Last class: Open discussion

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) Last class:Open discussion EMBA 60616 September 28, 2012

2. 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? See Stewart, Gruys, and Storm (2010) review, posted on website

3. Performance Evaluation 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

4. Performance Evaluation • A quarter of Fortune 500 companiesuse 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

5. Performance Evaluation • 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)

6. 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? See Stewart, Gruys, and Storm (2010) review, posted on website

7. Variable Pay • 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?

8. Variable Pay • 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?

9. Variable Pay

10. Variable Pay

11. Variable Pay • 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

12. Variable Pay • 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?

13. Generational Values Differences • 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?

14. Generational Values Differences • 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

15. Generational Values Differences Source: Cennamo & Gardner (2008) 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

16. Generational Values Differences Source: Twenge et al. (2012) Note: Individuals were surveyed when in high school

17. Generational Values Differences 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.

18. Generational Values Differences • 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?

19. Managing Derailing Employees • 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?

20. Managing Derailing Employees • One of biggest problems with derailing employees is distorted self-perceptions

21. Managing Derailing Employees Source: Shipper & Dillard (2000) Notes: Sample=1,035 middle managers Rating scale: 1=extremely low extent; 7=extremely high extent

22. Managing Derailing Employees • 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?

23. Essential Management Skills • 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

24. Predictors of current job performance and designation of high potential of 1,100 managers in 21 countries Source: Spreitzer, McCall, & Mahoney

25. Essential Management Skills Source: Shipper & Dillard (2000) Notes: Sample=1,035 middle managers Rating scale: 1=extremely low extent; 7=extremely high extent

26. Essential Management Skills 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

27. Essential Management Skills • 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

28. Team-Based Leadership • 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?

29. It’s been a pleasureand an honor:Keep in touch! EMBA 60616 September 28, 2012