NEW STATE OF PERFORMANCE MANAGEMENT · PERFORMANCE MANAGEMENT Market Insights, Design Risks, and...

NEW STATE OFPERFORMANCE MANAGEMENTMarket Insights, Design Risks, and Smart Solutions

October 23, 2013

CONFIDENTIAL

This presentation containsproprietary information whichremain the property of Mercer.

© 2013, Mercer, Inc.Live Webcast12:00PM - 1:00PM EDT

MERCER 11

Lori HolsingerMercer US

+1 404 442 [email protected]

Mercer

TODAY’S PRESENTERS

QUESTIONS?Please type your questions in the Q&A section of toolbar and we will do our best to answer.

• In full-screen mode, use the Q&A button on the bottom right-hand side of your screen.• In half-screen mode, use the Q&A panel on the bottom right-hand side of your screen.

Colleen O’NeillMercer US


Lynn StoudtMercer Canada


IS THERE REALLY A NEW STATE OFPERFORMANCE MANAGEMENT?

2

MERCER

Delivers exceptional value?

Works well?

Needs work?

PERFORMANCE MANAGEMENTEvaluate the Effectiveness of Your Approach

MERCER

Works Well

Works wellNeeds workExceptional

PERFORMANCE MANAGEMENT

49%48%Needs Work

Few Say Approach Delivers Exceptional Value

Mercer 2013 Global Performance Management Survey ReportCopyright © 2013.

MERCER

How could we build a growth and developmentfocus into our goal setting process?

How could we encourage higher quality dialogueand more candid feedback about performance?

What is our philosophy on differentiation? How canwe better identify our highest and lowest performers?

How should we link performance & pay decisions? Howtransparent is calibration and compensation planning?

What performance management change could havethe biggest positive impact to our business?

KEY QUESTIONS

5

Alignment

Dialogue

Differentiation

Transparency

Value

New State of Performance Management

MERCER

EvaluationDevelopment PerformanceEvaluation

PeopleDevelopment

Differentiatesperformance

6

Provides coaching andsupport for personal

development

Purpose Paradox: Development vs. Evaluation

BIGGEST DEBATE

6

MERCER 7

What Should the Process Do For You?

PERFORMANCE MANAGEMENT

Improve performance – employee & company

Identify top talent – individuals & teams

Help people succeed – individually & collectively

How do you measure up?

MERCER

How Should Performance Management Work for You?

MERCER POV

Through coachingand development.

Through feedbackfrom broad range ofexternal and internalconstituents.

By identifying talentthat has persistentlydelivered highperformance relativeto others.

By simply defininghigh performance,shared priorities,and commitments.

By providingcontinuous, real-time feedback.

8

1. ImprovePerformance1. Improve

Performance2. Identify Top

Talent2. Identify Top

Talent3. Help People

Succeed3. Help People

Succeed

MERCER

Old

4 Point Scale4 Point ScaleRelevant, meaningful,

real-time feedback.

Natural part of work,integrated with business.

Joint manager andemployee accountability.

Thoughtful, honest,engaging dialogue.

Measure success bybehavior, satisfaction & value.

Evaluative process with 3 or5 point rating scale.

Once/twice a year event.

Feedback often routine anddated due to timing ofassessments.

Seen as primarily amanager responsibility.

Viewed as administrativeburden, disruptive to work.

Success and effectivenessmeasured by whetherprocess is completed.

9

Evolution of Performance Management

EMERGING PRACTICESRefresh

10

Devote moreresources intoteaching and

developing leadersand associates

LEADING IDEAS

What are companies doing differently?

MERCER

Focused on:Accelerating individual, team, and business performance.Aligning individuals and teams to the quarterly business cycle.Timely, high-quality conversations about deliverables, results,and behaviors to help grow and develop people.

Eliminate annualratings

Focused on:Eliminating traditional ratings and preset achievement targets.Consistent calibration through relative laddering and alignment withinternal peer group, with manager discretion in compensation.Twice a year Conversation Day: Career --> Capabilities -->Connections --> Contributions --> Compensation.

Eliminate forceddistribution

Focused on:Data-driven model of top eight attributes of effective peoplemanagers with #1 rule: Be a good coach.Biannual upward feedback, tracking mgr. performance vs. norms.Performance reviews with ratings based on self-assessment andpeer reviews of contributions, strengths, areas of improvement.

Build bettermanagers

What Are Some High Performing Companies Doing Differently?

