towerswatson.com Fine-Tuning Performance Management at UPS

towerswatson.com Fine-Tuning Performance Management at UPS

Fine-Tuning Performance Management at UPS By Mary Franz UPS by the Numbers 2012 revenues: $54.1 billion 399,000 employees serving 8.8 million customers 4.1 billion packages delivered in 2012 96,173 vehicles in delivery fleet Operates one of the world s largest airlines, with 1,931 flight segments daily Whether enabling an online shopper to reschedule a delivery via Facebook or ensuring the safe shipment of temperature-sensitive vaccines to a remote corner of the globe, the seamless simplicity with which UPS serves its customers belies the complexity of its operations. As it successfully transformed itself from a U.S. package delivery company to a global leader in supply chain management and logistics, UPS has depended on its ability to manage the performance of its most important asset: its workforce. Our employees strive to perform at the highest possible level, and performance management is about how we reward employees for doing just that, said John McDevitt, senior vice president of human resources and labor relations at UPS. Performance management is the engine of our organization, said Mike Johnson, vice president and chief human resource officer. At its core, performance management reflects our ability to engage employees around a common set of goals and objectives, and to measure how effective we are at getting employees to meet those goals. Performance management has been part of UPS since the company s founding in 1907, but today it s more important than ever. The reasons: a highly competitive global business environment, heightened customer expectations and increasing job specialization in areas ranging from logistics engineering to analytics. To maintain its leadership position in this dynamic environment, UPS recognized that it needed to focus more sharply on engaging and retaining top-performing employees. We wanted to hold true to the concept of partnership and teamwork while recognizing the different degrees of contribution, said McDevitt. We also wanted to help our people understand how their individual performance contributes to the success of their team, business unit and company overall. Consequently, in 2011, UPS started on a journey to more clearly differentiate the contributions of each employee and to better align pay and performance through the introduction of a new base pay system. But early employee feedback from surveys, focus groups and informal communications revealed that some employees were struggling to understand the change. 2 towerswatson.com

John McDevitt, senior vice president, human resources and labor relations, UPS

Towers Watson consultant Emma Flack (far right) with UPS executives (left to right) Leslie Follman, succession management supervisor; Justin Brennan, learning project supervisor; Laura Collings, training communications manager; and Amy Mancilla, global learning network manager Employees weren t fully making the connection between performance and rewards, said Laura Collings, training communications manager. There was a gap. UPS leaders quickly realized that while much time and energy had been invested in designing a new compensation process, there was more work to be done clarifying some employees misconceptions about performance management in general and, in particular, how individual performance goals would be set and measured. It was natural for us to turn to our partners at Towers Watson to help us think through this challenge, said Johnson. A carefully orchestrated communication and change management initiative that reached UPS s 40,000 full-time management employees in the U.S. helped to turn the situation around. By delivering communications tailored to the needs of various employee groups at the right time and via the right channels, the leadership was able to bridge the gap in employees understanding of the link between their individual performance and their rewards. 4 towerswatson.com

The Disconnect In seeking greater alignment between performance and rewards, UPS set out to strengthen its already substantial focus on performance. In the past, UPS had relied on an egalitarian approach to people management and rewards, emphasizing loyalty, commitment and effort over individual performance and results for the current year. It now intended to move to a performance management strategy that placed a high value on differentiating and rewarding individual performance in a given performance period. UPS needed to create a rewards for performance environment, and this required a shift in its performance culture, said Towers Watson senior consultant Danielle Rasey. A number of issues contributed to the challenge. There were basic misunderstandings about the process, Collings said. Anne Schwartz, vice president of global leadership and talent development at UPS, added, The phases of the performance management process weren t viewed holistically as part of a yearlong cycle. Many employees regarded performance management as a once-a-year activity involving the completion of an online assessment form. Not only did employees view performance management as a one-off annual event, they didn t fully understand their role in the process. Consequently, some managers weren t spending enough time coaching employees, helping them set goals and providing feedback throughout the year. And many of their reports regarded performance management as a manager-driven process in which they played a limited and largely passive role. Planning a Course Correction UPS had only a few months to plan and implement a course correction before its 2012 year-end evaluations and goal setting for the coming year got under way. We needed to act quickly to ensure that employees at all levels from the part-time supervisor to the senior executive understood the different components of the performance management process and the relationship between rewards and performance, Collings said. We knew we d have to put a team together very quickly. Towers Watson already understood the journey we were on and where we wanted to go, so we brought them in right away, Schwartz said. An interdisciplinary team with specialists from key areas including learning and development, compensation and organizational development was formed to design a communication and change management initiative. Its objective was to educate UPS employees at all levels about the value of performance management, their respective roles in the process and how they d be rewarded for the success they helped to create. The primary requirements included: An easy-to-access, single source of information about the performance management process Clear, consistent, ongoing communications delivered via multiple channels A training curriculum and tools, tailored for various employee audiences, focused on sharing information and building skills related to the performance management process Cultivating a Performance- Oriented Culture Two principles guided the effort: Keep it simple, and be transparent. We needed to make sure that the materials would be understood by frontline workers, not only by leadership, Schwartz said. The team conducted a stakeholder analysis to identify the actions required of each workforce group, as well as their information needs. Leaders in corporate, HR and the business units served as change champions, providing overall direction to employees. HR area managers acted as subject matter experts, providing detailed information to employees on the performance management cycle. The components of the communication and change initiative included: Performance management web portal. As the central repository of performance management materials, the portal puts accurate, up-todate information at the fingertips of the entire workforce and helps to convey the importance of performance management. The easy-tounderstand materials include FAQs and emphasize action items, thereby helping employees understand the steps they need to take. Not only did employees view performance management as a one-off annual event, they didn t fully understand their role in the process. Strategy at Work 5

