are you getting the most from your talent pm piece final

7/27/2019 Are You Getting the Most From Your Talent Pm Piece Final

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Are you getting themost from your talent?Understanding and overcoming

the common pitfalls inperformance management

October 2012

At a glance

Lack of organizational

alignment around

performance management

programs often leads to

employee dissatisfaction

and disengagement

with the program.

Companies should decide

on a clear performance

management strategy

and not mix and match

approaches.

By answering pivotal

questions around

program goals and

strategy, company culture

and necessary change,

organizations can build farmore effective performance

management programs.


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2 Are you gett ing the most f rom your tal ent?

Todays business leaders, HR departments, managers and employees all have

different expectations of performance management programs. This lack of

alignment means that no ones needs are being met. Instead of inspiring stellar

performance, these programs are achieving quite the opposite: frustrating

employees and wasting managers time and budgets.

To avoid these disappointing pitfalls and to get the value they expect from

their performance management programs, companies need to answer three

pivotal questions:

1. Why do we want to have a performance management program?

2. Which performance management strategy best meets our needs?

3. How can we systematically implement each building block of our

selected strategy?

Instead of inspiringstellar performance,some programsare achieving quitethe opposite

Introduction

For performance management to be effective, senior managementmust make clear choices regarding the objectives behind performancemanagement and the level of effort spent on these programs. Withoutthat clarity, organizations are likely wasting precious time and money.

Program participation will be low, employees will be dissatised, and

managers will be ill prepared to guide their teams. Once alignmentis established and objectives communicated, however, organizationswill be ready to build performance management programs that are t

for purpose.


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3Understanding and overcoming the common pitfalls in performance management

Companies set up performance

management programs for a range

of reasons, from backward-looking

evaluation of past performance to

driving innovation and team behavior.

Why do we want to have a performance

management program?

1 PwC research, 2012.

Figure 1: Performance management curve. The size of the circles indicates the

number of U.S. companies at that point on the curve by order of magnitude.

The rationale for the performance

management program determines

where a company falls on the

performance management curve

in Figure 1.1

Manage

disciplinary and

low performance

issues

Determinecompensation

awardsand incentives

Identify and

engagetop talent

Drive long term

talent development

Serve as transformational

agent fororganization

Many organizations

Inconsistently administered

across the organization

Many organizations

Seldom based on a robust

competency framework

Some organizations

Yield varying results based

on strength of participating

leaders and consistency of

established competencies

Few o rgan izations

Goals are aligned to corporate

strategy and cascade to rest of

the organization

Few o rganizations

Serves as change catalyst

for the organization that

helps drive implementation

of organization initiatives

Reactive

Proactive


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of this problem. Less than half (45

percent) of employees in one survey

said their managers feedback at the

annual review was fair and accurate,2

and in another, more than half the

respondents felt their managers were

ineffective at driving performance.3

Underscoring this is the fact that

managers devote up to 20% of their

time on coaching and performance

reviews,4 but are many times

ineffective in this role. In one survey,

65 percent of senior HR leaders cited

managers ability to coach as their

top performance gap.5

These results point to the importance

of clearly dening and communicating

the rationale for the performance

management program. Lofty messaging

about transformation and culture,

coupled with a seemingly arbitrary

evaluation process and poorly delivered

coaching and feedback, will inevitably

lead the workforce to distrust both

the program and the organizations

commitment to their progress.

Most companies adopt a reactive

posture and use annual performance

reviews to inform decisions regarding

incentive compensation and

promotions, and accumulate data

for potential disciplinary actions

(left end of the curve in Fig. 1). True,

these programs are reactive, yet there

is nothing inherently wrong with

their limited scope if the companys

needs are met. Frustration and loss of

alignment across stakeholders often

occur because organizations:

Inconsistently communicate or

apply the program principles

Claim to be higher on the curve than

they really are

Fail to build the capabilities required

in their leaders and managers

Recent studies highlight the magnitude

2 Cornerstone OnDemand/Harris 2012 US Employee Report, December 2011.3 Sibson Consulting, 2010 Study on the State o Perormance Management, October 2010.4 PwC research, 2012.5 Sibson Consulting, 2010 Study on the State o Perormance Management, October 2010.