EMERGING PRACTICES

11

MERCER

ContentKnowledge

DecisionExcellence

StrategyAlignment

High StakesConversations

Power ofObservation

What Should Companies Be Doing Differently?FOCUS ON MANAGER CAPABILITY

12

WHAT ARE PREVALENT MARKETPRACTICES?

13

MERCER 14

How Companies Try to Create Performance Management ValuePERFORMANCE MANAGEMENT REPORT

1,057organizations

53countries

Industries withhighest participation

DurableManufacturing

14%

Technology

10%

ConsumerGoods

8%

Financialservices

7%Non-durable

Manufacturing

5%

Insurance

5%

Transportation

5%

Energy

7%Pharmaceutic

al

5%

Retail

5%

Education

4%

Telecommunications

4%

ProfessionalServices

5%

Healthcareprovider

7%

MERCER

PerformanceExpectations

Year-endProcess

15

More Similarities Than DifferencesDESIGN CHARACTERISTICS

Set ind.goals

Usecompetencies

Self-assessment

Overall perf.rating

Use 5-pointrating scale

Link perf& pay

80%

40%

60%

100%

20%

95%

85% 82%89%

57%

89%

MERCER

Consistency CEO Evaluation

16

Tailoring to Business Units or Leadership Levels is UncommonDESIGN CHARACTERISTICS

Commondesign

Tailored toexecutives

Bottom line& Ops

Leaderqualities

80%

40%

60%

100%

20%

75%

25%

66%

50%

MERCER 17

What Elements Have the Most Impact on Overall Success?DRIVER ANALYSIS

ManagementSkills

ExecutiveCommitment Calibration Technology

MERCER 18

Candid dialogue

29%

48%

“SMART” goal setting

Linking performance and development

ManagementSkills Executive

Commitment Calibration Technology


MERCER



19

Goal Cascade is Under UtilizedDRIVER ANALYSIS

Company

Business Unit

Employee

56%

51%

MERCER 20




MERCER 21

Discuss PM ascore to business

Provide regularcoaching

75%

90%

Highly committed executives



100

25

50

75

0


MERCER 22




MERCER 23

Calibration Increases Accuracy of EvaluationsDRIVER ANALYSIS



Leaders(or subset)

All employees

27%

56%

Who is reviewed?100

25

50

75

0

56%

MERCER 24



Introductions and ground rules

Performance expectations

Exceeds Fully meets Partially meets

DiscussBelow

Summarize agreements and action items


MERCER 25



The process is not confidential;it’s ok to explain the process to employees without sharing

names, ratings, and decisions.

Attendees are accountable for arriving at performance ratingdecisions that reflect expectations.


MERCER 26




MERCER 27

Technology is Less Prevalent Than ExpectedDRIVER ANALYSIS

52% 19% 15% 7%

HRMSOnly

HRMS+ 1

FullyIntegrated

NoIntegration



53%

MERCER 28

Align Philosophy With What Is MeasuredOPPORTUNITIES

Link perf& pay

Measurepeople mgmt

Rewardpeople mgmt

89%

36%

10%

80%

40%

60%

100%

0%

20%

MERCER

89%

29

Link perf& pay

80%

40%

60%

100%

0%

20%

Year-end review

94%

Link perf &succession

51%

Driveperformance

68%

75%measure

completion ofevaluation

42%measure pay for

performancelink

23%measure

selection of topperf. for

succession

19%measure

retention bet.top & poor perf.

Align Philosophy With What Is MeasuredOPPORTUNITIES

30

WHAT ARE SOME SMART SOLUTIONSTHAT ADD VALUE?

MERCER

• Improve thequality andquantity ofeffectiveconversations

• 2 day workshop

• Mandated for allpeople managers

• Skillsdevelopment

• Core models

• Engagedindividuals

• Differentialcommitment tochange

• Minimalorganizationalimpact

BUSINESSDRIVENNEED

EFFECTIVEPERFORMANCECONVERSATIONWORKSHOP

REVIEW

Case Example of Manager Capability Building

STAGE ONE IN JOURNEY

MERCER

DAY 1 DAY 2MORNING

Welcome and overview Review day 1

Flow (structure) for effectiveconversations

Skills and practice (clarify andputting it all together)

AFTERNOONSkills for effectiveconversations (observe, listen,and explore)

Your real conversation

Practice The learning you take away

Effective Performance Communications Program

LEARNING AGENDA

MERCER

• Develop aperformanceculture in all thebusinesses.

• Business unit.• Leader

sponsorship andteam events.

