Performance manageme:

Hayley MacDougall. tfareer andperformarice develcf)mentmanager at Orangenalent

ORABLOSSOMS

If the future's bright at Orange UK, it's at least partly down to a new performancemanagement process that encourages staff to think about how they can drive results

BY REBECCA JOHNSON

anagers in the telecomssector are facing newchallenges as companiesbring together theirofferings, from mobileand fixed-line tobroadband and multiplay,under one brand.

This process of convergence meant thatby 2005 Orange, taken over five yearsearlier by France Telecom, found itselfcompeting with providers such as BT andSky in an increasingly tough marketplace(seepanel, page 60). It needed to know thateveryone in the business was deliveringagainst its strategy.

To meet this challenge, Orange UKrealised it needed to make its performancemanagement more robust. It wanted all staffto be clear about how their objectives related

to those of managers and the organisation.The aim was to get everyone to own theprocess and see how they were contributingto the company.

All employees' annual salary reviewswere related to individual performance andthere was a profit-related pay scheme. Formanagers, there was also a bonus scheme.Performance was rated on a scale of one tofive. However, employees had concerns aboutthe fairness of these ratings. The companyhad to improve confidence in the process if itwanted to continue to link reward to businessas well as personal performance.

In spring 2005, Hayley MacDougall,career and performance developmentmanager at Orange Talent, asked seniormanagement what was important tothem. "We started by going to the headof Orange UK, executive vice-president

WWW.PEOPLEMANAGEMENT,CO.UK 26 OCTOBER 2006 57

Bernard Ghiilebaert, and agreeing five eoreprinciples," she says. These were:• there should be one elear cascade processfor objectives;• reward should stay linked to performanee;• there should be a balance between "what"and "how" objectives;• the process needed to he owned hythe business;• performance should be clearly andconsistently differentiated across the ratings.

It was evident, says MaeDougall, thatthe process couldn't he driven by HR."What came out from talking to executiveswas that they felt that in the past HR hadcome to them with the process and toldthem what to do. Then, when it wasn'treally working, they weren't happy to takeownership of it."

It wasn't only executives who hadproblems with existing processes. Inemployee surveys, only 32 per cent agreedsenior managers set objectives thatsupported the business; 34 per cent feltmanagers gave clear guidance and direction;

and only 20 per cent felt underperformancewas being properly managed.

What's more, some areas ofthe husiness,such as customer services, were using adifferent system from the rest ofthe firm,making it difficult to match reward toperformance consistently. MaeDougall knewthat the only way to get the buy-in the chief

Managers didn'twant somethingpicked up fromMicrosoft, forexample, andimplementedhere

executive wanted was to involve executives inthe design proeess so they could championit, knowing it eould deliver on their targets.

Senior managers were not interestedin adopting a best-practice approach.MaeDougall explains: "They were tellingme they wanted to be involved - they didn'twant something picked up from Microsoft,for example, and implemented here." Shedid do some research, but says there werefew organisations ofthe size of Orange thatcould offer a strong model for performaneemanagement. Instead, McDougall cameaway with "snippets of good stuff" that shethrew in for consideration.

A steering group of eight directors, onefrom each ofthe eore business directorates,came together in a facilitated session toconsider the path they should take. Oneimportant decision was to keep aspects ofthe system that were working well. Oneethe board had approved their ideas, the planwas taken to the employee consultationbody in the UK to get staff feedback oncommunicating the changes.

So what has changed? First, the companyreconsidered its five-point assessmentrating scale. People had always struggledto accept that a rating of three meant theyhad met their objectives and were doinga good job. This led to disagreements andskewed ratings.

"Historically, the majority of staffwere being awarded overperformanceratings," says MacDougall. "It couldn't betrue." The company had tried applyingthe same expected distribution curve toeach department, so throughout the firmthe same percentage of people receivedeach rating. This didn't work becausethe company was not getting a tmepicture of performance.

The solution MacDougall and thesteering group came up with was whatshe calls "an Orange thing": they keptthe five-point scale but changed thenumbers to names to make them moretransparent. One became "unacceptable";two was "getting there"; three - the markof effective performance - became "great

stuff." Then four became "excellent" and fivewas "exceptional".

A calibration process replaced thedistribution curve to ensure consistentratings. The calibration happens at severallevels, including the board, and has so farbeen run twice. For instance, on the board,each vice-president gives an overview

of their directorate's performance, thenproposes a rating for each direct report,which is discussed. "It gets them to thinkabout the rating as they have to justify it,"explains MacDougall. "The biggest driver isto get them to talk about their team, gettingexposure of one team's people to the others."

