The economic crisis has forced many executives to take tough decisions often resulting in radical cost cutting at all levels of their organization. But now, as markets start to show signs of recovery, what will these actions mean in terms of managing the performance of the business and employees?
Making the connection between business goals and work
In conversations with CEOs, we often hear the refrain ‘we came up with a good plan and communicated it very clearly – but it is not being carried out. Why?’
One reason is poor performance management resulting in poor organizational performance. What is happening at the frontline isn’t what is necessarily needed to deliver the business results asked for by the CEO. What has been ‘communicated’ has not always been as clearly understood. There is a disconnect between strategy and goals at a company level, and how these are translated into targets at a team or individual level.
Our experience reveals the same tell-tale signs about what is not working. In the majority of cases there is a gap between employee work and how that performance is managed and the impact on achieving business goals.
The hard and the soft of performance management
Strategic performance management makes the connection between the ‘hard’ – the business goals, the strategy – and the ‘soft’ – employee motivation and culture – of performance management. It links the strategy and the culture of an organization and managers’ ability to improve employees’ performance.
Employees want to do the ‘right’ thing, but they can only do so if they know what the right things are and receive regular feedback about their work, and if their rewards are aligned – and understand the impact on delivering the business strategy.
By successfully connecting these three elements: people, strategy and culture, CEOs can improve their business results, enhance employee productivity and increase the likelihood of achieving their business objectives.
What really gets in the way?
Over the years much time and effort has been invested to implement performance management ‘best practices’ as a way to ensure competitive advantage. Yet, for many organizations, it still fails to deliver superior performance.
The famous ‘balanced scorecard’ generates a lot of data that managers often have difficulty translating into actions that produce the desired business results. Furthermore, they are concerned about giving feedback that might demoralize hard working employees or worse cause them to leave. Often, there is little regular communication between managers and employees – no ‘culture of dialogue’.
Reward decisions are based on complex processes to translate performance into reward strategies that deliver the wrong results. And despite big investment to train managers in the processes, procedures and behaviors needed to implement effective performance management systems, employees complain that their performance systems are too complicated, too technical and not transparent about how individual performance helps deliver corporate goals.
Strategic performance management therefore, is more than just a target setting process or enhancing leaders’ capability to give feedback: it is about aligning company strategy to team and individual goals and rewards, and ensuring the whole organization is pulling together in the right direction.
The missing link – developing a new performance model
The missing link is the performance model. It provides guiding principles for the entire set of performance management beliefs, systems and processes for the business as a whole. A performance model helps to clearly define principles from a strategic and cultural context.
By generating transparency across the organization on what the goals are and how they can best be achieved in the current culture, it creates enormous power and motivation.
To develop a strategic performance model, executives need to ask themselves how they actually want to manage performance in their organization:
· What are the key levers in my business model to drive organizational performance?
· When looking at strategic targets – what are the key metrics to apply in the measuring systems?
· Who is in charge of making it happen? What is the accountability of line management?
· What is my reward philosophy around differentiating different performance levels?
· How do I reward the performance of my best people in terms of career opportunities?
· How do I deal with low performance – not just in how that feedback is given but what I need to do about how it is addressed?
For instance, in today’s current economic climate, many organizations are looking to cut costs. A powerful performance model will rescue them from cutting at the wrong elements when it comes to reviewing salaries or bonuses. Once stated what an organization clearly believes is differentiating levels of performance, it should stick to that philosophy even in tough economic conditions, otherwise motivation of the best people will drop and result on the overall performance of the organization.
While defining your performance model: watch out. Often the biggest barriers and enablers to creating the performing organization are the cultural factors – something most CEOs delegate to the HR department to resolve. This will not work. The key issues often arise from the way business decisions are taken. Line managers must be involved to identify cultural issues that affect business decisions. For example, if we take the classical planning dilemma between sales and operations. Regardless of a clearly developed process, discussions often end with the more powerful party winning the conflict – which may not necessarily be best for the business.
Tracy Bosch and Shereen Nicol are presenting Implementing Reward Strategy as part of the Total Rewards track at Conference 2010. For more information on this and other sessions, please refer to www.bchrma.org/conf2010.