2009 Performance Management by CX9Qm392


									                                       Performance Management
                                    October 2009 Best Practice Report

All organizations want to improve their overall performance. Performance management processes
attempt to do this starting with each individual employee. Most organizations want a performance
management system that will help improve individual performance to support organizational goals.
Employees want to know what they are expected to do and receive feedback on performance related to
those expectations. However, achieving these goals can prove difficult to achieve in reality. This report
will identify ways to create and implement a successful performance management system, suggest
aspects best practice organizations include in their performance management processes, and briefly
overview current products available in the marketplace to meet these needs.

Creating a Successful Performance Management System
Mercer’s 2008 Performance Management Practices Survey (completed by 350 leading U.S. companies)
shows that success with performance management initiatives is driven by four main factors. First,
senior leaders must be committed to the process and participate themselves. If senior leaders do not
follow and support the new performance management process, managers will not feel the need to
follow the process either, and the new initiative will fail. However, if senior leaders follow the process
with their direct reports, directors and managers will see the added value created by the new process
and feel pressure and/or accountability to also follow the process.

Another potential pitfall of performance management systems, regardless of it is technology-based or
paper-based, is maintaining a way to fairly evaluate performance across the organization. No doubt
there are managers at your organization who are harder evaluators than others. One way to combat
this issue is to hold calibration meetings. While only 22% of Mercer survey participants hold informal
meetings and 11% mandate them, this option is gaining popularity as a way to maintain fairness across
departments. These meetings ensure managers use the same “yardstick” to evaluate performance.
Having a way to calibrate ratings within and across departments and functions will ensure employees
are rated consistently and fairly across the organization. Some Farm Credit organizations hold formal
meetings to roll up performance ratings. This might start at a department level; ensuring all managers
and supervisors are consistent in their rating use. Department heads then meet to ensure consistency
across departments. This process flows up the organizational chart and ends with senior leaders
reviewing the ratings and/or merit increases for all employees across the organization. Another option
to help maintain fairness in ratings across the organization is for the next-level manager to review all
performance reviews. This provides consistency within departments. The Mercer survey found that
57% of companies conduct a next-level manager review as part of their performance review process.

Establishing strong management skills is the third element of a successful performance management
process. Providing managers with the knowledge and skills to understand what is expected for
performance across the organization will create alignment and credibility to managing performance.
The primary purpose of performance management systems is to provide meaningful feedback to
employees. 51% of companies in the Mercer survey state that their managers are only “marginally
skilled” at linking performance to actionable development planning. Likewise, 67% indicate managers
are “marginally skilled” at providing career development coaching.

The fourth driver of performance management success is technology. 40% of survey respondents
currently have a performance management technology solution in place. Of the other 60% who do not
have technology in place, 65% plan to purchase an external system and 14% plan to build their own
program within the next two years. (Mercer, 2008) It is important to note that automating a process
does not make it effective. Kevin Oakes, CEO of the Institute for Corporate Policy (formerly known as
the Human Resource Institute) states, “Performance management technology is increasing in popularity,
but without a solid process already in place, it’s not going to make a significant difference.”

What to Include in Your Performance Management Process
Many organizations face big challenges to improve the effectiveness of their performance management
process. Mark Vickers, a Senior Analyst with Institute for Corporate Policy said, “…There is no single
performance management practice that can transform an ineffective system into a good one.
Performance management systems are just that – systems. They require the coordination of multiple
key practices. The more of these practices that are in place, the more likely a performance management
system is to be seen as effective.”

An analysis of survey results conducted by HR.com and the Institute for Corporate Policy in 2006 found
correlations between performance management processes and overall perceived effectiveness in the
following nine practices:
      Plans for helping employees develop after the appraisal is complete
      Ongoing goal review and feedback from managers
      Training for managers on how to conduct a performance appraisal meeting
      Metrics of the quality of performance appraisal
      Ways of addressing and resolving poor performance
      Appraisal information that is not limited to the judgment of supervisors
      A system that is consistent across the whole organization
      Some type of multi-rater feedback
      Employees can expect performance feedback more than once per year (www.i4cp.com)

The most common design elements of performance management systems in the Mercer survey were:
     Individual goals (91%)
     Formal year-end review discussions (91%)
     Overall performance ratings (90%)
     Competencies/behaviors (83%)
     Formal performance planning discussions (82%)

Many companies struggle with how to integrate performance and development planning with
compensation, succession management and/or talent management practices. (Mercer) According to a
2007 research study conducted by Ventana Research, more than half of participating organizations do
not have access to the workforce metrics for which they are responsible. Mark Smith, CEO & EVP of
Research at Ventana Research says, “…This research shows that over two-thirds of organizations lack
information technology to measure and improve workforce performance, and surprisingly, many are not
making it a priority.” (www.ventanaresearch.com)

Options Available
There are many performance management vendors and products available in the marketplace. Below is
a small sample of options available to you.

