SAMPLE. Not for training purposes. Student Workbook. BSBHRM403 Support performance management process. 1 st Edition 2015

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1 Student Workbook BSBHRM403 Support performance management process 1 st Edition 2015 Part of a suite of support materials for the BSB Business Services Training Package

2 Acknowledgement Innovation and Business Industry Skills Council (IBSA) would like to acknowledge HASCOM Pty Ltd for their assistance with the original development of this resource for BSBHRM403A. Revised by IBSA for BSBHRM403 (2015) Copyright and Trade Mark Statement 2015 Innovation and Business Industry Skills Council Ltd All rights reserved. Apart from any use permitted under the Copyright Act 1968, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise, without written permission from the publisher, Innovation and Business Industry Skills Council Ltd ( IBSA ). Use of this work for purposes other than those indicated above, requires the prior written permission of IBSA. Requests should be addressed to Product Development Manager, IBSA, Level 11, 176 Wellington Pde, East Melbourne VIC 3002 or sales@ibsa.org.au. Innovation and Business Skills Australia, IBSA and the IBSA logo are trade marks of IBSA. Disclaimer Care has been taken in the preparation of the material in this document, but, to the extent permitted by law, IBSA and the original developer do not warrant that any licensing or registration requirements specified in this document are either complete or up-to-date for your State or Territory or that the information contained in this document is error-free or fit for any particular purpose. To the extent permitted by law, IBSA and the original developer do not accept any liability for any damage or loss (including loss of profits, loss of revenue, indirect and consequential loss) incurred by any person as a result of relying on the information contained in this document. The information is provided on the basis that all persons accessing the information contained in this document undertake responsibility for assessing the relevance and accuracy of its content. If this information appears online, no responsibility is taken for any information or services which may appear on any linked websites, or other linked information sources, that are not controlled by IBSA. Use of versions of this document made available online or in other electronic formats is subject to the applicable terms of use. To the extent permitted by law, all implied terms are excluded from the arrangement under which this document is purchased from IBSA, and, if any term or condition that cannot lawfully be excluded is implied by law into, or deemed to apply to, that arrangement, then the liability of IBSA, and the purchaser s sole remedy, for a breach of the term or condition is limited, at IBSA s option, to any one of the following, as applicable: (a) (b) if the breach relates to goods: (i) repairing; (ii) replacing; or (iii) paying the cost of repairing or replacing, the goods; or if the breach relates to services: (i) re-supplying; or (ii) paying the cost of re-supplying, the services. Published by: Innovation and Business Industry Skills Council Ltd Level Wellington Pde East Melbourne VIC 3002 Phone: Fax: reception@ibsa.org.au ISBN: Stock code: BSBHRM4031W First published: June st edition version: 1 Release date: June 2015

3 Table of Contents Introduction...1 Features of the training program...1 Structure of the training program...1 Recommended reading...1 Section 1 Review the System...3 What skills will you need?...4 Human resources and performance management...4 What are the components of a performance management system? Review position descriptions Provide performance indicators Monitor performance appraisal meetings Ensure that good performance is rewarded Ensure that underperformance is addressed Provide advice regarding performance appraisal outcomes Section summary Further reading Section checklist Section 2 Promote the System What skills will you need? Clarify goals and methods Provide updates and address questions Arrange or deliver training on how to use the system Encourage feedback on performance Section summary Further reading Section checklist Section 3 Analyse Data and Recommend Improvements What skills will you need? Collect, review and analyse data Address skills and performance gaps Revise policy and procedures Make recommendations Continuous improvement Section summary Further reading Section checklist... 77

4 Glossary Appendices Appendix 1: Integrated performance management system Appendix 2: Example of a job description template Appendix 3: Example position description Appendix 4: Performance planning checklist Appendix 5: Conducting an appraisal (sample procedure) Appendix 6: Appraisal form Appendix 7: Appraisal summary template Appendix 8: Communication plan template Appendix 9: Skills audit/training needs analysis Appendix 10: Learning and development plan template Appendix 11: Personal development plan Appendix 12: Organisational report template

