Employee performance management in a global setting. Brenda Wilson

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2 Employee performance management in a global setting Brenda Wilson

3 Performance management overview

4 What is performance management? Performance management is a CORE business process driven by business strategy, that impacts reward and talent processes INPUT OUTPUT Business strategy Performance standards - Goals and competencies Goal setting Goals Periodic review Talent management decisions (Rewards, development, succession planning) Year-end review and calibration 3

5 What is performance management? To facilitate optimal organizational success by achieving three primary objectives Performance management Management Driving results Building capability Differentiating and linking performance to to decisionmaking 1. Driving results in direct support of the business strategy 2. Building capability the forward-looking component that encourages behaviors and development that will lead to future success 3. Linking performance to decision-making recognizes that to drive results and behaviors, performance management must result in real consequences dependent upon employee actions (e.g., compensation, advancement decisions) 4

6 Performance management program variations 1. How to set performance criteria 2. How to evaluate performance 3. How performance management will matter 5

7 Performance management program variations How to set performance criteria Actions Establish how performance management will be used by the organization Determine the aspects of performance that should be defined and measured Evaluate business and team goals for how to cascade down to individuals Research appropriate performance criteria globally Consider the timeframe for impact of goal achievement Decide how target performance should be considered Considerations Development Rewards decisions Succession planning Results Behaviors Quantitative measures Qualitative measures Job s line of sight to business results Job s impact on the business Globally consistent measures Measures specific to geography Measures specific to business unit Results and behaviors currently driving business results Learning and development goals for building future competency Set to expectations/budget Set for stretch goal 6

8 Performance management program variations How to evaluate performance Actions Establish the frame of reference for performance evaluations Weight outcome and process measures for an appropriate blend Determine roles and accountabilities Evaluate level of differentiation Decide how controlled the performance distribution will be and how it will be applied Considerations Absolute performance Relative performance Equally weighted Emphasize outcomes over process Employee self-assessment Customer input Second-level manager review Leadership calibration HR oversight Five-point or more rating scale Four-point or fewer rating scale Multiple gradations of performance Evaluation of future potential Guideline percentages for each rating Forced distribution or forced ranking Manager discretion within budget Distribution applied by grade/level, geography, globally 7

9 Performance management program variations How performance management will matter Actions Establish what talent management decisions performance management evaluations affect Determine how much discretion managers have in decision-making Decide how the organization will view performance Considerations Development program participation Rewards Succession planning and promotions Determined only by rating Guidelines based on rating Manager discretion within budgets Holistically by overall rating Results rating viewed for pay decision, behavior/competency for training decisions 8

10 Mercer s guiding principles developing an effective performance management system

11 Mercer s guiding principles Effective employee performance management in a global setting 1. Reflect your company s performance values 2. Get the commitment and active participation of executives 3. Focus on the right performance measures 4. Hold managers accountable for performance feedback and differentiation 5. Establish complementary roles and responsibilities 6. Minimize administrative burden 7. Integrate with other business and human resource processes 8. Provide necessary communication and training 9. Measure and track success 10. Engage in continuous improvement Based on Mercer performance management research and consistent with Mercer client experience and best-in-class studies 10

12 Mercer s guiding principles 1. Reflect your company s performance values Performance management approach should align with the company mission, values, and culture Degree of differentiation? Individual vs. team performance? Decision-making freedom vs. corporate/hr oversight? Openness of communication? Structured vs. informal? Measure results and/or efforts/behaviors? Encourage employee self-management? Relative or absolute performance? 11

13 Mercer s guiding principles 2. Get the commitment and active participation of executives Get it Understanding and knowledge Support it Belief and commitment Do it Action and behaviors Senior management team Understand how the performance management process will help to achieve strategic goals Champion the performance management process Actively and publicly endorse the process and lead by example The more you actively engage leaders at all levels in the process, the more successful performance management will be Never underestimate the power of the words and behaviors of the executive team 12

14 Mercer s guiding principles 3. Focus on the right performance measures Align individual performance expectations with organizational values and goals Keep performance criteria simple focus on the mission critical performance measures Use a blend of results and behavior-based measures Enterprise goals and strategic priorities Business unit/department goals Team objectives and targets Individual performance expectations and measures of achievement Job results Behaviors Assessing and rewarding results Performance management Compensation / recognition / learning / career movement 13

15 Mercer s guiding principles 4. Hold managers accountable for performance feedback/differentiation Differentiation: Provide managers with the guidelines and tools to distinguish levels of employee performance across their business units or departments Feedback: Require managers to give honest feedback and provide them with the training to do so effectively. People perform better when they receive regular performance feedback and coaching Rating model Classic standard distribution curve Curve with skew of performance at and above solid performance Employee rating Distribution of employees Performance conversations need to include coaching and development. Two-thirds of participants in Mercer s 2008 US Performance Management Practices Survey indicate their managers are only marginally skilled at providing career development coaching and direction to employees 1 5% 2% - 5% 2 15% 10% - 15% 3 60% 50% - 60% 4 15% 20-30% 5 5% 5% 14

16 Mercer s guiding principles 5. Establish complementary roles and responsibilities Cascade goals Align plans Engage and motivate Coach Assess and differentiate Reward and recognize Develop Participate in goal-setting Strive for achievement and development Self-assessment Key accountabilities for performance management Employees (Own achievement) Managers (Own outcomes) Human resources (Own process) Support vision Create tools Coach Drive deadlines Measure success 15