Lofty messaging,

coupled with poorcoaching andfeedback, willinevitably lead theworkforce to distrustboth the program andthe organizationscommitment totheir progress


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Take a company that has been

successful at raising workforce

participation and involvement in

a performance rating system, as in

the Rater strategy. Now, that same

company is interested in moving up thecurve toward a proactive performance

management strategy. How can it

do that? The answer is to agree on

the capabilities its people need,

understand workforce motivation

and coach employees through

ongoing dialogue and feedbackall

components of the Driver strategy.

PwC has identied three performance

management strategies, each building

on the foundation of the previous

strategy. Companies can use the

building blocks to identify gaps in their

current programs as well as to gureout how to systematically move up

the performance management curve

(see Figure 1). Right now, a primary

reason behind the frustration with

these programs is that companies

mix and match building blocks from

different levels without setting a solid

foundation rst.

Which performance management strategy

best meets our needs?

Individual &Team-based

BusinessLead

Motivation &Rewards

OngoingDialog

Process &Technology

ParticipationProgramRationale

PerformanceObjectives &Evaluation

Capabilities& Skills

Transformer

Driver

Rater

Transformer: To boost team performance.

Used as a catalyst f or broad organizational

change initiatives

Driver: To improve individual employee

performance and retention, and to accelerate

development of employee capabilities

Rater: To def ine objective measures of

employee performance and effic iently assign

basic performance ratings, of ten linked to

compensation

Focus

Figure 2: Three performance management strategies. The Driver and Transformer

strategies build on the Rater strategy.


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Integration. Raters typically

integrate performance management

and compensation processes,

and not much more. Drivers and

Transformers require a rm grasp

of employees capabilities and skills

and solid integration with learning

and development processes (at a

minimum) as well as with recruiting

and succession management. As

the focus on boosting individual

and team performance intensies,

talent analytics becomes an

essential capability.

Effort and cost. Relativelyspeaking, the Driver and

Transformer strategies require a

larger investment in human capital

(e.g., enhancing the communication

and coaching skills of leaders and

managers), far more time and

greater technological sophistication

than the Rater strategy. None

of the strategies is inexpensive.

In fact, all can be expensive and

time-consuming. This raises the

importance that companies answer

the fundamental question, Is

the time, money and effort worth

the outcome?.

Before selecting a strategy, companies

need to recognize and internalize the

signicant differences among the three

strategies in the following areas:

Ownership. HR typically owns the

Rater strategy. With the Driver and

Transformer strategies, the business

is increasingly in charge. To boost

team performance (Transformer)

at one high-tech company, the CEO

notes that we had to embrace

the importance of talent and culture

in achieving goals. It is not HRs

responsibility, but the business

leaders responsibility. And that iswhere the CEO has a role to play.6

Communication. Raters may

have only one or two formal touch

points each year. Drivers and

Transformers establish a much

richer, more frequent dialogue

with their employees that includes

both formal and informal elements

of coaching and feedback. Peers,

mentors, and other colleagues

may be involved along with anemployees direct manager.

6 Bill Roberts, Juniper Networks is turning words on the wall into behaviors in action, HR Magazine, March 2012.

Companies

must answer thefundamentalquestion, Is the time,money and effortworth the outcome?.


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After companies select the strategy that

ts their rationale for a performance

management program, they need to

review each building block required

for that strategy. Some of the building

blocks may represent brand newinitiatives, some may need revamping,

and some may work well as-is. Here

we will follow the same path as a

company interested in the Transformer

strategystarting with the four Rater

building blocks, working our way

through the three Driver blocks, and

nally to the two Transformer blocks.

Rater strategy: Assessingpast performance

The building blocks of the Raterstrategy include:

Program purpose. Dening and

communicating the purpose of the

program is never a one and done

effort. Companies need to regularly

take the pulse of their workforce to

ensure that leaders, managers, and

employees are aligned on the rationale

of the program and that they are

using appropriate tools and processes.

Though this is a seemingly obviousstep, it is often missed.

Performance objectives and

evaluation. Companies need to

translate and cascade corporate goals

down to individual employees. To do

that, they may dene two types of

performance objectives for themquantitative (the what, measured

by meeting nancial goals) and

qualitative (the how, measured

by upward feedback, team-building

activities, volunteer activities).