5 Student Workbook Introduction Introduction Features of the training program The key features of this program are: Student Workbook Self-paced learning activities to help you to develop an understanding of key concepts and terms. The Student Workbook is broken down into several sections. Facilitator-led sessions Challenging and interesting learning activities that can be completed in the classroom or by distance learning that will help you consolidate and apply what you have learned in the Student Workbook. Assessment Tasks Summative assessments where you can apply your new skills and knowledge to solve authentic workplace tasks and problems. Structure of the training program This training program introduces you to performance management processes. Specifically, you will develop the skills and knowledge in the following topic areas: 1. Review the system. 2. Promote the system. 3. Analyse performance data and recommend improvements. Your facilitator may choose to combine or split sessions. For example, in some cases, this training program may be delivered in two or three sessions, or in others, as many as eight sessions. Recommended reading Some recommended reading for this unit includes: Armstrong, M., 2006, Performance management: Key strategies and practical guidelines, 3rd edn, Kogan Page. Daniels, A., 2003, Bringing out the best in people, McGraw-Hill, New York. Dwyer, K., Essentials of performance management, Change Factory, viewed June 2015, < Hale, J., 2003, Performance-based management: What every manager should do to get results, Pfeiffer, San Francisco. Performance Management, PeopleStreme, viewed June 2015, < BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 1 of 109

6 Introduction Student Workbook PriceWaterhouseCoopers, 2008, Managing Business Performance: Metrics that Matter, available online, viewed June 2015, < Performance-Metrics-2008.pdf>. Rothwell, W. and Sredl, H., 1992, The ASTD Reference Guide to professional Human Resource Development Roles and Competencies, 2nd edn, Vol 2, ASTD, Alexandria, MASS. Tovey, M., Uren, M. and Sheldon, N., 2010, Managing performance improvement, 3rd edn, Pearson, Australia. Please note that any URLs contained in the recommended reading, learning content and learning activities of this publication were checked for currency during the production process. Note, however, IBSA cannot vouch for the ongoing currency of URLs. Every endeavour has been made to provide a full reference for all web links. Where URLs are not current we recommend using the reference information provided to search for the source in your chosen search engine. 1 st edition version: 1 BSBHRM403 Support performance management process Page 2 of Innovation and Business Industry Skills Council Ltd

7 Student Workbook Section 1 Review the System Section 1 Review the System This section is about the skills and abilities you will need to review a performance management system. This section focuses on: reviewing the components of a performance management system in light of strategic goals; reviewing position descriptions; providing performance indicators; monitoring performance appraisal meetings; ensuring that good performance is rewarded; ensuring that underperformance is addressed; and providing advice regarding performance appraisal outcomes, particularly in cases where there is disagreement on performance. Case study: Review performance management infrastructure at Australian Hardware Australian Hardware (a simulated business) is a large and expanding hardware and homeware retailer with approximately 140 stores located across Australia. In its vision statement, Australian Hardware outlines that it intends to lead the hardware and homeimprovement market in Australia within five years. In order to realise this vision, the organisation will take the following strategic approaches outlined in its business plan: increase sales revenue and gross profit maintain or increase market share control direct and indirect operational costs maintain superior product and service quality standards establish reputation of Australian Hardware as socially and environmentally responsible company. As part of supporting these strategic approaches, particularly maintaining service quality standards, Australian Hardware will focus on training and development opportunities for existing staff. Australian Hardware will offer a range of ongoing training options to meet business requirements and develop staff skills. Performance management will focus on individually tailored development goals in line with business expectations. At Australian Hardware, performance management is implemented from the top levels of management through to the store and team levels. The implementation of performance management is designed to be integrated with other related management functions such as financial control recruitment, and succession planning, risk management, work health and safety, training, etc. to take a unified and holistic approach to the development of individuals and of a high-performing organisation. Australian Hardware is committed to continuous improvement and undertakes regular reviews of its systems and processes. Connie is newly employed as an assistant to the HR manager at Australian Hardware. Her first job is to review the performance management infrastructure and make recommendations on what may need to be improved. Australian Hardware simulated business information, including business and operational plans, financial information, and policies and procedures (including performance management) can be located online at < BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 3 of 109

