tying employee performance to compensation in a high involvement organization
TRANSCRIPT
Tying Employee Performance to Compensation in a High
Involvement Organization
Bill [email protected]
http://billmarkis.com
The Changing H. R. Paradigm
’70s — the decade of compliance (the cop) ’80s — strategic HRM (siloed perspective) ’90s — strategic partner (align function,
processes & policies to execute strategy) ’00s — the decade of talent (create
processes to attract, develop and retain the talent critical to organizational sucess) (¹)
High Involvement Organization Practices
1. Employment Security
2. Selective Hiring
3. Decentralization of Decision making
4. High Compensation based on Organizational Performance
5. Extensive Training
6. Less Status Distinctions across Levels
7. Extensive Sharing of Information (2)
Introduction
The purpose of this presentation is to show how performance can be managed and tied to compensation decisions
Objective of Performance Management
To communicate with employees and provide them specific feedback on performance
To avoid “Social Loafing: the tendency of individuals to slack when work is shared and individual performance is not assessed.”(3)
Traditional Approach
Employees were forced to endure a once-a-year paperwork exercise of performance appraisals
Not very effectiveDreaded by employees and managers
alike
Traditional Appraisal Factors
Employees and managers were evaluated on traits such as:
• Dependability
• Punctuality
• Loyalty
not on their accomplishments
Traditional Appraisal was Dysfunctional
There was, at the most, only a vague connection between the appraisal content and the work results that were needed by the organization to be successful
The New ApproachPersonality trait rating forms have been
replaced with more objective measures of performance focusing on job-related outcomes and behaviors
Employees and supervisors jointly list specific objectives to be accomplished during the appraisal period
Performance measurement levels (Meet and Exceed) are defined
TRADITIONAL NEW
Basis of measurement
Activity or behavior Results or accomplishment
Number of accomplishments
One or two Five
Focus of measurement
Efficiency Effectiveness and Efficiency
Development of measures
By management, internal staff specialist, or outside consultant
By employees within work group
Level of measurement
Individual Both individual and by work group or team
Purpose of measurement
Control Monitor and provide feedback, reinforcement, support problem solving
Traditional versus New Measurement Systems
360 Degrees
Employees can receive appraisal feedback from their peers and subordinates as an adjunct to an appraisal from a manager or supervisor
Timing of review
Change the process from a paperwork exercise into an ongoing dialog where there will be no once-a-year surprises
From being a once-a-year event to an ongoing process, with short formal reviews every six months
Dynamic Process
Formal reviews are focused on a discussion of progress in: Meeting objectives Plans for the following appraisal period
Objective Setting
Objectives should encompass: Plans for personal contribution to corporate
or team objectives:
╬ Quality and production increase
╬ Cost reduction
╬ Improvement in safety customer service
Teamwork objectives
Learning and development objectives
What Drives Objective Setting
Objectives relate to personal accomplishments consistent with the objectives of the employee’s team or work group and are dictated by:
╬ Company Culture
╬ Competitive requirements
╬ Corporate strategy
╬ Market conditions
╬ Customer demands
Company Culture
Shared beliefs and values established by leaders and then communicated and reinforced through various methods, ultimately shaping employee perceptions, behaviors and understanding
A company’s structure and design – its body A company’s culture – its soul (4)
Example of Company Culture — Values
The Five Company Values
People Our success depends on the talent of our people working individually or in teams to deliver results for our shareholders
Performance Promise execute deliver with discipline and passion
Sense of Urgency Time is a resource we seize to our advantage
Customer Relationships
We’re fanatics about driving customer success
Innovation We unleash our imaginations to search for what’s possible and deliver what’s needed
Typical Types of Objectives
Managers and employees in the work group should develop objectives consistent with company strategy and customer needs:
Quality measures
Financial measures
Timeliness measures
Productivity/efficiency
Employee DevelopmentPerformance management focuses on:
Increasing an employee’s value to the team
Personal development
Employee development is an important part of the appraisal process: Improve an existing skill Develop a new skill that brings value to the
work group
Types of objectives
Strategic means setting direction, e.g.: Long Term Objective
Tactical is the work flow, e.g.: Short Term Objective
Transactional are the day to day activities and are not objectives
Long-term Objective
A long-term objective shall be an expectation of: Best in class or world class:
╬ Performance╬ Quality╬ Customer service╬ Flexibility
as called for by our company’s strategy
Short-term ObjectiveIs an intermediate target that is better than
current performance, but not necessarily as challenging as the long-term objective
It is challenging but attainable
It can be gradually made more difficult over time, thus establishing a pattern of continuous measurable improvement toward the long-term objective, which itself becomes more challenging over time
Define Performance LevelsExceeds Expectations
Overall performance clearly and consistently meets most position requirements and exceeds many
Compared with others performing the position, this performance level clearly exceeds that of others – among the better performances for this performance period
Define Performance LevelsMeets Expectations
Performance accomplished by a competent employee who is experienced and fully trained to perform the position
Effective performance indicates that position requirements are consistently met and some occasionally exceeded
Define Performance LevelsBelow Expectations
Performance has continually failed to meet the minimum acceptance standards of the position for which the person was hired
Performance is not fully proficient and is below expectations that are normally achieved by a proficient employee
Sample Objectives forAdministrative Assistant
1. OBJECTIVE WEIGHTING: MEASURE: JOB KNOWLEDGE
Extent of job information and understanding possessed by employee.
