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Reinventing Performance Management - How to do it right

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Reinventing Performance Management - How to do it right

  1. 1. Rusty Lindquist V P H C M S T R A T E G Y & I P A T B A M B O O H R Mykkah Herner M O D E R N C O M P E N S A T I O N E V A N G E L I S T A T P A Y S C A L E
  2. 2. The Law of Inertia We tend to be carried forward in life by the inertia of our past. @rustylindquist
  3. 3. Performance Reviews of performance reviews end up decreasing employee performance - Psychological Bulletin of executives believe their current program doesn’t result in performance or engagement. – Deloitte 30% 58% 70% of companies are now reconsidering their performance strategy. – Bersin 70% of companies surveyed think performance reviews are worth their time - Deloitte of HR executives say yearly evaluations are useful. – Deloitte 6% 2% of workers are dissatisfied with their perfpormance reviews. – Deloitte80% of employees with highest performance scores aren’t actually the highest performers - CEB 2/3 -5% improvement in performance is all managers believe will be generated in the process. - CEB 3%
  4. 4. “Performance appraisals are perhaps the most reviled standard practice in all of management” Performance Appraisals Peter Cappelli Wharton School of Management “Why we love to hate HR” HBR
  5. 5. It’s time to blow up HR and build something new Rethinking HR Why we love to hate HR What will it take to fix HR It’s time to split HR HR faces a crisis of credibility in the boardroom HR is our “favorite corporate punching bag” A crisis of credibility
  6. 6. A Little History
  7. 7. Performance Problems
  8. 8. “You rate me on ‘Marcus makes decisions quickly’ and your rating reveals simply whether I make decisions more quickly than you do. If you rate me on ‘Marcus is a good listener’ and we learn only whether I am a better listener than you. All of these questions are akin to you rating me on height. Whether you perceive me as short or tall, depends on how short or tall you are." Idiosyncratic Rater Effect Marcus Buckingham Harvard Business Review
  9. 9. • Overgeneralization • Random measurement error • Interpretation error • Idiosyncratic rater effect • Recency Bias • Confirmation Bias • Faulty memory syndrome • Quantification of past behaviors is ineffective • We tend to let it stand for more than it should • Negative psychological impact (defensive and demotivating) • Too many variables • Too often rater is unqualified (doesn’t understand job) • Shown to decrease morale • Found to create infighting • Leads to “gaming” and politics • Too subjective • Too infrequent • Too much focus on past, not enough on future • Too costly • Takes too much time • Too despised Performance Problems
  10. 10. Exodus “When asked what would shake up the HR world most in 2016, 44% of companies said shifting from traditional performance reviews in favor of real-time feedback” —2016 BambooHR Comp Best Practices Report
  11. 11. 80,000 hours 2,000 managers The Result Employees were: Less inspired Less motivated Turnover Increased Adobe Performance Review Process
  12. 12. Adobe (2012) PROBLEM SOLUTION Annual performance reviews were eating up a ton of time. And it wasn’t giving the business return for that time. Stopped doing annual review “in favor of regular check-ins allowed Adobe to have a lightweight process that served—rather than distracted from—people doing their best work.” http://www.businessinsider.com/adobe-abolished-annual-performance-review-2014-4
  13. 13. Accenture (2015) PROBLEM SOLUTION CEO Pierre Nanterme said that sharing only once a year what you think of your employees “doesn’t make any sense.” Performance is an on-going activity, and people want to know if they’re doing things right on an on-going basis. It should be “instant performance management.” Accenture “plans to implement a more fluid system that would allow for immediate employee feedback on an ongoing basis.” https://www.washingtonpost.com/news/on-leadership/wp/2015/07/21/in-big-move-accenture-will-get-rid-of-annual- performance-reviews-and-rankings/