The Big Lesson Learned: It Takes an Interdisciplinary Team UPS leaders assembled a strong interdisciplinary team to spearhead the performance management project. The team consisted of a project manager from UPS and representatives from UPS s learning and development, corporate communications, compensation and organizational development functions. Towers Watson communication and change management consultant Emma Flack was embedded in the team three days a week for roughly six months. Towers Watson senior consultant Danielle Rasey served as the strategic advisor guiding overall efforts and deliverables. This interdisciplinary project team was critical to the project s success. The primary benefits of such a team include: Performance management training program. The team developed an online training program that all employees were required to complete in preparation for year-end performance reviews and goal setting for the coming year. The program, consisting of a series of short, engaging Flashbased modules, explains the year-round cycle of goal setting, continuous feedback, evaluation and rewards, as well as the roles of managers and employees in the cycle. Also included is a library of skill-based training materials related to performance management. Customized communications. Borrowing from consumer marketing, the team developed communications and activities tailored to its different audiences. For example, HR leaders attended webcasts that prepared them to deliver consistent messages about performance management. Ongoing collaboration. This type of team facilitates collaboration among various groups, leading to a quicker resolution of important issues. For example, at UPS, feedback from market research about gaps in employees understanding of performance management was quickly communicated to team members from learning and development. They ensured that these issues were addressed in the new performance management training modules. Ready access to subject matter experts. With subject matter specialists on the team, expert knowledge was available when and where it was needed. Sustained change. Because the team was staffed largely by UPS employees, its members continued to own the change after completing the formal project, which is essential to sustaining the strengthened link between performance and rewards. The team also created materials to meet managers needs: a detailed brochure on performance management at UPS, manager checklists of performance management activities and discussion guides to help managers have the right performance-related conversations with employees. Finally, all employees had access to the performance management website, the training materials, a performance management overview brochure and FAQs organized by topic. Email distributed company-wide reminded employees about performance management milestone dates. For example, to help prepare employees for their year-end evaluation conversations with managers, the team developed a visually compelling, concise email reminder that included a link to the new performance management web portal. New visual identity. The team also created a set of templates to ensure that all materials from the training modules to the brochures had a consistent look and feel, making performance management content easy to recognize. And a new, eye-catching graphic identifier helped employees visually understand the performance management cycle and easily spot performance management materials. The team worked tirelessly to ensure that all of its messages were simple and transparent in keeping with the project s main principles. The communication campaign stressed that performance management is a shared responsibility between managers and employees. Other messages focused on bridging gaps in employees understanding of performance management elements, including: Goal setting. Goal setting helps ensure that managers and their direct reports share an understanding of individual performance expectations for the coming calendar year and how progress against the goals will be measured. Continuous feedback. Ongoing formal and informal feedback aids in assessing day-to-day individual performance and identifying areas for improvement. Performance-related discussions are most effective when employees at all levels are open to receiving and providing feedback. 6 towerswatson.com

The link between performance and rewards. Ongoing feedback, and formal midyear and yearend evaluations, help employees understand how well they re meeting expectations and how they ll be rewarded for contributing to UPS s success. Rewards can be financial and nonfinancial, and include merit pay as well as recognition (e.g., awards and gift certificates for achievements), skill development and career advancement opportunities. The team s efforts were well received. Employees were pleased with the consistent, easy-tounderstand messages. And as a result, they were able to develop a better understanding of their responsibility in the performance management process, Collings said. Delivering the Change How did UPS gauge the success of the effort? In its first two months of operation, the performance management web portal generated over 130,000 visits, reflecting the effectiveness of the new site. A question was added to the company-wide employee engagement survey to gauge employees understanding of the performance management process. It scored an 85% favorable rating. Over 26,000 management employees completed the performance management training by the deadline, a notable accomplishment considering that this training took place during the holiday season, UPS s busiest period. 98% of eligible employees received a performance evaluation within the required time frame using guidelines from the training program. There s now much greater clarity around how individual performance is measured and how everyone s performance collectively helps UPS achieve its objectives, Johnson said. UPS has always had a high-performance culture. The real change for us is that we now have a stronger, more effective mechanism in place to determine whether our employees are aligned around the company s performance objectives. with minimal detours. Johnson concurred, adding, Our Towers Watson consultants helped us to think more broadly about the issues we were tackling. And in addition to their expertise, they brought us very useful data. There s now much greater clarity around how individual performance is measured and how everyone s performance collectively helps UPS achieve its objectives. The Ongoing Journey The successful communication and change management initiative enabled UPS to build the foundation for its ongoing performance management journey. I don t see a conclusion to this project; at UPS, we re always constructively dissatisfied, McDevitt said. UPS plans to regularly review and refresh the performance management web portal, training modules and communication materials. We ll continue to listen to employee feedback and to make necessary changes to messaging and processes, Collings said. UPS leaders believe that when performance management is done right, everyone wins. Individual and team performance improves, customers are satisfied and the company sharpens its competitive edge. Towers Watson provided a valuable external perspective, McDevitt said. We were coming to a fork in the road, and Towers Watson consultants gave us good direction at a time when we wanted to get from point A to point B as quickly as possible Mike Johnson, vice president and chief human resource officer, UPS, with Anne Schwartz, vice president, global leadership and talent development, UPS (left), and senior Towers Watson consultant Danielle Rasey Strategy at Work 7

About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With more than 14,000 associates around the world, we offer consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Copyright 2013 Towers Watson. All rights reserved. TW-NA-2013-35433 towerswatson.com