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The Real Revolution In Performance Management

Steven Hunt

After years spent complaining about performance management, companies are finally redesigning this critical, yet much maligned, part of human capital management. Here’s a quick snapshot of what the real revolution in performance management is about based on my experience working with hundreds of companies.  And it is not about ratings.

Performance management refers to processes used to communicate job expectations, provide ongoing support to help employees achieve those expectations, and make decisions about pay, promotions, and other scarce resources based on employee performance against expectations.  The revolution taking place in performance management is a result of companies realizing that performance management is not a single activity.  It is two distinct activities that must be kept separate to be effective but must be linked to be impactful.

Performance coaching: maintaining ongoing discussions about performance expectations.

Performance investment: accurately assessing employee performance and using this data to make decisions related to pay, staffing, and development.

Thinking of these two areas as separate but linked allows companies to make major advances in how they engage employees throughout the year while ensuring the company also invests its resources in a manner that reflects the level of contributions different employees make to the company.

The performance coaching revolution. Managers and employees should discuss performance throughout the year so there are no surprises at the end-of-year review.  But managers and employees inevitably fail to hold these ongoing discussions.  They either forget to have regular check-in meetings or they use the meetings for tactical problem solving instead of engaging in coaching conversations about goal alignment and performance expectations. Happily this is starting to change.

Companies are starting to seriously address managers whose behaviors, intentional or not, suggest they have little interest in the career success of their direct reports.  It has long been said that employees don’t quit companies, they quit lousy managers.  In a scarce labor market companies cannot afford to lose talent due to poor management practices.

To address this issue, companies are making use of innovative, continuous performance management technology that helps managers and employees schedule and hold productive ongoing one-on-one coaching sessions.  It reminds them to have the meetings, helps guide session agendas, and tracks data from the meetings that can be referred to over time.  It also allows companies to measure whether managers are performing the core tasks required to be an effective manager (i.e., talking with direct reports about their jobs and careers).  This technology might be likened to a “health app” for employee-manager dialogue.  Instead of reminding you to eat right and exercise regularly, it reminds you and your manager to have clear goals and discuss them regularly.

The performance investment revolution.  Despite claims about companies “getting rid of ratings”, all companies rate their employees in the sense that they place them in different categories based on perceived performance contributions. I have yet to meet a business leader who didn’t want to know who the high performers are in their company and who didn’t believe there should be some link between pay and performance. Consequently, I have yet to see a company that doesn’t rate its employees in some manner.  The question is whether those ratings are accurate and impactful.

Historically, most companies had managers provide an annual overall rating of the performance of their direct reports.  The problem is these ratings were often inaccurate, failed to differentiate between employees, and/or had limited influence on decisions related to compensation and staffing.  People often viewed the rating process as an exercise in stress, futility, and bad data. Rather than continue using a flawed rating process, many companies have decided to eliminate ratings made by individual managers operating in isolation. The old annual ratings are being replaced by calibration sessions that stress collaborative discussion between managers and other stakeholders to determine which employees provide the greatest impact on company success.

Note that calibration is not the same as forced ranking. Calibration is about coming together to discuss and agree on the performance levels of employees. This may include placing employees into a predefined performance distribution, but forced distributions are not a necessary component of effective calibration sessions.

The shift to calibration is fueled by three things:

  1. Companies are recognizing that the only way to develop a consistent definition of performance across managers and employees is to discuss what defines high performance in their group.
  2. Second, companies are recognizing that how you evaluate someone’s performance is heavily influenced by your perspective.  When a manager evaluates their direct reports, they are primarily evaluating them based on their interactions with that person. To get a true picture of a person’s performance you need input from multiple people who interact with them in different situations and settings.
  3. Third, technology is making it easier to conduct calibration reviews.  It used to take weeks to assemble the performance records and employee profiles necessary to hold a calibration session.  The data was often out of date by the time the session was conducted.  Companies can now access employee data in real time, enabling more frequent and focused use of calibration to gain insight into the strengths and weaknesses of the workforce.

Performance management is both difficult and necessary.  Performance management is difficult because it addresses the reality of performance differences.  Employees do not all perform at the same level and most people believe employees who contribute more to the organization should receive more in return.  But addressing performance differences requires managing issues that can quickly blow up if not dealt with appropriately. Performance management is necessary because it impacts business-critical and legally sensitive decisions around pay, job assignments, and employment.  Leaving managers to make these sorts of high stakes decisions based on intuition is not a good formula for long-term success.  When you consider the sorts of activities and decisions involved in performance management it is not surprising that companies have struggled to do it well.

