CEB ReImagineHR - Research on Performance Management and Reward

The CEB has been running another successful ReImagineHR conference in London, including some of their client case studies and also more of their excellent research.

I think some of the most powerful insights this year focus on performance management and reward.

Performance management:

• Clearly needs to change - only 4% of HR leaders feel they are effective at accurately assessing employee performance
• According to CEB, removing ratings isn’t the way to do it and in fact despite the hype around it less than half of HR leaders are interested in doing this.
• Removing ratings reduces the amount of time managers spend on performance management together with the quality of their performance conversations and negatively impacts employee engagement.

I think the most important suggestion which I completely agree with is that HR leaders should make an informed decision about removing ratings considering both their organisation’s situation and how removing ratings will affect managers and employees.

I am personally very pleased that so many organisations are dropping reviews or ratings as it was never a process I appreciated as either appraiser or appraisee, but that’s beside the point. It really doesn’t matter whether it’s the trend or not - the only thing which matters is what is right for a particular business, and the employees who work in it.

Linked to this, it’s important to note there is never one perfect solutions - ratings helps do some things well and fails at others, no ratings does other things well but suffers different problems too. So I also agree with the CEB’s advice that when organisations do remove ratings they need to take    other appropriate actions to mitigate what may be the negative consequences.

For example to ensure that employees still have a positive perception of pay differentiations, organisations should 1. guide managers to base pay decisions on simple criteria such as performance against role in order to identify employees who should receive the highest awards; and 2. help employees understand how their contributions and the organisational context have informed their pay decision in order to demonstrate how pay decisions were made fairly.

The CEB therefore suggest bigger and easier gains can be made by focusing on other changes in performance management, e.g.:

• Provide Ongoing, Not Episodic, Performance Feedback
• Make Performance Reviews Forward Looking, Not Backward Looking
• Include Peer, Not Just Manager, Feedback in Evaluating Performance

Reward:

The other issue for many organisations is how they reward people appropriately without the crutch of performance ratings.

CEB research suggests this may not be a particularly significant issue as organisations would do better to give a few big pay increases for large differences in performance rather than lots of little increases for small differences.

I agree with this logic too though I worry about the impact of large differentials on the performance of CEB’s network contributors. That could be reduced by paying for different types of performance, for example improvements in, as well as exceptional levels of, performance.
 

But the key comes down, once again, to the power of conversations - enabling managers to use narratives rather than ratings to explain compensation decisions to employees, helping them understand the impact of their performance and contribution.


Another great set of privations and I look forward to next year’s conference.

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Organisation Prioritisation Model

I've finally completed work on my 'organisation prioritisation model' (OPM) which has been in development for the last five years or so. At least I think it is now finished - certainly the only changes I've made to it over the last few years have been very minor. I've also used the model successfully in a couple of OD and HR transformation contexts. And I'm personally convinced it's a major step forward compared to Galbraith's Star model, McKinsey's 7S etc.

• It's more complicated - because the business environment and our organisations are more complicated. However it tries to make things as simple as possible by identifying four core organisational elements separately from the enablers which support it.
• In particular it gives more focus to the role of relationships and means we don't need to focus on something as unmanageable as culture. 
• It's also dynamic, showing how design needs to be based upon clarity around organisational capabilities and principles (what and how) and that this then leads to the creation of human, social and particularly organisation capital.  
• It helps prioritise an organisation's choice of structure based upon which of the core elements are most important. Eg a very people oriented organisation (perhaps one which competes on Kaplan & Norton's learning and growth perspective) may want to use a community based structure.
• The enabling elements separate out reporting arrangements eg self management and groups eg whether we are focusing on teams or individuals from the choice of structure. This helps aid creativity in design of organisation models and means we can be more specific in describing things like holocracy (a group based, top down, horizontal team structured organisation design).

There's loads more I could explain, but which will wait to later posts. However I'm happy to answer any specific questions you might have here.

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Positioning Reward for the Future

Positioning Reward or the Future - with my friends at beqom

November 15th at 3.30pm

Microsoft, 2 Kingdom Street, London W2 6BD

 

Registration is now open - book here.

See you there!

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Techno Dreams in Recruitment

I've been quoted in this article in Recruiter magazine: Techno Dreams Become Reality.

The article explores the use of predictive analytics, serious gaming and virtual reality in recruitment and is well worth reading.

I comment on the role of machine learning:

Machine learning is a part of predictive analytics that is helping recruiters to use technology far more intelligently. “Machine learning raises the potential of being able to analyse even deeper patterns within the data produced within and around recruitment,” says Jon Ingham, people and organisation development strategist at the consultancy Strategic Dynamics. He believes that while recruiters and candidates are busy getting on board with social media and mobile, technology development has hit a plateau – but that is set to change.  

“The drivers of these changes are around IT analytics, particularly when blended with machine learning systems to deepen the amount of insight we can generate quickly and easily,” he says. “The next five years will be really exciting as these technologies take hold.”

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Hot topic: Paying bonuses

There's an interesting piece in HR Magazine today questioning whether bonuses are an effective reward mechanism.

The article includes comments from Craig Newman, chief executive of Woodford Investment Management which gave up paying bonuses last year. Their conclusion was that bonuses are largely ineffective in influencing behaviours.

There are several more recent examples which relate to this too.

The Wells Fargo scandal is probably the biggest of these. And also the most stupid. If you pay people bonuses to sell bank accounts without motivating other behaviours or creating an ethical culture guess what's going to happen? People will sell more accounts. Even if their customers don't know about them.

Or actually equally powerfully there is the example of ride operators at Alton Towers being paid bonuses to minimise downtime. With understandable if terrible results.

Bonuses can work, but only if you set measures carefully and you understand how people are going or are not going to be motivated around these.

I like Peter Cheese's comments that "we need to go back to the fundamentals, starting with how we evaluate performance beyond just delivery of numbers, how we assess performance, making it clear and simple, how we recognise and encourage good performance beyond just paying more, and how we create fairer payment systems."

I'll be speaking about some of the opportunities to do this at a session with beqom and Microsoft in London on 15th November.  Come along if you can - I'll share more details with you shortly.

The beqom Total Compensation platform is used globally across all industry sectors by over 100 large companies such as Microsoft and Vodafone. It addresses all Performance and Compensation aspects such as Salary Review, Bonus, Long-Term Incentives, Commissions, Benefits, Non-cash rewards and all key drivers towards Employee Performance and Sales Performance.

HR, Sales and Finance organizations leverage the platform to drive performance, retention, cost optimization and... happiness among their people.

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