At director level, 12 ratings changed asa result of the exercise, enough to prove toMacDougall and the company that the newprocess worked. A similar review is held ineach directorate, reviewing the spread ofratings for each team to improve consistency.

The way objectives are set has alsochanged, and has been linked explicitlyto the balanced scorecard approach thatOrange introduced at the same time. Vice-presidents' objectives are developed intandem with the scorecard and cascadedthrough the organisation. Their objectivesarc also published on the web, "to showpeople that they do it too," says MacDougall.The strategy and "business excellence"teams work with HR to set the scorecardand translate strategy into operational

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ORANGE: A POTTED HISTORY

Orange was launched in the UK in 1994 andby 1997 had one million customers. Followinga takeover by Mannesman AG in 1999, itsfuture seemed less certain. In 2000 FranceTelecom bought Orange for €39.7 (£26-8)billion, twice its paper value, to secure thebrand for its own products. The Frenchphone giant then set about rebranding all itsown subsidiaries to the Orange name, thelatest being Wanadoo, the UK broadbandinternet provider, which recently integratedwith the UK mobile arm.

France Telecom has operations in22 countries with 147 million customers andits strategy is convergence of services, usingOrange as the brand for all its mobile, fixed-line, multiplay (which allows further dataexchange), broadband and business offerings.Orange UK, incorporating Wanadoo, has13,000 staff, of whom around 6,000 arecall-centre operatives.

i Further infoHayley MacDougall is speaking on "Performancemanagement" at the CIPD'5 annual conference andexhibition in Harrogate on 24-26 October.»www.cipd.co.ul(/ace ^ ^ M ^TJ 020 8612 6248 ^ ^ V ' iT\mis\ conference

& e x h i b i t i o n JfJOd

The intentionwas to get staffto take a biggerinterest in nowthe coinpanywas doing.In the past,non-managerperformancenad no reallink to rewardother thanthe annualsalary review

targets along four dimensions: shareholders,customers, partners and suppliers, and"people" (the workforce). Individuals'objectives are aligned to these. "It is one ofthe big breakthroughs," says MacDougallof this HR-business partnership. "Workingtogether on the bigger picture was quite astep forward for Orange."

These measures set an example fromthe top and enable all employees to seehow their own objectives form part of thebusiness plan.

Objectives are weighted to ensurebehaviour is given the attention required.Staff must have two or three behaviouralobjectives related to the outputs expectedof them. In line with the chief executive'sdemand, this constitutes the "how" ofperformance, and normally makes up 40 percent of the rating score. The new rating isflexible enough to allow managers to allocateonly 20 per cent to behaviour when corebusiness targets are the top priority, but theystill have to be taken into account.

The other significant change is the wayin which performance scores are linkedto reward. Since the middle of last year.Orange has had a profit-share scheme fornon-managers called "Success share", butit paid out equally to all. Now companyperformance dictates how much moneythere is to share every six months, while

individual performance determines howmuch of this pot anyone gets. "The intentionwas to get the mass of the employeepopulation to take a bigger interest in howthe company was doing. In the past, non-management staff performance had no reallink to reward other than the annual salaryreview," MacDougall explains.

For managers, the bonus scheme has alsoaltered. In the past, managers had to setthe personal element of someone's bonuswithin a band: for example, for a rating ofthree, between 65 and 80 per cent couldbe awarded.

Many managers told the company thiswas too restrictive. The new method setsonly a minimum limit, allowing managersa pot for their team and the ability to setindividual bonuses at their discretion. Itgives managers more flexibility vrithoutmanipulating the ratings.

The rollout of the new process, and theonline system to support it business-wide,began in January, so it is still early days.However, MacDougall says anecdotalfeedback is good. The calibration processis producing results. "We haven't hadto go back to any vice-presidents andchallenge their spread of ratings. Theyhave taken ownership and sorted it outthemselves," she says. What's more, allthe vice-presidents had their objectives inplace by December 2005, instead of March.And, MacDougall says, there's a noticeableshift in the way senior management talksabout performance.

The calibration process is also beginningto provide a backbone for successionplanning and talent reviews. In addition,this year 91 per cent of all employees hadtheir ratings in on time, compared vdth 60per cent in previous years, even taking intoaccount adapting to a new online tool. Andcustomer service staff- half of the Orangepopulation - have given the new approach athumbs-up in their feedback, despite it beinga bigger cultural shift for them from theirold methods.

MacDougall adds that the next employeesurvey will run in November and will givea good indication of the success of thechanges. Some new questions have beenadded to get a better idea. "It's about gettingclarity for employees on what we are doingand giving the board confidence that weare doing what we need to do to deliver thestrategy" she says. •

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