The good news is there’s a revolution going on in performance management. This revolution is about creating continuous performance conversations between employees and managers and using calibration sessions to gain accurate insight into employee contributions.  Annual ratings are not going away due to this revolution.  But they are playing an increasingly minor role as companies shift their emphasis from collecting performance ratings to creating more effective ongoing performance dialogue between employees, managers, and leaders.

It is my privilege to work with many companies who are on the forefront of the performance management revolution. These companies are demonstrating how technology enables us to rethink this important but historically troublesome HCM practice.  For videos with tips on how to improve one-on-one meetings, please visit these links for employees, managers, and HR professionals.

For more insight on performance management strategies, see How To Get Better At Receiving Feedback.

This story also appeared in the SAP Business Trends community.

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Steven Hunt

About Steven Hunt

Steven Hunt is the Senior Vice President of Customer Value at SAP. He is responsible for guiding the strategy and deployment of knowledge, tools and process improvements that increase the value customers receive from SuccessFactors & SAP Cloud software as a service solutions.

How To Design Your Company’s Digital Transformation

Sam Yen

The September issue of the Harvard Business Review features a cover story on design thinking’s coming of age. We have been applying design thinking within SAP for the past 10 years, and I’ve witnessed the growth of this human-centered approach to innovation first hand.

Design thinking is, as the HBR piece points out, “the best tool we have for … developing a responsive, flexible organizational culture.”

This means businesses are doing more to learn about their customers by interacting directly with them. We’re seeing this change in our work on d.forum — a community of design thinking champions and “disruptors” from across industries.

Meanwhile, technology is making it possible to know exponentially more about a customer. Businesses can now make increasingly accurate predictions about customers’ needs well into the future. The businesses best able to access and pull insights from this growing volume of data will win. That requires a fundamental change for our own industry; it necessitates a digital transformation.

So, how do we design this digital transformation?

It starts with the customer and an application of design thinking throughout an organization – blending business, technology and human values to generate innovation. Business is already incorporating design thinking, as the HBR cover story shows. We in technology need to do the same.

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Design thinking plays an important role because it helps articulate what the end customer’s experience is going to be like. It helps focus all aspects of the business on understanding and articulating that future experience.

Once an organization is able to do that, the insights from that consumer experience need to be drawn down into the business, with the central question becoming: What does this future customer experience mean for us as an organization? What barriers do we need to remove? Do we need to organize ourselves differently? Does our process need to change – if it does, how? What kind of new technology do we need?

Then an organization must look carefully at roles within itself. What does this knowledge of the end customer’s future experience mean for an individual in human resources, for example, or finance? Those roles can then be viewed as end experiences unto themselves, with organizations applying design thinking to learn about the needs inherent to those roles. They can then change roles to better meet the end customer’s future needs. This end customer-centered approach is what drives change.

This also means design thinking is more important than ever for IT organizations.

We, in the IT industry, have been charged with being responsive to business, using technology to solve the problems business presents. Unfortunately, business sometimes views IT as the organization keeping the lights on. If we make the analogy of a store: business is responsible for the front office, focused on growing the business where consumers directly interact with products and marketing; while the perception is that IT focuses on the back office, keeping servers running and the distribution system humming. The key is to have business and IT align to meet the needs of the front office together.

Remember what I said about the growing availability of consumer data? The business best able to access and learn from that data will win. Those of us in IT organizations have the technology to make that win possible, but the way we are seen and our very nature needs to change if we want to remain relevant to business and participate in crafting the winning strategy.

We need to become more front office and less back office, proving to business that we are innovation partners in technology.

This means, in order to communicate with businesses today, we need to take a design thinking approach. We in IT need to show we have an understanding of the end consumer’s needs and experience, and we must align that knowledge and understanding with technological solutions. When this works — when the front office and back office come together in this way — it can lead to solutions that a company could otherwise never have realized.

There’s different qualities, of course, between front office and back office requirements. The back office is the foundation of a company and requires robustness, stability, and reliability. The front office, on the other hand, moves much more quickly. It is always changing with new product offerings and marketing campaigns. Technology must also show agility, flexibility, and speed. The business needs both functions to survive. This is a challenge for IT organizations, but it is not an impossible shift for us to make.

Here’s the breakdown of our challenge.

1. We need to better understand the real needs of the business.

This means learning more about the experience and needs of the end customer and then translating that information into technological solutions.

