives: Control and manage top management, Aligned HR strategy to Business Strategy, Benchmarking and best practice, Policies & procedures in place, Attraction of suitable skills Targets: Established Performance Management, Potential assessment and development Plans, Skills Development Plan, Succession and Career Planning Processes Value Drivers: Sustainability and Growth Objectives: Optimise operational processes, Market segmentation, Identify new business opportunities in ports, Develop and grow infrastructure Targets: Benchmarked/best practice, Improvement, Worth of industries in Ports and Syncrolift
Competencies A Competency: Skills Knowledge Traits/Behaviours Foundational Practical Reflexive Skills Audit
Competencies • • • Define competencies and a rating scale Make it part of the PM process and procedure (360 o? ) Reward and recognise the desired competencies
Challenges 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
Thank You Questions