Softscape: Medica, a healthcare provider in the upper Midwest with 1, 150+ employees, was using
spreadsheets to track individual performance, which required many hours to maintain and was not
effective across the organization. They wanted a way to integrate their existing HRIS with the new
workforce performance management system. They used three modules from Softscape to meet their
needs. By purchasing and implementing the Learning Management, Succession Planning, and
Workforce Performance modules, they were able to tie individual performance, goals, competencies
and job duties to leverage their workforce. By integrating the learning management and succession
planning with the performance management system, they were able to reduce re-work and leverage
existing information to create a strong understanding of the workforce today and project for years to
come. (www.Softscape.com)

SuccessFactors: SuccessFactors can link employee information from Ceridian and create efficiencies for
your organization. This system allows you to map competencies to positions and individuals to ensure
that employees are in jobs that fit their natural skills and promotes success for individuals and the
organization. You may utilize cascading goals so employees are held accountable for aligning their
efforts with that of the organization. In turn, employees stay focused and meet corporate objectives.
By providing clear performance metrics, growth paths and compensation for performance, your
companies will retain top performers.

SuccessFactors Professional Edition is a fully-supported solution designed specifically to help businesses
with their employee performance and talent management. Built on a single platform, this automated
and configurable web-based solution includes four core modules:
     Goal Management
     Performance Management
     Employee Central
     Analytics & Reporting

In addition, you may purchase additional modules such as 360 feedback, business performance
accelerators, compensation management, execution survey, learning and development, metrics
navigator and stack ranker. For more information on this product, please contact Teresa Heath-Alva at
651-282-8442 or email: Teresa.Heath-Alva@FarmCreditFoundations.com.

TOPS: TOPS is a web-based performance management system supported by the Workforce
Management team. Six Farm Credit Foundations employers are currently using TOPS. This system has
six main areas:
     Goals/Objectives
     Job Duties/Responsibilities
     Competencies
     Training/Learning Planning & Tracking Tool
     Recognition
     Overall Summary

TOPS is a customizable solution that can be modified to meet your organization’s unique needs. For
more information on this product, please contact Heather Binger at 651-282-8807 or email:
Implementation Suggestions
Often, managers and leaders think that changing the performance management process will
automatically improve performance management practices and results at organizations. However, this
is not always the case; unless core practices change, updating to a new system or technology for
performance management will lead you to the same results you have always seen in your organization.

Patricia Zingheim and Jay Schuster recommend seven ways to help improve performance management.

   1. Define “performance” at your organization clearly. Understand what behaviors you want to
      evaluate and what you want to do with the results of that evaluation of performance (is it tied
      to compensation decisions, promotions, development opportunities, etc.).
   2. Evaluate current practices. What is working well in your current performance management
      process and what needs improvement? Why are you thinking of changing processes/systems?
   3. Explore “Best”, Not Prevailing, Practices. Too often organizations call other organizations to
      get copies of their forms and select their favorite to implement at their organization.
      Remember that if you have a solid performance management process, all the form does is
      document it. The actual goal setting, feedback, coaching, discussion and exchange of
      performance information make for effective performance management. More importantly, find
      out what others do, but ask them why they do it and what it does to benefit the organization.
   4. Customize to your Organization. Performance management is not a one-size-fits all situation
      and you need to match the solution to where you are currently, where you want to go and how
      managers and employees feel about performance management. The solution needs to be
      ‘owned’ by your organization.
   5. Train Raters and Ratees. The tools of performance management are only as good as those who
      apply them. Teach managers how to give effective feedback and coach employees. Likewise,
      it’s helpful to teach employees how to receive feedback, since it might be a new experience for
      them as well.
   6. Provide Role Models. Performance management must be practiced by everyone in the
      organization, starting with the CEO and Board of Directors. When key individuals champion the
      process, others follow suit and the performance management initiative is much more successful.
   7. Communicate and Coach. Continually communicate to managers and employees why this
      process is used and how it adds value.

Creating an effective way to manage performance is not a simple solution. It takes well thought out
processes, effective coaching/feedback training and time to get everyone on board. By taking time to
first examine your current processes to determine what you like and want to change, you will be better
able to implement an updated performance management system/process that will truly have an impact
to your organization.

www.i4cp.com (December 2006) “Nine Key Practices Are Critical In Effective Performance

Mercer (October 10, 2008) “GO FIGURE: New Study Highlights Current Performance Management
Practices”. www.mercer.com.

Softscape “Midwest Healthcare Provider Achieves Efficiency Boost and Cost Reduction” (Medica case
study) www.softscape.com.

Softscape (May 2009) “5 Tips for Getting the Most out of your Workforce Performance Management
System” www.softscape.com.

Ventana Research (May 2007) “Research Finds Widening Gap in Workforce Performance Management”

Zingheim, P. & Schuster, J. (July 2008) “Performance Management “Challenging Times” Style”. The SZA
Total Rewards Bulletin.

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