2. We need to be involved in more of the strategic discussions of the business.

Use the regular invitations to meetings with business as an opportunity to surface the deeper learning about the end consumer and the technology solutions that business may otherwise not know to ask for or how to implement.

The IT industry overall may not have a track record of operating in this way, but if we are not involved in the strategic direction of companies and shedding light on the future path, we risk not being considered innovation partners for the business.

We must collaborate with business, understand the strategic direction and highlight the technical challenges and opportunities. When we do, IT will become a hybrid organization – able to maintain the back office while capitalizing on the front office’s growing technical needs. We will highlight solutions that business could otherwise have missed, ushering in a digital transformation.

Digital transformation goes beyond just technology; it requires a mindset. See What It Really Means To Be A Digital Organization.

This story originally appeared on SAP Business Trends.

Top image via Shutterstock

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Sam Yen

About Sam Yen

Sam Yen is the Chief Design Officer for SAP and the Managing Director of SAP Labs Silicon Valley. He is focused on driving a renewed commitment to design and user experience at SAP. Under his leadership, SAP further strengthens its mission of listening to customers´ needs leading to tangible results, including SAP Fiori, SAP Screen Personas and SAP´s UX design services.

How Productive Could You Be With 45 Minutes More Per Day?

Michael Rander

Chances are that you are already feeling your fair share of organizational complexity when navigating your current company, but have you ever considered just how much time is spent across all companies on managing complexity? According to a recent study by the Economist Intelligence Unit (EIU), the global impact of complexity is mind-blowing – and not in a good way.

The study revealed that 38% of respondents spent 16%-25% of their time just dealing with organizational complexity, and 17% spent a staggering 26%-50% of their time doing so. To put that into more concrete numbers, in the US alone, if executives could cut their time spent managing complexity in half, an estimated 8.6 million hours could be saved a week. That corresponds to 45 minutes per executive per day.

The potential productivity impact of every executive having 45 minutes more to work every single day is clearly significant, and considering that 55% say that their organization is either very or extremely complex, why are we then not making the reduction of complexity one or our top of mind issues?

The problem is that identifying the sources of complexity is complex in of itself. Key sources of complexity include organizational size, executive priorities, pace of innovation, decision-making processes, vastly increasing amounts of data to manage, organizational structures, and the pure culture of the company. As a consequence, answers are not universal by any means.

That being said, the negative productivity impact of complexity, regardless of the specific source, is felt similarly across a very large segment of the respondents, with 55% stating that complexity has taken a direct toll on profitability over the past three years.  This is such a serious problem that 8% of respondents actually slowed down their company growth in order to deal with complexity.

So, if complexity oftentimes impacts productivity and subsequently profitability, what are some of the more successful initiatives that companies are taking to combat these effects? Among the answers from the EIU survey, the following were highlighted among the most likely initiatives to reduce complexity and ultimately increase productivity:

  • Making it a company-wide goal to reduce complexity means that the executive level has to live and breathe simplification in order for the rest of the organization to get behind it. Changing behaviors across the organization requires strong leadership, commitment, and change management, and these initiatives ultimately lead to improved decision-making processes, which was reported by respondents as the top benefit of reducing complexity. From a leadership perspective this also requires setting appropriate metrics for measuring outcomes, and for metrics, productivity and efficiency were by far the most popular choices amongst respondents though strangely collaboration related metrics where not ranking high in spite of collaboration being a high level priority.
  • Promoting a culture of collaboration means enabling employees and management alike to collaborate not only within their teams but also across the organization, with partners, and with customers. Creating cross-functional roles to facilitate collaboration was cited by 56% as the most helpful strategy in achieving this goal.
  • More than half (54%) of respondents found the implementation of new technology and tools to be a successful step towards reducing complexity and improving productivity. Enabling collaboration, reducing information overload, building scenarios and prognoses, and enabling real-time decision-making are all key issues that technology can help to reduce complexity at all levels of the organization.

While these initiatives won’t help everyone, it is interesting to see that more than half of companies believe that if they could cut complexity in half they could be at least 11%-25% more productive. That nearly one in five respondents indicated that they could be 26%-50% more productive is a massive improvement.

The question then becomes whether we can make complexity and its impact on productivity not only more visible as a key issue for companies to address, but (even more importantly) also something that every company and every employee should be actively working to reduce. The potential productivity gains listed by respondents certainly provide food for thought, and few other corporate activities are likely to gain that level of ROI.

Just imagine having 45 minutes each and every day for actively pursuing new projects, getting innovative, collaborating, mentoring, learning, reducing stress, etc. What would you do? The vision is certainly compelling, and the question is are we as companies, leaders, and employees going to do something about it?