8 Section 1 Review the System Student Workbook What skills will you need? In order to review performance management systems, you must be able to: review current position descriptions to ensure that they specify key requirements of the role assist in reviewing the performance management system to ensure it aligns with the strategic direction of the organisation review managerial reports of performance indicators to ensure that they are consistent with the position description requirements check that performance appraisal meetings are held in line with organisational timeframes, that correct documentation has been completed, and that necessary parties have recorded agreement check that appropriate organisational procedures have been followed for acknowledging good performance and addressing underperformance provide advice and support where there is disagreement about performance appraisal outcomes. Human resources and performance management What is performance management? How does it relate to human resources (HR) and the human resources cycle more generally? Consider the following definition: Performance management can be defined as a strategic and integrated process that delivers sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams. 1 Performance management represents an important development in human resources management, growing out of a realisation that older approaches to HR management were simply not working as they should. Older models of HR management were found to be lacking in strategic approach and were not integrated sufficiently with other management systems or activities. This lack of strategic thinking resulted in HR practices that did not work in a unified way to develop organisational and individual capacity and achieve important organisational objectives. It is useful to think of performance management as being integrated both vertically linking organisational, departmental, team and individual objectives and capabilities 1 Armstrong, M., 2000, Performance Management: Key Strategies and Practical Guidelines, 2 nd edn, Kogan Page, pp st edition version: 1 BSBHRM403 Support performance management process Page 4 of Innovation and Business Industry Skills Council Ltd

9 Student Workbook Section 1 Review the System and horizontally linking other components of HR as well as other management systems (Armstrong, 2000). The combination of vertical and horizontal integration is illustrated in the diagram below. Performance management is geared to ensure that activities at every level of the organisation are coordinated and align with organisational goals. Importantly, while most organisational goal setting is top-down, goals at each level are best negotiated and agreed to ensure employee cooperation, hence vertical integration is two-way. Training/ Planning Recruitment Monitoring coaching The Human Resources Cycle Vision, mission, strategy Strategic HR management Another way to view performance management and human resource management is to view the relationship through the lens of the human resources cycle. The cycle describes the process of performance management from the individual perspective. Human resource management is an end-to-end process starting from the time that a person joins the organisation to the time that they leave. BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 5 of 109

10 Section 1 Review the System Student Workbook The human resources cycle is usually described in terms of four elements: recruitment, planning, development, and transition or exit: Recruitment Transition Development The human resources cycle is important for realising the aims of the organisation through the recruitment and development of its people and their capacities. Firstly, the organisation recruits employees to fulfil the needs of the organisation in accordance with its recruitment strategy. Secondly, the organisation inducts employees and initiates them into the organisation, including its culture, its ways of doing things; skills development and career planning is undertaken within the context of both organisational needs and individual development. Thirdly, the organisation develops employees through formal training and informal, on-the -job development. Performance management is undertaken in the form, for example of performance appraisals, etc. and individual performance is monitored. Finally, employees transition to new roles or leave the organisation. The entire HR cycle is managed to ensure the best possible outcome for both the organisation and employee at the least cost or risk. The Performance Management Cycle Planning While the HR cycle includes the stages of employees entry into and exit from a job role, the performance management cycle focuses on the time the employee is with the acting within the same role. 1 st edition version: 1 BSBHRM403 Support performance management process Page 6 of Innovation and Business Industry Skills Council Ltd

11 Student Workbook Section 1 Review the System Consequently, planning and development phases within the human resources cycle (highlighted to the left) can be considered on their own as a cycle within the HR cycle. These stages can be developed and expanded in more detail as illustrated below. Recruitment Transition Planning Development Review Performance review Plan Performance agreement Monitor Managing performance Act Personal development BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 7 of 109

