INNOVATION IN PERFORMANCE
MANAGEMENT
June 25, 2011
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Discussion
 Innovation as key to enhance performance
 What is innovation
 Need for innovation, performance management as an enabler
 Performance Management - Context:


What is performance management. Need for performance management system
Distinction between performance appraisal and performance management
 Issues and perceptions about performance management system


Perception of performance management
Understanding gaps
 Key drivers in effective performance management system
 Aligning employee performance to organizational goals
 Role of motivation, metrics, culture and employee development in performance
management
 Summing up:
 Practical aspects in making performance management work resulting in high employee
performance
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Innovation
Innovation
 Innovation – new ways of thinking and doing things
 From Industrial age to information age to innovation age
INDUSTRIAL AGE
INFORMATION AGE
Steady, continuous change
-
Unpredictable, discontinuous change
Predictable outlook
Customers have limited choices
Long life cycles
High entry costs to markets
Physical resources drive value
Innovative in internal
1980
INNOVATION AGE
1990
-
Unpredictable outlook
Customers have multiple choices
Short life cycles
Low entry costs
Intangible resources drive value
Innovation is collaborative
2000
2010
2030
(Jeremy Hope: Performance Management in the innovation age: An introduction)
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Need for Innovation
Innovation
 Innovation as a necessity:
 Change in market demands new ways of response
 Apple, Microsoft, Google, Cisco, GE etc.,
 Airbus and Boeing. Airbus’s A380 as response to Boeing’s 747
 Need for speed and rapid response for threats and opportunities
 Boeing’s change in policies and practices in execution of 787 dream liner
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What is Performance Management
Context
Performance Management is a continuous process of driving employee
effectiveness and facilitating his / her development thereby resulting in
organizational success
Need for Performance Management
- Creates direction for the organization by aligning
employee expectations with organizational needs
- Clarity on employee deliverables, rewards and
roadmap for employee development.
- Facilitates continuous dialogue among manager,
employee and the organization
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Performance Appraisal and Performance Management
Context
 Performance appraisal is a subset of performance
management process.
 While performance appraisal concentrates on setting /
reviewing and rating of goals, performance management is a
continuous process by linking other HR systems like rewards,
career planning / development
 Emphasis of performance appraisal is on performance aspect
of employee while performance management concentrates
on performance, social and motivational aspects and the
impact they have on the organization
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Perception of Performance Management
Perception
 Another HR driven activity forced upon managers. Tedious forms and
templates with no concrete value outcomes.
 A process which is often top down and has limited correlation to rewards
and development
 Outdated, mere formality and usually results in more heartburn. A
process that creates rift within teams as it force-fits employee
performance and does not account for emotions
Understanding Gaps
 Lack of alignment of what employee perceives / values against
organizational realties / goals.

Performance management as a stand alone process without pre-requisite
and integrating aspects like organization culture, employee motivation,
behaviors etc.,
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Quality of Performance Appraisal
Drivers
 Alignment of employee goals with organizational objectives
 Clarity of performance expectations and deliverables.
Distinction between goals and activities
 Continuous dialogue between manager and subordinate as
against bi-annual formality
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Goal Alignment: Top Down approach


Organization dictates
goals. A set strategy is
translated into actions
Unit Level
Goals
Team level
goals
Individual
Goals
Individual
Goals

What to do is already
decided. Managers are only
expected to implement

Not the best model for
creativity and innovation
Organization
Goals
What is good for
organization is good for
employee
Team level
goals
Individual
Goals
Drivers
Unit Level
Goals
Team level
goals
Individual
Goals
Team level
goals
Individual
Goals
Individual
Goals
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Performance goal setting – Collaborative approach


Employee has a say, give
and take approach
Organization
Goals
Alignment of personal
goals with broader
objectives
Unit Level
Goals
Team level
goals
Individual
Goals
Individual
Goals
Team level
goals
Individual
Goals
Drivers