To read more about the EIU study, please see:

Feel free to follow me on Twitter: @michaelrander

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Michael Rander

About Michael Rander

Michael Rander is the Global Research Director for Future Of Work at SAP. He is an experienced project manager, strategic and competitive market researcher, operations manager as well as an avid photographer, athlete, traveler and entrepreneur. Share your thoughts with Michael on Twitter @michaelrander.

The Robotics Race

Stephanie Overby

As robotic technologies continue to advance, along with related technologies such as speech and image recognition, memory and analytics, and virtual and augmented reality, better, faster, and cheaper robots will emerge. These machines – sophisticated, discerning, and increasingly autonomous – are certain to have an impact on business and society. But will they bring job displacement and danger or create new categories of employment and protect humankind?

We talked to SAP’s Kai Goerlich, along with Doug Stephen of the Institute for Human and Machine Cognition and Brett Kennedy from NASA’s Jet Propulsion Laboratory, about the advances we can expect in robotics, robots’ limitations, and their likely impact on the world.

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qa_qWhat are the biggest drivers of the robot future?

Kai Goerlich: Several trends will come together to drive the robotics market in the next 15 to 20 years. The number of connected things and sensors will grow to the billions and the data universe will likewise explode. We think the speed of analytics will increase, with queries answered in milliseconds. Image and voice recognition – already quite good – will surpass human capabilities. And the virtual and augmented reality businesses will take off. These technologies are all building blocks for a new form of robotics that will vastly expand today’s capabilities in a diversity of forms and applications.

Brett Kennedy: When I was getting out of school, there weren’t that many people working in robotics. Now kids in grade school are exposed to a lot of things that I had to learn on the job, so they come into the workplace with a lot more knowledge and fewer preconceptions about what robots can or can’t do based on their experiences in different industries. That results in a much better-trained workforce in robotics, which I think is the most important thing.

In addition, many of the parts that we need for more sophisticated robots are coming out of other fields. We could never create enough critical mass to develop these technologies specifically for robotics. But we’re getting them from other places. Improvements in battery technology, which enable a robot to function without being plugged in, are being driven by industries such as mobile electronics and automotive, for example. Our RoboSimian has a battery drive originally designed for an electric motorcycle.

qa_qDo you anticipate a limit to the tasks robots will be able to master as these core technologies evolve?

Goerlich: Robots will take over more and more complex functions, but I think the ultimate result will be that new forms of human-machine interactions will emerge. Robots have advantages in crunching numbers, lifting heavy objects, working in dangerous environments, moving with precision, and performing repetitive tasks. However, humans still have advantages in areas such as abstraction, curiosity, creativity, dexterity, fast and multidimensional feedback, self-motivation, goal setting, and empathy. We’re also comparatively lightweight and efficient.

Doug Stephen: We’re moving toward a human-machine collaboration approach, which I think will become the norm for more complex tasks for a very long time. Even when we get to the point of creating more-complex and general-purpose robots, they won’t be autonomous. They’ll have a great deal of interaction with some sort of human teammate or operator.

qa_qHow about the Mars Rover? It’s relatively autonomous already.

Kennedy: The Mars Rover is autonomous to a certain degree. It is capable of supervised autonomy because there’s no way to control it at that distance with a joystick. But it’s really just executing the intent of the operator here on the ground.

In 2010, DARPA launched its four-year Autonomous Robotic Manipulator Challenge to create machines capable of carrying out complex tasks with only high-level human involvement. Some robots completed the challenge, but they were incredibly slow. We may get to a point where robots can do these sorts of things on their own. But they’re just not as good as people at this point. I don’t think we’re all going to be coming home to robot butlers anytime soon.

Stephen: It’s extremely difficult to program robots to behave as humans do. When we trip over something, we can recover quickly, but a robot will topple over and damage itself. The problem is that our understanding of our human abilities is limited. We have to figure out how to formally define the processes that human beings or any legged animals use to maintain balance or to walk and then tell a robot how to do it.

You have to be really explicit in the instructions that you give to these machines. Amazon has been working on these problems for a while with its “picking challenge”: How do you teach a robot to pick and pack boxes the way a human does? Right now, it’s a challenge for robots to identify what each item is.

qa_qSo if I’m not coming home to a robot butler in 20 years, what am I coming home to?