12 Section 1 Review the System Student Workbook The four stages in the performance management cycle can be described in more detail as follows. Planning involves defining job roles and agreeing on performance outcomes. Development involves a number of activities that improve employees skills and knowledge in order to build workplace capability. The development needs to support agreed performance outcomes. The entire process is monitored to identify the results of the planning and development. Finally, performance planning is reviewed and amended, based on the results of monitoring, as necessary to support individual and organisational outcomes and to ensure continuous improvement. Why is it important to manage performance? Performance management is essential to the sustainable development of capacity within organisations. It has measureable impact on the job satisfaction and commitment of employees and the financial performance or organisations. For example, a study completed by Price Waterhouse Coopers in late 2008 of over 400 senior managers in Canada revealed that organisations with high financial performance were 26% more effective in planning, analysing, measuring and managing performance when compared with organisations of low financial performance. 2 Performance management systems are not just nice to have. Well designed and well implemented performance management systems have a direct impact on the profitability of organisations. What drives the performance of people? Performance management is based on the aim to improve the measurable competence of the organisation s people. Competence is the ability to perform a job role to a particular standard and it is demonstrated through behaviours and attitudes that are observable and measurable. So what drives optimal behaviours? In simple terms, there are three key drivers of behaviour in people: If people are going to change their behaviour, they need to believe that: 1. The new behaviour is good for them in some way. Good may come from remuneration, self-esteem, a sense of belonging or many other personal motivating forces. 2. Their peers and friends will support them in behaving in the manner required. People are affected by what they see as the subjective norm. If they believe that their peers and friends whose views they value do not support them demonstrating the required behaviour, they are unlikely to do so. 2 PriceWaterhouseCoopers, 2008, Performance management matters: Sustaining superior results in a global economy, p. 1, available online, viewed June 2015, < 1 st edition version: 1 BSBHRM403 Support performance management process Page 8 of Innovation and Business Industry Skills Council Ltd

13 Student Workbook Section 1 Review the System 3. They have the capability to behave in the way required. People need to believe that they have the necessary skills, knowledge, resources and authority to execute the required behaviour. Performance management systems must take into account these drivers of people s behaviour in order to be effective. Learning activity: Australian Hardware Review the Australian Hardware Head Office business plan and the performance management policy for the Wollongong store (available in the General Operations Manual). These documents are available online in the intranet at: < Consider the following questions and make note of your initial responses: What are the overall aims of the business? How can performance management procedures help to achieve organisational goals? How reflective of the human resources and performance management cycles are the Australian Hardware policies and procedures? What improvements would you make? At the end of this section, you will have a chance to consider your initial responses and make amendments. BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 9 of 109

14 Section 1 Review the System Student Workbook What are the components of a performance management system? The performance management system comprises core and optional components. Core components These are the elements of a performance management system that should exist in all organisations: goals, strategy and tactics job descriptions recruiting processes, policies and procedures orientation induction and probation key performance indicators (KPIs) development plans and performance plans annual (minimum) formal individual performance reviews regular coaching and mentoring formal training and informal upskilling reward and recognition scheme counselling, confronting and termination processes. Optional components Optional components assist in the delivery of the core components and are more appropriate when dealing with larger organisations. succession planning employee surveys customer surveys annual training plan competency framework policies on authority and behaviour written processes competency-based organisational design. Example: A model of an integrated performance management system See Appendix 1 for an example flowchart of a fully integrated performance management system. 1 st edition version: 1 BSBHRM403 Support performance management process Page 10 of Innovation and Business Industry Skills Council Ltd

15 Student Workbook Section 1 Review the System Learning activity: Define components of a performance management system Review the core and optional components of a performance management system listed on page 10. Create a glossary of terms for those that you are less familiar with. Learning activity: Identify components of a performance management system Review the Australian Hardware simulated business documentation and identify components of the performance management system. How many can you identify? Take note of what components of performance management systems may have been neglected. Rate how well the core components of a performance management system have been implemented on a scale of 1 to 5 (1 is poor, 5 is good): Component Communicated goal, strategy and tactics Job descriptions Recruiting processes policies and procedures Orientation induction and probation Key Performance Indicators Development and performance plans Annual (minimum) formal individual performance reviews Regular coaching and mentoring Formal training and informal upskilling Reward and recognition scheme Counselling, confronting and termination processes Score BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 11 of 109