17 Mercer s guiding principles 6. Minimize administrative burden Automate administration but only after your company has established a well-defined foundation for performance management design: Leveraging available technology can minimize administrative burden and maximize participation and support Web-based software makes it easier for managers and employees to cascade and calibrate goals, access online performance documents, and gather multisource comments and approvals Integrated talent management software systems also are available. These systems allow companies to align and integrate their selection, development, performance management and rewards systems Streamline process steps don t just automate an overly complicated process. Look for opportunities to simplify your process steps and administrative requirements. 16

18 Mercer s guiding principles 7. Integrate with other business and human resources processes Business and talent planning processes should be aligned and integrated Use PM results for planning development programs Use strategic planning process to finalize business plans for coming year Oct Sep Use succession process to evaluate longer term performance and potential Aug Nov Dec Establish department goals for coming year Evaluate make-up of whole team along with business needs Jan Review performance and provide feedback throughout the year Jul Complete Performance Review Mid-Year performance check-in Jun Confirm annual goals Feb May Use performance management process to facilitate annual performance reviews and goal setting Mar Apr Conduct formal/informal mid-year performance management discussions Use competencies for recruiting process 17

19 Mercer s guiding principles 8. Provide communication and training Training should enhance managers performance management skills, including performance planning, feedback, evaluation and development: Teach managers how to have difficult performance feedback discussions and coach for development Teach all stakeholders the necessary skills, not just managers For example, employees, providers of 360-feedback, leaders who review evaluations, and HR specialists who support the process Support the process through ongoing communication provide all stakeholders with ongoing training and communication on performance management Some organizations use just-in-time communication to keep managers and employees informed of key events, such as goal setting, midyear discussions and year-end evaluations 18

20 Mercer s guiding principles 9. Measure and track success / 10. Engage in continuous improvement Track your success in implementation: Are stakeholders satisfied with the quality of delivery? Are performance appraisal practices differentiating performance levels? Measure the business impact: What performance measures optimize business performance? Analyze not only what people say, but also what they do: Behavior can be observed through statistical modeling of links between performance management practices and business outcomes Change with the business: Performance management is an ongoing process that should reflect the current and emerging business priorities and company values. As the business and workforce change, modify the performance management process Implement prioritized, targeted interventions: Constantly assess and improve as needed, but resist the temptation to change everything every year 19

21 Mercer s guiding principles Effective employee performance management in a global setting On track Needs improvement Reflects your company s performance values Gets the commitment and active participation of executives Focuses on the right performance measures Holds managers accountable for performance feedback and differentiation Establishes complementary roles and responsibilities Minimizes administrative burden Integrates with other business and human resource processes Provides necessary communication and training Measures and tracks success Engages in continuous improvement Based on Mercer performance management research and consistent with Mercer client experience and best-in-class studies 20

22 Global performance management design

23 Key design issues globally How globally consistent versus locally adaptable? Upstream activities Downstream activities Performance Elements Planning Objective setting Specification of desired performance Performance evaluation Development planning Corrective action Reward Feedback More globally consistent More locally adaptable Elements likely to endure more consistency: Communication of goals and goal setting Understanding what is expected and what success looks like Access to personal development Fair evaluation of performance and frequency of feedback (delivery is another issue) Elements likely to require local flexibility: Methods for evaluating performance Methods for delivering and receiving feedback Methods for determining and delivering rewards Data storage and protection 22

24 Current state of global performance management Scorecard by region/country General trends as noted by Mercer consultants Drive business results Performance expectations Performance feedback Performance coaching Linkage to rewards US Latin America North Europe South Europe Middle East China India Aus, HK, Singapore Japan, Korea = Mature; generally does this = Maturing; somewhat does this = Does not do this, generally 23

25 Key administration issues globally Overall and by region/country Globally, performance management (PM) is often an HR compliance activity, rather than a business driver or valued process owned by management: Most notably, coaching and development are seldom effectively addressed or incorporated in performance management Administrative regulations exist in many European countries (i.e., works councils) and some parts of Asia, which may limit implementation of global PM designs and systems PM is often administered in a stand-alone format, without ties to other human resource programs In Asia, many company cultures are resistant to global best practice PM performance tends to be evaluated with discretion, and competencies and attitude play a more significant role than individual objectives in this region This trend is particularly pronounced in Japan and Korea, where age and seniority are valued more than individual achievement 24

26 Global trends and future directions Globally, organizations struggle to link performance management to the business strategy/goals, employee rewards, and other human resource programs (e.g., learning and development), even in areas with more mature PM practices: In some countries, these linkages are seldom developed, or even considered (e.g., Latin America) While technology is a focus in the US, PM systems in other regions are often either manual or lack customization: Technology will play a key role in PM design in the future Web-based systems will allow integration with other HR processes PM will play a more important role in the future, as organizations become more diverse geographically and culturally: Global consistency, while allowing for locally-relevant customization, will be key 25

27 Further learning opportunities Additional training sessions are available. We encourage you to register to participate via this link: 30 online training sessions Our 30 sessions are organized into six topic modules (with five sessions per module): 1. Global policy setting and governance 2. Global growth and performance drivers 3. Global mobility 4. Europe and Middle East 5. Asia Pacific 6. Americas How is this program different from other programs? 1. Gold standard content 2. Online training 3. Flexible modular program 4. Online test and certification 5. Worldwide peer networking 26

28 Questions

29 Thank you Brenda Wilson Business Leader, Human Capital, Hong Kong

30 Copyright 2010 Mercer LLC. All rights reserved. This document contains intellectual property of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer s prior written permission. The information contained in this document has been obtained from a range of sources. While this information is believed to be reliable, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in this document.

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