  14. 14. GE (2015) PROBLEM SOLUTION Removed stacked rankings, firing the bottom 10 percent each year (10 years ago). They’re now removing performance reviews completely because it “leads to a tendency for HR to focus excessively on process over outcomes.” And doesn’t make sense for their current workforce, who want feedback more “frequent, faster, mobile-enabled.” They’re transitioning from bell- curve management to focusing on their people who are more motivated by connection, inspiration and developing people http://qz.com/428813/ge-performance-review-strategy-shift/
  15. 15. 70% of companies are now reconsidering their performance strategy —Bersin
  16. 16. Done Well
  17. 17. THE RIGHT WAY
  18. 18. Frequent Feedback Increase communication touch points
  19. 19. • Stack ranking • Annual review cycles • Encourage ownership thinking • Provide frequent feedback • Build skills 42% of millennials want feedback every week Source: Ultimate Software & the Center for Generational Kinetics Motivating Employees
  20. 20. Preferred Frequency by Generation https://www.tinypulse.com/blog/difference-in-perception-between-generations
  21. 21. Increase Cycle Time Intended Direction Actual Direction Don’t wait till here Catch them here And here Organizational Waste
  22. 22. Signal to Noise Ratio
  23. 23. THE RIGHT WAY
  24. 24. Ask Simple Questions 1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a fiv e-point scale from “Strongly agree” to “strongly disagree”]. 2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on the five-point scale]. 3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis]. 4. This person is ready for promotion today [measures potential on a yes-or-no basis]. Performance Questions Now Asked By Deloitte
  25. 25. Ask Simple Questions 1. If Allison got a job offer elsewhere I would a. Do everything I could to keep Allison. We’d be in trouble! b. Convince Allison to stay. Allison would be difficult to replace c. Need to think about it. Allison does a decent job. d. Wish Allison well. I’ll be able to find a better replacement anyway e. Be relieved. It’s not likely to work out anyway. 2. How engaged is Allison at work? a. High engagement and a great attitude. b. Good engagement and a mostly positive attitude. c. Medium engagement and an okay attitude. d. Low engagement and is burned out. e. No engagement and is checked out. 3. What are some things Allison does well? 4. How could Allison improve? Performance Questions Now Asked in BambooHR
  26. 26. Connecting Performance with Pay
  27. 27. • Performance management aligned to business goals & cycles • Paying for results • Getting creative about both performance and pay Modern Pay for Performance
  28. 28. • 50.1% based increases on performance • 61.8%* give individual incentives • 25.7%* give team incentives *of those giving bonuses How are companies linking Performance with Pay?
  29. 29. “Employees won’t believe there is a link between pay and performance unless they can see it.” — Margaret O’Hanlon re: Think Consulting
  30. 30. Culture and perks that reward high performers Higher increases for top performers Results-based incentive plan Performance-based rewards & recognition Linking Pay to Performance
  31. 31. • Bonus vs Incentive • Match incentive cycle to work cycle • Alignment: individual, team, organization • Additional structure considerations • Self-funding – variable costs • Keep it simple Incentive Pay
  32. 32. Base pay increases are determined by performance and position in market-based range using a Merit Matrix Exceeds Meets Does not Meet Base Pay
  33. 33. Employees and employers are in a relationship where they agree to things What’s your Deal? • Exchange of value • Mental math – does it add up?
  34. 34. Getting Creative
  35. 35. • Passes to sporting events • Catered lunches for winning teams • Days off after big deadlines • Choice of work assignment • Development opportunities • Lunch with the CEO • Remote work Get Creative
  36. 36. It’s not a best practice if it’s not best for your organization
  37. 37. Thank you! BambooHR Receive a free job posting on our ATS and full HRIS for one week. We will contact everyone within the next few days to set this up. Download a free ebook around pay for performance. PayScale http://bit.ly/29UBsHO
  38. 38. Questions? Rusty Lindquist V P S T R A T E G I C H R I N S I G H T S B A M B O O H R @ r u s t y l i n d q u i s t r u s t y @ b a m b o o h r . c o m w w w . l i n k e d i n . c o m / i n / r u s t y l i n d q u i s t Mykkah Herner M O D E R N C O M P E V A N G E L I S T P A Y S C A L E @ m y k k a h _ h e r n e r M y k k a h H @ p a y s c a l e . c o m w w w . l i n k e d i n . c o m / i n / m y k k a h h e r n e r