16 Section 1 Review the System Student Workbook Review position descriptions Clearly defining job roles is a key component of performance management systems. If people don t know what their job is and how it relates to the aims of the organisation, they can t be expected to perform the right tasks to the required standard. Alignment to organisational planning In order for position descriptions, or job descriptions, to be useful in a performance management system, they should communicate the purpose of the job and the tasks that are required in order to fulfil the needs of the role. To do this, it is important that the position description is aligned to organisation s strategic aims. A hierarchy of plans exists in organisations. At the top of the hierarchy, a strategic or business plan is developed by senior managers or the executive team to document how they are going to achieve the organisation s vision and mission. Business plans are vital for running any business as they provide a clear picture of the current state of the business, the position the organisation is in and how it s going to achieve its goals. Strategic or business plans are long-term plans and detail the organisation s future, usually for the next three to five years. These plans set out strategic goals; statements of what should be achieved over the period of the strategic plan (e.g. over the next year, five years, ten years). Once the organisation s strategic goals have been set each business unit or department then develops an operational plan. The operational plan may be a long-term plan or a shorter-term plan detailing the weekly, monthly and quarterly operations of each business unit or department. Each operational plan specifies the activities the business unit or department plans to complete to achieve the relevant strategic goals of the organisation. Job descriptions need to be written to align with operational plans, business plans and the organisation s overall vision and mission. Elements In addition to the purpose of the job role and the main tasks that the person in that role needs to perform, optional inclusions in a position description include: organisational hierarchy authority supervisory requirements working conditions equipment used physical requirements qualifications required. See Appendix 2 for an example of a position description template. 1 st edition version: 1 BSBHRM403 Support performance management process Page 12 of Innovation and Business Industry Skills Council Ltd

17 Student Workbook Section 1 Review the System Learning activity: Develop a position description Find a position description to review. You can use your own position description or source one from an employment website or use the position description provided in Appendix 3. Review the position description and see how many of the elements listed above you can identify. Now, consider: Is the position description aligned to organisational objectives? What is included in the position description? How specific and useful is the information? What is missing from the position description? If the position description is for your own role, or one you are familiar with, how reflective of the actual role or its conditions is the position description? Provide performance indicators In order for performance to be effectively monitored and evaluated, it needs to be measured. Performance is generally measured using key performance indicators (KPIs). Usually, statistics generated from data collected from the business form the basis of KPIs. For example, a business may have as one of its key performance indicators the percentage of its income that comes from return customers. KPIs measure an organisation s performance in critical areas, often called key result areas (KRAs). Key result areas may include general areas of performance important to the business or the role such as: financial measures, productivity, customer focus or training and development. KPIs show the progress (or lack of it) toward realising the organisation s objectives or strategic plans by monitoring activities in key result areas. These are the activities that, if not properly performed, are likely to cause severe losses or outright failure. KPIs will differ depending on the organisation. As discussed previously with respect to organisational goals (see the diagram on page 5), KPIs are also vertically integrated. That is, objectives and KPIs at a lower level of the organisation align with objectives and KPIs set at higher levels. As such, KPIs may also measure team or individual performance using indicators such as: dollar value of sales number of tasks performed per hour percentage of customer calls answered within the first minute. BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 13 of 109