• Audit.• All manager

workshops.• Sustaining

activities.• Measurement.• Communication

strategy.

• Induction.• All levels of

leadership.• Clinics.

BUSINESSNEEDCHANGES

BUILDINGSUSTAINABLEPERFORMANCEPROGRAM

SYSTEMICMODELDELIVERY

Case Example of Manager Capability Building

STAGE TWO: SUSTAINABILITY

MERCER

Strategically aligned: e.g. engagement, strategic shift, capability building.Easily customised; audit, leadership team events, workshops.Data driven; audits.Leadership engagement, commitment and action plan.All managers in a short period; e.g. 500 in 3 months; 80 one week.Program not a course; 18-24 month change program.Trained champions/change agents to sustain momentum.

Features

Features and Benefits

BUILDING SUSTAINED PROGRAM

34

Benefits andOutcomes

Measureable progress.Communication strategy.Speed, creating critical mass and momentum.Leadership team insight.Self sustaining and adaptable.Business unit ownership.

MERCER

RELIABLE IMPLEMENTATION METHODOLOGY

Diagnosisaudit andinterviewsbaseline

Senior leadersAlignment,planning andsponsorship

Leadershipteam planningand integrationmeetings

Embedding andsustainability• Follow-up

measurement• Transfer of

capabilitiese.g.,championdevelopment

Leaders Alignment andskills practice

Integration intodaily work

On the jobapplication andsupportEmployees Alignment and

awareness

COMMUNICATION, MEASUREMENT, SUSTAINABILITYSYSTEMS AND PROCESSES: MANAGER TOOLKIT AND ON LINESUPPORTCOACHING SUPPORT DURING AND AFTER SKILLS PRACTICESESSIONS

Sustained Program

PROGRAM ARCHITECTURE

MERCER 36October 23, 2013

Leader Accountability DashboardMULTI-SOURCE “AUDIT” OF EFFECTIVENESS

ALIGNMENT QUALITY

Question

Audit 1(Baseline)

Question

Audit 1(Baseline)

% Team leader(To a greatextent)

%Employee(To a greatextent)

% Teamleader(To a greatextent/High)

% Employee(To a greatextent/High)

Team leader clarifies what is expectedof direct reports

63.6 54.8Team leader agrees to a measurable,time-bound end result for eachpriority

27.3 29.0

Team leader clearly linksindividual priorities andbusiness priorities

72.7 41.9Team leader addresses poorperformance in a timely and effectivemanner

27.3 25.8

Team leader adjusts individualpriorities when business prioritieschange

54.5 38.7Team leader coaches effectively tospecifically improve competenceand/or behaviour

45.5 35.5

Team leader discusses and clarifiesthe action needed to reach priorities

36.4 29.0 Quality of the performance planningconversations

27.3 29.0

Team leader takes into account what’simportant to direct reports, theirconcerns and circumstances, inperformance conversations

36.4 32.3

Quality of follow-up andmonitoring of the outcomesof performance planningconversations

9.1 19.4

Team leader clarifies what is expectedfor you to deliver or exceedexpectations

27.3 35.5

MERCER

SUSTAINABILITY TOOLKIT

MERCER 38

TALENT CHESS

• A one-day workshop that blends current thinkingaround strategic talent management practiceswith a simulation game that challengesparticipants to evaluate their own, and theirorganizations, talent decision-making.

• By using game pieces to keep track of employeeprogress, participants discover what happenswhen they make decisions around talent such as:

Who gets promoted and when does thishappen in their career?

When is the right time for a developmentalassignment?

Who should take on a mission-criticalassignment — do we take a risk on an up-and-comer or give it the “usual suspects”?

• Realism is added to the game by the use ofchance and market-condition derailers.

• Workshop learning's are transferred toparticipants own teams / business, as plans areput in place for developing their talent pipelines.

HOW DO YOU ADDTALENT VALUE?

