INNOVATION IN PERFORMANCE MANAGEMENT

INNOVATION IN PERFORMANCE MANAGEMENT June 25, 2011

Discussion • Innovation as key to enhance performance • What is innovation • Need for innovation, performance management as an enabler • Performance Management - Context: • What is performance management. Need for performance management system • Distinction between performance appraisal and performance management • Issues and perceptions about performance management system • Perception of performance management • Understanding gaps • Key drivers in effective performance management system • Aligning employee performance to organizational goals • Role of motivation, metrics, culture and employee development in performance management • Summing up: • Practical aspects in making performance management work resulting in high employee performance

Innovation Innovation • Innovation – new ways of thinking and doing things • From Industrial age to information age to innovation age INDUSTRIAL AGE INFORMATION AGE INNOVATION AGE Steady, continuous change Unpredictable, discontinuous change • Predictable outlook • Customers have limited choices • Long life cycles • High entry costs to markets • Physical resources drive value • Innovative in internal • Unpredictable outlook • Customers have multiple choices • Short life cycles • Low entry costs • Intangible resources drive value • Innovation is collaborative 1980 1990 2000 2010 2030 (Jeremy Hope: Performance Management in the innovation age: An introduction)

Innovation Need for Innovation • Innovation as a necessity: • Change in market demands new ways of response • Apple, Microsoft, Google, Cisco, GE etc., • Airbus and Boeing. Airbus’s A380 as response to Boeing’s 747 • Need for speed and rapid response for threats and opportunities • Boeing’s change in policies and practices in execution of 787 dream liner

Context What is Performance Management Performance Management is a continuous process of driving employee effectiveness and facilitating his / her development thereby resulting in organizational success Need for Performance Management • Creates direction for the organization by aligning employee expectations with organizational needs • Clarity on employee deliverables, rewards and roadmap for employee development. • Facilitates continuous dialogue among manager, employee and the organization Performance Management

Context Performance Appraisal and Performance Management • Performance appraisal is a subset of performance management process. • While performance appraisal concentrates on setting / reviewing and rating of goals, performance management is a continuous process by linking other HR systems like rewards, career planning / development • Emphasis of performance appraisal is on performance aspect of employee while performance management concentrates on performance,social and motivational aspects and the impact they have on the organization

Perception Perception of Performance Management • Another HR driven activity forced upon managers. Tedious forms and templates with no concrete value outcomes. • A process which is often top down and has limited correlation to rewards and development • Outdated, mere formality and usually results in more heartburn. A process that creates rift within teams as it force-fits employee performance and does not account for emotions Understanding Gaps • Lack of alignment of what employee perceives / values against organizational realties / goals. • Performance management as a stand alone process without pre-requisite and integrating aspects like organization culture, employee motivation, behaviors etc.,

Drivers Drivers for effective Performance Management Quality of Performance Appraisal Organizational Culture Motivation and Rewards PERFORMANCE MANAGEMENT Managerial Capability Performance Metrics and Accountability Employee Development

Drivers Quality of Performance Appraisal • Alignment of employee goals with organizational objectives • Clarity of performance expectations and deliverables. Distinction between goals and activities • Continuous dialogue between manager and subordinate as against bi-annual formality

Drivers Goal Alignment: Top Down approach • What to do is already decided. Managers are only expected to implement • Not the best model for creativity and innovation Organization Goals • Organization dictates goals. A set strategy is translated into actions • What is good for organization is good for employee Unit Level Goals Unit Level Goals Team level goals Team level goals Team level goals Team level goals Individual Goals Individual Goals Individual Goals Individual Goals Individual Goals Individual Goals

Drivers Performance goal setting – Collaborative approach • Enhanced ownership and accountability • Facilitates participation in organization building Organization Goals • Employee has a say, give and take approach • Alignment of personal goals with broader objectives Unit Level Goals Unit Level Goals Team level goals Team level goals Team level goals Team level goals Individual Goals Individual Goals Individual Goals Individual Goals Individual Goals Individual Goals