18 Section 1 Review the System Student Workbook Objectives, targets and the KPIs that measure these can be classified into three types: input, process and output. Input KPIs measure activities such as management actions to implement performance management and achieve organisational goals such as holding performance review meetings, coaching or providing training. Process KPIs measure the efficiency of processes, for example, the number of times stock is sold or used over a period of time (inventory turnover or stock turn). Another example, more geared towards the measurement of individual performance might be contribution to the improvement of team processes or the support of co-workers to do the same. Finally, output KPIs measure the results of inputs and processes. These could include productivity levels or number of sales per month for example. KPIs are often said to be leading, in that they indicate future performance, or lagging, in that they reflect past performance. For example, sales training numbers may indicate future sales performance, while current sales figures reflect past activity. To be useful in the context of performance management, KPIs should generally conform to the following three requirements. 1. KPIs should promote common, clear understanding. They must be: a. simple enough for anyone to understand b. calculated in a standard way across the organisation c. documented. 2. KPIs should correlate with performance. They must: a. directly measure the results of a process b. be directly affected by changes in that process c. not be directly affected by factors outside of that process. 3. KPIs, even soft KPIs, such as behaviours and attitudes, should be quantifiable, that is they should be expressed as a number or a percentage so that they can be measured. An important principle to follow is that all individual or team KPIs should be related to organisational strategic KPIs. If the alignment is not clear, you need to question whether the KPI is appropriate. Sometimes what is measured in terms of individual, team and organisational performance ends up being what is easy to observe and measure (or was has always been observed and measured) and not what it is important to measure. In other words, don t measure an aspect of performance because it is easy to express as a number or ratio, measure it because it matters. 1 st edition version: 1 BSBHRM403 Support performance management process Page 14 of Innovation and Business Industry Skills Council Ltd

19 Student Workbook Section 1 Review the System Job-related objectives When you are examining indicators of people s work performance, you may find it helpful to approach it from two different angles. You can consider objectives in terms of targets or in terms of tasks or projects. Targets include quantifiable and time-bound objectives. These may be measured by KPIs such as the number of sales or productivity statistics. Tasks or projects include activities and outcomes which must be completed at a certain time to a particular standard. Regardless of how you identify the objectives to be measured against, the objectives should be developed SMART: specific, measurable, achievable, relevant and timeframed. Tip: Give employees SMART goals or objectives Employees should be provided with simple, concise and clear statement of what is to be achieved, a date and any measurable or assessable criteria as required. S Specific States exactly what the organisation wants to accomplish and uses action words such as design and implement. When writing specific goals you are identifying the tasks to be done and the time it will take to complete them. M Measurable Measurable goals provide you with milestones that indicate your progress. Setting measurable targets allows you to determine and compare the progress of team members or employees. A Agreed Each team member or employee should be in agreement as to what is to be achieved. R Realistic Goals must be attainable. There is no point in setting unreachable targets. Instead, set goals that might stretch capabilities a little. Goals that are too hard may not allow you to perceive important but small improvements in performance; Goals that are too easy to achieve may undermine performance potential. T Timeframed Goals must have deadlines if they are to be effective. Setting deadlines helps you to estimate your progress and focus on your achievements. BSBHRM403 Support performance management process 1 st edition version: Innovation and Business Industry Skills Council Ltd Page 15 of 109

20 Section 1 Review the System Student Workbook Tip: Write effective goals or objectives Goals should never be ambiguous or leave any doubt in anyone s mind about what is to be achieved. To construct clear goals you need to use a specific language structure: Action verb... To do Measurable result...what Target date... By when At what cost? For example: To increase... To do My sales by 10%...What By 1st of July... By when With no increase in sales expenses... At what cost Job standards Objectives and standards are important element of job descriptions and accountabilities. They are, however, two distinctive concepts. Objectives are time-bound and relate to particular individuals or teams. Standards are levels of performance that must be consistently achieved and may apply more generally; to anyone in a particular role. For example, all customer service staff, or any employee that makes customer contact may be expected to conduct themselves in accordance with company values and be friendly, courteous and helpful. Although standards may be quantifiable or measureable, the essential function of a standard is to define the quality of a job function. Example: Writing job standards One essential function of a customer service representative at Australian Hardware is to answer telephones, i.e. answering telephones is what the employee is expected to do. How can we tell that the customer service representatives have answered telephones properly; that is, to a certain standard of quality? We might say that telephones are answered properly if: all calls are answered with courteous tone of voice telephones are answered by the third ring callers are transferred to correct extensions the employee introduces themselves by name, specifies their department and asks how may I help you? If the Australian Hardware employee answers the telephones according to this list of standards, we know that the telephones are answered properly. 1 st edition version: 1 BSBHRM403 Support performance management process Page 16 of Innovation and Business Industry Skills Council Ltd