Further, they must decide how to

evaluate employee progress toward

these objectives, how to weight

objectives (e.g., meeting nancial goals

is table stakes while meeting a team

development goal is a differentiator),

and what inputs to include in theevaluative process. The sidebar,

The dark side of rewarding high

performance delves into this.

Process and technology.

Many companies have established

performance management processes,

such as the simple Rater process of

objective setting, mid-year review

and year-end evaluation. Elements

such as coaching touch points can be

layered on as companies move up theperformance development curve. Over

time, companies typically increase the

standardization of processes across

business units and geographies to be

able to compare apples to apples,

and to better incorporate feedback and

approval steps into the workow.

How can we systematically implement each

building block of our selected strategy?


8/12


7 The Wall Street Journal, Should I Rank My Employees? April 7, 2009. Adapted rom The Wall Street Journal

Guide to Management by Alan Murray, published by Harper Business.8 Bill Roberts, Juniper Networks is turning words on the wall into behaviors in action, HR Magazine, March 2012.

Most companies have put aside their

Excel spreadsheets and adopted

specialized software to enable

their performance development

processes. Key features of these

systems include the ability to cascade

goals, support complex matrix

relationships and social networks,

and integrate with HR software

modules such as compensation,

learning and development, and

succession management.

A simple and intuitive user interface

and mobile capabilities are

increasingly important in drivingpositive user experiences and high

workforce adoption rates. For example,

giving a supervisor the ability to

provide feedback from her smartphone

increases the likelihood that she will

provide real-time coaching to her

direct reports.

Participation. Though most U.S.

organizations complete annual

performance reviews, many struggle

to achieve anything close to fullparticipation in that process. If

employees and managers fail to see

the value in the processas most do

they simply go through the motions.

Participants may check off the item on

the HR compliance list; but with each

passing year, the goals and capabilities

of the workforce and the organization

become increasingly out of synch.


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Rating systems that are too granular

or incorporate more than a handful of

competencies seldom succeed as they

are difcult to maintain and explain to

the business. And highly quantitative

competency ratings can result in

pseudoscientic performance ratings

that are still subjective.

Motivation. What inspires

employees to go above and beyond,

making that discretionary effort

that ultimately results in exceptional

performance? There is much still to

be learned about motivation, but one

thing is for surethe answer is oftennot money. Two-thirds of employees

surveyed recently claimed to be

dissatised by pay-for-performance.9

Increasingly, organizations are

exploring other motivational

tactics, such as more autonomy,

developmental support and a sense

of value. A large online retailer,

for example, successfully reduced

voluntary turnover and increased

productivity by eliminating itsminimum ofce hours and physical

attendance requirements.10

Driver strategy: Boostingtalent development

The Driver performance strategy addsthree elements to the Rater foundation:

Capabilities and skills. The

notion of competency management

as a core element of strategic talent

management programs has been

around for a long time, and several

well-established competency libraries

exist in the market. Even so, many

companies struggle to effectively

implement them. The two key

challenges are: Business alignmentReaching

agreement on which competencies

to use

AdaptationUsing the competencies

in a consistent way and applying

meaningful ratings to them

Frustrated with these issues, some

companies are experimenting with

setting competencies aside and trying

to infer development needs from

performance objectives. A better plan

may be to dene a simple, consistent

(across geographies and units) set of

behavioral and job-specic capabilities

and skills and use them to inform

objective setting, development,

and evaluations.

9 The Corporate Executive Board Company, Driving a High-Perormance Culture, June 2011.10 U o M study shows Best Buy cuts sta turnover with lex schedule, Minneapolis/St Paul Business Journal,

Author-Ed Stych, April 6, 2011.11 The Corporate Executive Board Company, Managing or High Perormance and Retention January 2010.

Ongoing dialogue. Many

managers still struggle to effectively

communicate with their teams, despite

the tremendous importance such a

dialogue plays in boosting employee

performance and retention. Fair and

accurate feedback, according to one

study, drives 39 percent of employee

performance and the quality of

internal communications drives 38

percent of employees intent to stay.11

To boost the quality and frequency

of the coaching conversations, one

leading software company rolled out

an intensive program to boost thequality and frequency of coaching

conversations and encourage a more

collegial exchange. And a global

telecommunications company has

increased its managers engagement

in compensation activities by raising

staff awareness about the managers

responsibilities in the process. Other

companies have started using social

performance tools to create platforms

for ongoing feedback and learning.


