CREATING A PERFORMANCE-BASED CULTURESESSION 2: THROUGH PROPER PERFORMANCE MANAGEMENT OF PEOPLECNI’s Journey, Mistakes, and Lessons Learned

Kenny OngCNI Holdings Berhad

Contents

1. Key Workforce challenges to achieving organization performance

2. Managing Performance through People: Support and Philosophy

3. How to really manage Performance

4. Managing Performance through Incentives

5. Employee Distinctions through Relative Performance

6. Managing Team performance – collaboration, innovation

Workforce Challenges

Key Workforce Challenges in Achieving Organizational Goals (Extremely Simplified Version):

1. Right Person, Wrong Job (5%)

2. Wrong Person, Right Job (20%)

3. Wrong Person, Wrong Job (1%)

4. Right Person, Right Job, Managed Wrongly (74%)

Managing Performance through People: Support and Philosophy

Alignment: 4-Wheels Model

Philosophies

Corporate

ObjectivePerformance Objectives

StructureResources

Leadership

Person

Alignment: Framework

• Equal / Fair• Happy / Productive • Performance vs Potential • Retention / Engagement• Activities / Results• Leading / Lagging• Macro / Micro

Philosophies

How to really manage Performance

• Beating a Dead Horse

Most Common Desperate Performance Improvement methods

1. Send for more Training

2. Enforce more Incentives (positive/negative)

Mager and Pipe

• Analyzing Performance Discrepancies

Managing Performance through Incentives

Incentive Problems

Problem with Incentives in managing performance:• Most people are confused or unsure about

compensation tools• Some people misuse compensation tools

What to Pay?

• Pay for Service

• Pay for Job

• Pay for Performance

• Pay for Competency

Performance and Incentives

1. Internal Equity1. Internal Job Rates

2. Performance differentials

2. External Competitiveness1. External Job Rates - Benchmarking

2. Demand & Supply

What’s the Difference?

• Increment

• Bonus

• Promotion

Compa Ratio Table

Use this if your company: • Pays for Performance, and • Pays for Job rates

Def:

Mid-Point = Mid Point of Pay Grade

Grade E2

Min RM2,000

MID RM2,500

Max RM3,000

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5

4

3

2

1

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5

4

3 5%

2

1

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 9

4 7

3 9 7 5% 4 3

2 2

1 0

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 15 12 9 8 7

4 12 9 7 5 3

3 9 7 5% 4 3

2 6 4 2 1 0

1 4 2 0 0 0

Dangers of Direct Incentives

1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment

contract, 9. rebellion from non-incentivised staff, 10.end up incentivising everyone for everything?,

Employee Distinctions through Relative Performance

Employee Distinction?

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 9 8 7 6 5

4 8 7 6 5 4

3 7 6 5% 4 3

2 6 5 4 3 2

1 5 4 3 2 1

Employee Distinction?

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 20 15 12 8 5

4 18 12 9 5 3

3 9 7 5% 4 3

2 1 1 1 0 0

1 0 0 0 0 0

Employee Distinction

Average Rating

Rating Multiply Factor

Example Rating

Example Increme

nt

> 4.1 5 2 4.2 8.4%

> 3.3 – 4.1 4 1.2 3.5 4.2%

> 2.3 – 3.3 3 0.75 2.8 2.1%

> 1.3 – 2.3 2 0.5 1.8 0.9%

≤ 1.3 1 0 1.0 0%

Employee Distinction

Group I

(Talent Pool)

23

45

PE

RF

OR

MA

NC

E

2 3 4 5

POTENTIAL• Identify

Employee Distinction

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

23

45

PE

RF

OR

MA

NC

E

POTENTIAL• Identify

Curse of the Bell Curve

‘A’ Staff

‘B’ Staff

‘D’ Staff

‘E’ Staff

‘C’ Staff

Managing Team performance – collaboration, innovation

Managing TEAMS

1. Identify the right ‘levers’

2. Set KPIs for the right ‘levers’

3. Manage the ‘levers’ through performance systems

4. Balance Individual vs. Team priorities

5. Manage conflicting KPIs, but don’t eliminate them

TEAM levers

C.O.R.E.

÷

W.L.

Possible TEAM-type KPIs and incentives

Team Type Possible Incentive Type

Functional •Recognition for exceptional success (usually not in cash)•Individual role considered in normal merit increase process

Process •Team competencies recognised in pay for proficiency approach•Gainsharing or operational progress incentives

Project/ Time-based

•Recognition for exceptional individual contributions in spot wards or salary increases•Project / programme Phantom Stock or Profit Sharing

Network/ Partnerships

•Recognition for exceptional individual or team successes in spot awards or share increases•Venture profit sharing

Team Incentive Models

1. Fixed Salary Proportion (Fixed Personal, Variable Team)

Performance Incentive = Fixed Quantum + (Balance Sum In Bonus Pool ÷ Headcount)

Team Incentive Models

2. Two-tier Multiplier (Variable Personal, Variable Team)

Performance Incentive = Personal Target Achievement + (Personal Target Achievement x Team Performance Multiplier)

Team Incentive Models

3. Team Ratio Plan (Variable Personal, Fixed Team)

Performance Incentive = Team Ratio x Personal Target Multiplier

• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding

Possible Innovation levers

Innovation Levers?

1. Add 10 value increasing properties to each product or service every 90 days

2. Reduce jointly held inventories and lead time required by 90% in 24 months

3. Reduce new-product/service development cycle time by 75% in next 2 years

4. Copy 10 ideas every 60 days form competitors and noncompetitors

5. Target % Revenue from New Products (previous 24 months) - start with 50%

Source: The Innovation Challenge, “Thriving on Chaos”, by Tom Peters; Alfred A. Knopf Inc.

Managing People performance: A Summary

More Problems….

1. cost of evaluation vs. gains of evaluation

2. defer achievements of a good year to next

3. barely achieve so that next target is not high

4. spread improvements over several years

5. value reducing actions to increase performance

6. most ratings are 4 or 5, new people are 3

Contents

1. Key Workforce challenges to achieving organization performance

2. Managing Performance through People: Support and Philosophy

3. How to really manage Performance

4. Managing Performance through Incentives

5. Employee Distinctions through Relative Performance

6. Managing Team performance – collaboration, innovation

Before I forget…

• Re-train Appraisers• Train new Appraisers

Alignment: 4-Wheels Model

Philosophies

Corporate

ObjectivePerformance Objectives

StructureResources

Leadership

Person

Thank You.

soft copy of slides: www.totallyunrelatedrandomanddebatable.

blogspot.com