Goerlich: We naturally tend to imagine humanoid robots, but I think the emphasis will be on human-controlled robots, not necessarily humanshaped units. Independent robots will make sense in some niches, but they are more complex and expensive. The symbiosis of human and machine is more logical. It will be the most efficient way forward. Robotic suits, exoskeletons, and robotic limbs with all kinds of human support functions will be the norm. The future will be more Iron Man than Terminator.

qa_qWhat will be the impact on the job market as robots become more advanced?

SAP_Robotics_QA_images2400x16004Goerlich: The default fear is of a labor-light economy where robots do most of the work and humans take what’s left over. But that’s lastcentury thinking. Robots won’t simply replace workers on the assembly line. In fact, we may not have centralized factories anymore; 3D printing and the maker movement could change all that. And it is probably not the Terminator scenario either, where humanoid robots take over the world and threaten humankind. The indicators instead point to human-machine coevolution.

There’s no denying that advances in robotics and artificial intelligence will displace some jobs performed by humans today. But for every repetitive job that is lost to automation, it’s possible that a more interesting, creative job will take its place. This will require humans to focus on the skills that robots can’t replicate – and, of course, rethink how we do things and how the economy works.

qa_qWhat can businesses do today to embrace the projected benefits of advanced robotics?

Kennedy: Experiment. The very best things that we’ve been able to produce have come from people having the tools an d then figuring out how they can be used. I don’t think we understand the future well enough to be able to predict exactly how robots are going to be used, but I think we can say that they certainly will be used. Stephanie Overby is an independent writer and editor focused on the intersection of business and technology.

Stephanie Overby  is an independent writer and editor focused on the intersection of business and technology

To learn more about how humans and robots will co-evolve, read the in-depth report Bring Your Robot to Work.

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What Is The Key To Rapid Innovation In Healthcare?

Paul Clark

Healthcare technology has already made incredible advancements, but digital transformation of the healthcare industry is still considered in its infancy. According to the SAP eBook, Connected Care: The Digital Pulse of Global Healthcare, the possibilities and opportunities that lie ahead for the Internet of Healthcare Things (IoHT) are astounding.

Many health organizations recognize the importance of going digital and have already deployed programs involving IoT, cloud, Big Data, analytics, and mobile technologies. However, over the last decade, investments in many e-health programs have delivered only modest returns, so the progress of healthcare technology has been slow out of the gate.

What’s slowing the pace of healthcare innovation?

In the past, attempts at rapid innovation in healthcare have been bogged down by a slew of stakeholders, legacy systems, and regulations that are inherent to the industry. This presents some Big Data challenges with connected healthcare, such as gathering data from disparate silos of medical information. Secrecy is also an ongoing challenge, as healthcare providers, researchers, pharmaceutical companies, and academic institutions tend to protect personal and proprietary data. These issues have caused enormous complexity and have delayed or deterred attempts to build fully integrated digital healthcare systems.

So what is the key to rapid innovation?

According to the Connected Care eBook, healthcare organizations can overcome these challenges by using new technologies and collaborating with other players in the healthcare industry, as well as partners outside of the industry, to get the most benefit out of digital technology.

To move forward with digital transformation in healthcare, there is a need for digital architectures and platforms where a number of different technologies can work together from both a technical and a business perspective.

The secret to healthcare innovation: connected health platforms

New platforms are emerging that foster collaboration between different technologies and healthcare organizations to solve complex medical system challenges. These platforms can support a broad ecosystem of partners, including developers, researchers, and healthcare organizations. Healthcare networks that are connected through this type of technology will be able to accelerate the development and delivery of innovative, patient-centered solutions.

Platforms and other digital advancements present exciting new business opportunities for numerous healthcare stakeholders striving to meet the increasing expectations of tech-savvy patients.

The digital evolution of the healthcare industry may still be in its infancy, but it is growing up fast as new advancements in technology quickly develop. Are you ready for the next phase of digital transformation in the global healthcare industry?

For an in-depth look at how technology is changing the face of healthcare, download the SAP eBook Connected Care: The Digital Pulse of Global Healthcare.

See how the digital era is affecting the business environment in the SAP eBook The Digital Economy: Reinventing the Business World.

Discover the driving forces behind digital transformation in the SAP eBook Digital Disruption: How Digital Technology is Transforming Our World.

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Paul Clark

About Paul Clark

Paul Clark is the Senior Director of Technology Partner Marketing at SAP. He is responsible for developing and executing partner marketing strategies, activities, and programs in joint go-to-market plans with global technology partners. The goal is to increase opportunities, pipeline, and revenue through demand generation via SAP's global and local partner ecosystems.