Performance management can play a critical role in organisational performance, however many companies still fail to leverage their resources effectively in this area. Jacqueline Burns looks at the foundations of successful performance management and speaks with two organisations who have got it right
Performance management can play a critical role in organisational performance, however many companies still fail to leverage their resources effectively in this area. Jacqueline Burns looks at the foundations of successful performance management and speaks with two organisations who have got it right
Organisations that rigorously provide feedback to their employees have workforces that are between 15 and 20 per cent more engaged, according to Hewitt Associates. Moreover, based on research conducted by Hewitt, the AGSM and Fairfax as part of this year’s Best Employers study, organisations that are able to engage more than two-thirds of their employees deliver better business results.
“We were surprised by how strong the relationship is between frequency of feedback about performance and the level of engagement,” says Hewitt Associates’David Brown. “Intuitively we knew that that was going to be important, but we didn’t know how strong that relationship is. Clearly, employees want feedback about how they are doing, what is expected, what they should develop and how they are going to be rewarded.”
Performance management is about changing behaviour and, if managed well, can contribute to greater levels of understanding, connectedness and delivery of business outcomes. It spans a person’s life within an organisation – from recruitment to training, development, reward and finally departure.
According to Brown, the companies that are best at performance management have four characteristics in common:
1. They create a common understanding of their organisation’s priorities and goals.
2. They articulate a clear set of expectations in terms of what an individual or a group needs to contribute.
3. They focus on building capability through feedback and learning.
4. They create commitment based on meaningful work and rewards.
Brown is a strong advocate of outcomes, not process. Though he acknowledges the best employers are making a significantly greater investment in the development, utilisation and management of their people, he does not regard technology to be key to successful performance management.
“You can have the greatest performance system in the world, but if you have lousy leaders who don’t use the system or don’t know how to use the system, what’s the point? Performance management is about quality, face-to-face conversations; it’s not about computer screen-to-computer screen interaction,” Brown points out.
Companies tend to measure the value derived from their performance management systems by KPI achievement. KPIs can include: percentage of workers delivering on their goals; percentage improvement achieved in capability enhancement; and improvement in the utilisation of human assets.
Managing performance well at Dell
Direct-selling computer giant Dell was one of eighteen organisations selected by Hewitt as the Best Employers in Australia and New Zealand this year.
As Karl Solomonson, HR director Australia and New Zealand explains, Dell embarked on a major cultural transformation based around a leadership imperative about four years ago. Though Dell had for some time retained the enviable position of being number one in its markets, it was alert to the threat of competition and the need to protect its marketshare.
“We really needed to look at what was going to keep us in front of our competitors,” explains Solomonson. “That included looking at all of our people processes and truly aligning those with our strategic initiatives.
“This is not just about performance management. Our cultural transformation is about our passion for the organisation, our winning culture and having a great place to work. We truly believe that those key indicators separate us from our competition.”
Every six months Dell takes its pulse by way of an online cultural survey, termed ‘Tell Dell’. Around 94 per cent of Dell’s 45,000 employees participated in the most recent survey, with 80 per cent awarding their employer an overall favourability score.
Eighty-two per cent of participants responded favourably when asked about ongoing feedback that helps them improve their performance, while 92 per cent responded favourably when asked about how well they understand how their performance is evaluated.
This month Dell will consolidate four disparate platforms into a single performance management system. The upgrade will automate the development of career goals and development plans, resulting in a fully integrated people management program. Dell’s performance management tool isn’t restricted to employees and their managers. Feedback can also be input from both internal and external customers, which helps to ensure informed decisions are made.
“We’ve invested a lot in a new user-friendly performance management tool because in the past we have had some challenges around the time that it takes. Now that it’s seamless and online those challenges have been overcome,” Solomonson reports.
Though reluctant to quantify Dell’s performance on any level, Solomonson reveals the company’s attrition rate in this region is less than the industry average. Most of Dell’s open requisitions are filled internally, however the company’s phenomenal growth rate is necessitating an increase in external hires. Dell is only 20 years old (10 years old in Australia) yet it has grown substantially faster than even GE or Microsoft did in their first two decades. Two years ago Dell announced its ‘Triple in Three’ strategy, the seemingly impossible objective being to transform the US$20 ($25.7) billion organisation into a US$60 ($77.2) billion company within three years. Dell recently announced it’s one year ahead of that strategy.
It’s not surprising the organisations feeling the talent war most acutely are working hardest at performance management. Dell’s learning and development manager, Colin Lee, says the company is always on the lookout for exceptional talent because finding good people is such a challenge for the business locally.
The shallow pool of external talent means succession planning is vital. Dell’s general managers report twice-yearly on their unit’s succession plans, key talent and progress made towards developing its stars. Manager workshops are also conducted at a regional level twice per year, providing business leaders with an opportunity to share information cross functionally, forecast growth and tentatively slot people into future openings. If the flagged individuals aren’t ready for their next role, development plans are designed to support them. These are then reviewed periodically to ensure promises are being fulfilled.
“The whole idea of performance management is about reward for performance. Dell is a meritocracy. If you perform here you’ll be rewarded,” Solomonson concludes.
Why stay for the long haul
Wyeth is a multinational sales and marketing organisation that supplies biotech, pharmaceutical and nutrition products. Within Australia and New Zealand the company employs 300 white collar workers, including many salespeople in the field who have limited direct contact with head office.
Such geographic challenges don’t appear to be adversely impacting Wyeth’s people management program, with an average tenure rate of 5.2 years.
“We’ve endeavoured to create an environment that is conducive to people staying throughout their ongoing development, and rewarding them for high performance,” says Claudia Lincoln, Wyeth’s resources and talent manager.
The company’s performance management strategy is very much aligned with Wyeth’s global strategy. Furthermore, Australia has led the way in some systems, including performance appraisals as well as formal succession and career development processes.
The company made a significant investment in piloting its new performance management system and training its people in the process. Having just reached the first review cycle since implementation, Wyeth is unable to report ROI yet. However, the electronic system has been positively received and has already improved the consistency of performance management across the organisation in terms of both form and focus.
“We’re still wrestling with the issue of metrics,”concedes Colin Lee, learning and organisation development manager. “We review the ratings across the board at an executive and senior management level, raise questions about performance in various areas, query what the average or range of ratings might be and challenge any discrepancy between individual ratings and the group,” he explains.
Wyeth has also prioritised the development of capabilities within its leadership group and management team on the basis that a person’s relationship with their manager is all important to retention.
Lee considers the heart of the conversation itself is the biggest barrier to achieving better outcomes from performance management systems.
“Many leaders continue to have difficulty in having an honest dialogue with a colleague about their performance, in identifying where a person could improve and in communicating where a person is placed right at a moment in time in terms of their performance. Regardless of whether it’s automated or manual, that still remains a barrier to be overcome in order for a system to be effective,” says Lee.
Hewitt Associates’ Brown agrees. In his opinion, there has been a “dumbing down” of management talent across corporate Australia as employers have withdrawn their investment in teaching people how to manage people.
“If you pick up a CV from somebody in their 40s you will see they have training in leadership management 101 – how to give feedback, how to resolve conflict, how to have a performance discussion,” he says. “Managers in their twenties have not been trained in how to have those conversations.”