Drivers Drivers for effective Performance Management Quality of Performance Appraisal Motivation and Rewards Organizational Culture PERFORMANCE MANAGEMENT Managerial Capability Performance Metrics and Accountability Employee Development

Drivers Motivation and Rewards • Motivation as a key element of Performance Management system. Employee satisfaction and commitment affect performance • Workplace system where employees have greater discretion to think, act and contribute to overall work. (Theory Y) • Inviting people to play bigger and important roles and explaining to subordinates “why something must be done” acts as motivating factor to enhance performance (Linda Hill, Harvard Business School) • Employees must believe that their effort will lead to overall success and in turn will lead to valued personal outcomes (Vroom’s Expectancy theory)

Drivers Motivation and Rewards • Role of intrinsic and extrinsic rewards in effective performance management system • Intrinsic Rewards as superior motivating tool • Growth • Recognition • Quality of work • Sense of achievement (Frederick Herzberg, “One more time: How do you motivate employees?” (HBR classic), Harvard Business Review, January 2003.)

Drivers Managerial Capability • Being a “right” manager more important than being “nice” manager • Ability of manager in having “continuous dialogue” is critical for success of performance management process • Manager as a “coach” rather than as “command – control” authority • Telling versus exploring • Directing versus facilitating • Authority versus Partnership (Performance Management: Measure and improve effectiveness of your employees: Harvard Business Essentials)

Drivers Employee Development • The concept of “Necessary and Sufficient conditions” in employee develop interventions • Traditional Training approach versus “decision science” (John W. Boudreau and Peter M. Ramstad, Tapping the full potential of HRIS: Shifting the HR paradigm from Service Delivery to a Talent Decision Science”) • Individual development results in higher motivation, leading to enhanced performance resulting in overall organizational effectiveness • Necessary and sufficient conditions for individual development Mary Dee Hicks and David B. Peterson, “The Development Pipeline,” Knowledge Management Review July – Aug 1999

Drivers Drivers for effective Performance Management Quality of Performance Appraisal Organizational Culture Motivation and Rewards PERFORMANCE MANAGEMENT Performance Metrics and Accountability Managerial Capability Employee Development

Drivers Performance Metrics and Accountability • Lack of transparency, inconsistency in rakings / ratings major source of demotivation • Measure what is “critical” and not what is “easy to measure” • Ex: Bottom line performance as a goal but compromising integrity as a value? • Measure those which have maximum impact and effectiveness on performance rather than generic measures • Ex: Turnover metrics. Importance of turnover of experienced and critical role holders against overall turnover • Importance of “means to achieve the goals” in addition to “end objective” • Critical qualitative metrics for consideration • Behaviors and competencies • Values of the Organization • Nurturing performers and creating leaders for the future

Drivers Organizational Culture • Culture as “taken for granted, shared, tacit ways of perceiving, thinking and reacting” (Edgar Schein) • Culture as “building block” to organizational performance and includes norms, values, beliefs, assumptions and behavior pattern of employees • Culture as enabling factor for performance • Empowerment as against command and control • Means as important as outcomes • Team versus individual focus • Customer centric as against internal focus

Summing up First Steps in making Performance Management Work Champion culture of trust and empowerment with clarity on deliverables and accountabilities Quality of Performance Appraisal Encourage regular conversations and dialogue between manager and employee Motivation and Rewards Organizational Culture PERFORMANCE MANAGEMENT Focus on intrinsic aspects of employee motivation and create individual plans in partnership with line manager Understand which programs have maximum impact on performance and measure its impact Managerial Capability Performance Metrics and Accountability Employee Development Be a coach to line manager. Make them accountable for “people management” outcomes. Nurture leadership

THANK YOU

INNOVATION IN PERFORMANCE MANAGEMENT