10/12


according to one study,13 and only 15

percent of companies describe their

employees goals as very aligned with

business priorities.

Certainly HR has a role in

disseminating goals throughout an

organization; however, the day-to-day

Transformer strategy:Changing team and

organizational behaviorThe Transformer performance strategy

adds two elements to the foundation of

the previous two strategies.

Individual and team-based.

Companies are increasingly addressing

the trade-offs inherent in traditional

performance measures that exclusively

incentivize individual performance,

sometimes at the expense of the larger

team. For example, moving to team-

based sales targets can inspire greatersharing of knowledge and collaborative

problem solving, ultimately resulting

in greater revenue than the time-worn

every man for himself approach. To

ensure all team members pull their

weight, companies can put qualitative

targets in place to measure each

persons contribution to the team.

Another way to drive team performance

is to formally hold leaders accountable

for team development. For example,

one leading professional services

rm sets specic objectives for their

leaders regarding team development

and team members engagement and

commitment to the group.12

Business led.All too often,

employees have little idea of how

they contribute to meeting the

corporate business goals. The data

are concerningonly 36 percent of

employees understand the strategic

direction of their organizations,

12 PwC research, 2012.13 The Corporate Executive Board Company, Driving a High Perormance Culture, June 2011.

interactions with leadership really set

the tone and direction for employees.

As the practice of continuous dialogue

and coaching spreads through an

organization, goal alignment and

leadership effectiveness are bound to

increase (see the sidebar The Journey

from Rater to Transformer).


11/12


3. Take stock. Assess your current

performance management practices

against your objectives. For each

building block, determine whether

you need to change your approach.

For example, determine whetheryour processes and systems

enable sufcient participation

and dialogue, or if you need to

invest in a more social approach.

Similarly, assess whether your

approach to ranking staff sends the

right motivational messages. Then

prioritize a list of necessary changes.

4.Adjust. Based on your

prioritization, implement change.

Make sure to communicate quickwins to demonstrate early traction

and show business results (e.g.,

improvements in productivity) and

employee sentiment (how managers

and staff feel about the new

process). Use whatever strategy

you have chosen to create greater

alignment with business executives

and leaders.

Ready to build a far more effective

performance management system?

Then take these steps:

1. Get real. Take a hard look at your

current practices and outcomes.Ask questions such as: How are

employees and managers perceiving

the effort, and how well are they

participating? On balance, is

our current approach to rating

employees helping or hurting our

efforts to motivate and retain talent?

Do our incentive schemes have any

unintended consequences? What

behaviors are we driving? How good

are our managers and staff at setting

goals and giving feedback?

2. Take aim. Take a look at your

business strategy and reassess the

role that performance management

needs to play in it. Determine which

performance management strategy

(Rater, Driver or Transformer) best

supports your business objectives

and best ts your organizational

culture (or the culture you want to

create). Alignment between business

leaders and the chosen strategy is acritical part of this step.

Next steps to enhance your performance

management program

Get real

Take aim

Take stock

Adjust


12/12

To have a deeper discussion

on performance management,

please contact:

To discuss your companys

talent priorities and other

issues related to human

capital, please contact:

www.pwc.com

PwC frms help organizations and individuals create the value theyre looking or. Were a network o frms in 158 countries with close to 169,000 people who arecommitted to delivering quality in assurance, tax and advisory services. Tell us what matters to you and fnd out more by visiting us at www.pwc.com.

2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC reers to the US member frm, and may sometimes reerto the PwC network. Each member frm is a separate legal entity. Please see www.pwc.com/structure or urther details. This content is or general inormationpurposes only, and should not be used as a substitute or consultation with proessional advisors.

Sayed Sadjady

Principal

Advisory Services, People and Change

646 471 [email protected]

Jan Seele

Director

Advisory Services, People and Change

646 471 9955

[email protected]

Ed Boswell

Principal

US People & Change Leader

704 350 [email protected]

Bhushan Sethi

Managing Director

Financial Services - US People &

Change Leader

646 471 2377

[email protected]

Marla Graeber

Principal

Health Industries - US People &Change Leader

267 330 2517

[email protected]

Christine Ayers

Principal

Public Sector Practice - US People &

Change Leader

703 918 1173

[email protected]

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