Enhanced ownership
and accountability

Facilitates participation
in organization building
Unit Level
Goals
Team level
goals
Individual
Goals
Team level
goals
Individual
Goals
Individual
Goals
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Motivation and
Rewards
Organizational
Culture
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Motivation and Rewards
Drivers
 Motivation as a key element of Performance Management
system. Employee satisfaction and commitment affect
performance
 Workplace system where employees have greater discretion
to think, act and contribute to overall work. (Theory Y)
 Inviting people to play bigger and important roles and
explaining to subordinates “why something must be done”
acts as motivating factor to enhance performance
(Linda Hill, Harvard Business School)
 Employees must believe that their effort will lead to overall
success and in turn will lead to valued personal outcomes
(Vroom’s Expectancy theory)
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Motivation and Rewards
Drivers
 Role of intrinsic and extrinsic rewards in effective
performance management system
 Intrinsic Rewards as superior motivating tool




Growth
Recognition
Quality of work
Sense of achievement
(Frederick Herzberg, “One more time: How do you motivate employees?” (HBR
classic), Harvard Business Review, January 2003.)
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Managerial Capability
Drivers
 Being a “right” manager more important than being “nice”
manager
 Ability of manager in having “continuous dialogue” is critical
for success of performance management process
 Manager as a “coach” rather than as “command – control”
authority
 Telling versus exploring
 Directing versus facilitating
 Authority versus Partnership
(Performance Management: Measure and improve effectiveness of your employees:
Harvard Business Essentials)
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Employee Development

Drivers
The concept of “Necessary and Sufficient conditions” in employee develop
interventions

Traditional Training approach versus “decision science”
(John W. Boudreau and Peter M. Ramstad, Tapping the full potential of HRIS: Shifting the HR
paradigm from Service Delivery to a Talent Decision Science”)

Individual development results in higher motivation, leading to enhanced performance
resulting in overall organizational effectiveness

Necessary and sufficient conditions for individual development
Development Conditions
in learners
Learners must
Insight
Know what they need to develop
Motivation
Be willing to invest the time and energy required to develop
themselves
New Knowledge
Know how to acquire the new capabilities required
Real world practice
Receive and use opportunities to try new skills at work
Accountability
Internalize new capabilities to improve performance and
results
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Mary Dee Hicks and David B. Peterson, “The Development Pipeline,” Knowledge Management
Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Performance
Metrics and
Accountability
Managerial
Capability
Employee
Development
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Performance Metrics and Accountability
Drivers
 Lack of transparency, inconsistency in rakings / ratings major
source of demotivation
 Measure what is “critical” and not what is “easy to measure”

Ex: Bottom line performance as a goal but compromising integrity as a value?
 Measure those which have maximum impact and effectiveness on
performance rather than generic measures
 Ex: Turnover metrics. Importance of turnover of experienced and critical
role holders against overall turnover
 Importance of “means to achieve the goals” in addition to “end
objective”
 Critical qualitative metrics for consideration
 Behaviors and competencies
 Values of the Organization
 Nurturing performers and creating leaders for the future
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Drivers for effective Performance Management
Drivers
Quality of
Performance
Appraisal
Organizational
Culture
Motivation and
Rewards
PERFORMANCE
MANAGEMENT
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
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Organizational Culture
Drivers
 Culture as “taken for granted, shared, tacit ways of perceiving,
thinking and reacting” (Edgar Schein)
 Culture as “building block” to organizational performance and
includes norms, values, beliefs, assumptions and behavior
pattern of employees
 Culture as enabling factor for performance




Empowerment as against command and control
Means as important as outcomes
Team versus individual focus
Customer centric as against internal focus
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Summing up
First Steps in making Performance Management Work
Champion culture of trust and
empowerment with clarity on
deliverables and accountabilities
Quality of
Performance
Appraisal
Motivation and
Rewards
Organizational
Culture
Understand which programs have
maximum impact on performance
and measure its impact
Encourage regular conversations and
dialogue between manager and
employee
PERFORMANCE
MANAGEMENT
Focus on intrinsic aspects of
employee motivation and create
individual plans in partnership with
line manager
Managerial
Capability
Performance
Metrics and
Accountability
Employee
Development
Be a coach to line manager. Make
them accountable for “people
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management” outcomes. Nurture
THANK YOU
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