Being competent in required job skills and knowledge.
Exhibit ability to learn and apply new skills.
Keep abreast of current developments.
Require minimal supervision. Display understanding of how
job relates to others. Use resources effectively.
MEET: Assistant demonstrates competency in the skills and knowledge required. She learns and applies new skills within the expected time period. She is knowledgeable about current developments in her field and she works within the normal scope of supervision. Assistant displays a good understanding of how her job relates to other jobs. She effectively uses the resources and tools available to her. EXCEED: Assistant demonstrates significant expertise at her job because of her in-depth knowledge and skills. She is an exceptionally fast learner and able to quickly put new skills to use. She reads and researches extensively, staying on top of current developments that might impact her field. Assistant performs extremely well with very little, if any, supervision or assistance needed. She displays an extraordinary understanding of the interrelationship between her job and the jobs of others. She ingeniously puts the resources and tools available to her to maximum use.
Sample Objectives for Human Resources
OBJECTIVE: WEIGHTING: MEASURE: 1. FACILITATE TRANSITIONING IT
FUNCTION TO PEROT Coordinate employee transfer with Perot
15% MEET: Provide Perot the data needed, on a timely fashion EXCEED: Provide Perot the data needed, on a timely fashion, and communicate to transferred employees its implications
2. ORGANIZATIONAL DEVELOPMENT
Initiate OD intervention for Billing & Settlements
5% MEET: Completed 3rd quarter EXCEED: Completed 2nd quarter
3. TRAINING FOR ORGANIZATION EFFECTIVENESS
Provide in-house training on Setting Objectives; Preventing Sexual Harassment; Ergonomics; and Customer Service. Increase # of MS Office and soft-skills CBT courses
15% MEET: Completed 3rd quarter EXCEED: Completed 2nd quarter
Motivation
Objective setting in the organization has an important influence in employee motivation
Specific and difficult objectives lead to higher employee performance – provided those who had to attain them accepted the objectives
Employee Participation
The degree of employees’ acceptance of objectives is a function of: Their level of participation in setting
objectives The extent to which they perceive that the
final objectives are attainable
Reinforcement
Employee behavior is strongly influenced by the consequences of that behavior
Positive behavior that is inspired and reinforced is more likely to reoccur
Reinforce approximations of the final desired behavior or result of that behavior
Relationship of Reinforcement to Objective Setting
The motivational impact of objectives comes from employees’ anticipation that they will be reinforced for attaining an objective
Self-fulfilling Prophecy
Objective attainment itself is reinforcing since it enhances an employee’s sense of accomplishment and self-worth
If the objective is too difficult, employees will not try to attain it or they will become frustrated with trying to attain it and stop trying
Performance Pay
The assumption is that individual or group-based pay plans improve organizational performance Correlation does not imply causation Infer proper determinants of performance Experiment. Learn by doing (5)
Link Performance to Pay
Position in Salary Band
Performance Level
Below Midpoint
At or Above
Midpoint
Above Maximum lump sum payment
Exceeds Expectations
9.9% 8.1% 6.3%
Meets Expectations
6.3% 4.5% 3.2%
Below Expectations
0% 0% 0%
References “Workplace 2000, The Revolution Reshaping
American Business” from Joseph H. Boyett and Henry P. Conn, Dutton, 1991
Performance Now! software, by Knowledge Point (¹) Patrick M. Wright, Human Resource Executive
magazine, Forecast 2009 (2) Jeffrey Pfeffer, The Human Equation, 1998 (3) Julia Whitty, writer for Mother Jones (4) Naomi Cossack, SPHR, content manager SHRM’s
HR Knowledge Center (5) Fay Hansen, Merit-Pay Payoff?, Workforce
magazine, 11/03/08