Developmentoptions cards

VICE PRESIDENT

DIRECTOR A DIRECTOR B

MANAGER A MANAGER B MANAGER C MANAGER D

Sharpening Leaders Decision-MakingTALENT MANAGEMENT SIMULATION

MERCER

5

39

CALIBRATIONCase Example

20 Nurse Managers

Report to

600 Staff RNs

Report to

CNO/ NurseDirectors

MERCER 40

CALIBRATIONCase Example

10 Nurse Managers

Report to

177 Staff RNs

Report to

5 Nurse Managers

207 Staff RNs

Report to

5 Nurse Managers

48 Staff RNs -Surgery

Report to

5 Nurse Managers

104 Staff RNs

Report to

3 Nurse Managers

136 Staff RNs

Report to

5 Nurse Managers

33 Staff RNs

Report to

MERCER 41

Create Employee TimelineDevelop Detailed Story for Each Employee

EmployeeHired

Feb 2009

John Smith Employee EE001101

Mercer Analytics

Nov 2010Performance

Review 1,Promotion,

CompensationAdjustment

Nov 2011Performance

Review 2,Compensation

Adjustment

Nov 2012Performance

Review 3,Lateral

Movement,Compensation

Adjustment

20092000s

Hired 2010 2011 2012 January2013

February March Now

SustainedHigh Performer

Mar 2013


HR USING LONG DATA

MERCER

• Over time, do we really reward our employees who consistentlyreceive high performance ratings through: greater pay increases;bonuses; promotions; and career opportunities?

• Where are our performance: pay outliers, e.g. employees who havereceived a low performance rating but an above median payincrease?

• Which employees received high performance ratings both this yearand last year?

• Which employees have received high performance rating over thepast three to five years?

• Which employees received low performance ratings more than threetimes in their past five reviews?

• What are the characteristics of employees that upgraded from amedium to high performer?

• What are the characterizes of employees that downgraded from ahigh to a medium performer? From a medium to a low performer?

42

Reward forPerformance

$

New EmployeeSegments

Downgradesand Upgrades


ANSWERING CRTICAL QUESTIONS

MERCER 43October 23, 2013October 23, 2013

We love theseemployees – how are

we going to keepthem?

These downgradesare of concern. Whatorganizational factors

contributed to this,and what

interventions areneeded to retain and

engage theseemployees?

Was there an activeintervention that

occurred to movethese employees

from a Low toMedium performer?

This big jump (fromHigh to Low, or Low

to High) is unusual inone review period.

Should we check theintegrity of our PM

process?

Measuring Year-Over-Year Variability

ADVANCED ANALYTICS

WHAT ARE BENEFITS AND RISKS OFELIMINATING RATINGS?

44

MERCER

Can remove the “threat response” andpromote feelings of engagement

rather than anxiety and fear

Manager feedback can be more valid andconstructive (no “meeting a curve”)

Puts the focus on constructive,development-based conversations

High performance may become moreintrinsically motivated

Some people like numbers and keepingscore and may be uncertain how they

are being assessed

avoidMay make it easier to avoidconfrontation and shy away from

giving honest feedback

scalabilityConcerns about scalability, may bemore difficult for managers with large

spans of control

Places more demand on the quality andrigor of assessment for hiring and

selection

Absence of labels can diminishcognitive biases such as halo effect to allocate consequences

Can inhibit internal mobility and make itmore complex to allocate consequences

and scarce rewards equitably45

ELIMINATING RATINGSBenefits Drawbacks

What Are the Benefits and Drawbacks?

46

NEW STATE OF PERFORMANCEMANAGEMENT TAKEAWAYS?

MERCER

• Consider programs in the context of others.

– Performance management, pay levels, incentives, supervision, andleadership development all reinforce one another.

• Test whether programs are getting you the desired returns andunderstand what is holding you back.

– Use analytics to measure progress.

– Design or implementation issues?

– Skill or “will” gap?• Be very clear on your performance differentiation and career

development philosophy.

• Optimize manager capability, executive commitment, calibration, andtechnology – it makes a real difference.

New State of Performance Management Insights

DISCUSSION SUMMARY

MERCER

• One-Day Workshop

• Program DesignPartner

• Design Team Toolkit

• 360 and UpwardFeedback Tools

• Enabling Technology

• Senior LeadershipAlignment

• Manager Training andDevelopment

• Talent ManagementSimulation

• Communication

• Benchmark Data byRegion, Industry

• Audit

• Say-Do Analysis

• Dashboards

• Advanced Analytics

48

DIAGNOSTICS DESIGN RIGHTSOLUTION

BUILD CULTURE& CAPABILITY

HOW WE CAN HELP


MERCER

www.imercer.com/performance &www.mercer.com/merceranalytics www.mercer.com www.mercer.com

MERCER 4949

Lori HolsingerMercer US



Q&A

QUESTIONS?Please type your questions in the Q&A section of toolbar and we will do our best to answer.

• In full-screen mode, use the Q&A button on the bottom right-hand side of your screen.• In half-screen mode, use the Q&A panel on the bottom right-hand side of your screen.

Colleen O’NeillMercer US


Lynn StoudtMercer Canada


50

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