INTRODUCTION TO PERFORMANCE MANAGEMENT “ Since my last report, this employee has reached rock bottom and shows signs of starting to dig.” “ I would not allow this employee to breed.” “ Works well under constant supervision and cornered like a rat in a trap.” “ He sets low personal standards and then consistently fails to achieve them.” “This associate is really not so much of a has-been, but more of a definitely won’t be.”

PERFORMANCE MANAGEMENT Some Perspectives: 85% of SA companies have a PMS 95% of these have a strong commitment of the CEO In 94% of these organisations, there is a formal communication strategy Only 51% believe employees and managers are adequately educated and trained in PMS 37% uses the Balanced Scorecard methodology 86% allows employees to jointly set targets and objectives with the manager 91% have clear PMS policies, procedures and systems in place. Most companies measure performance using hard and soft measures 2001 Deloitte & Touche HCC Survey

PERFORMANCE MANAGEMENT “So what is Performance Management”? (if 85% of companies apply it, what do they actually do)? Group Discussion:

PERFORMANCE MANAGEMENT A Definition: Performance management is the process of ensuring individual and team effort support the organisational objectives and to realise key stakeholder expectations and wealth creation in all the identified value drivers of the organisation. Thus: Planning is crucial Stakeholder expectations are key drivers Management and employee buy-in and involvement are paramount Link to and alignment with strategy

PERFORMANCE MANAGEMENT Performance Management is the process of: Planning Performance (setting KPA’s, objectives and standards that are linked to corporate strategy, development plans). Maintaining Performance (monitoring, feedback, coaching and mentoring, regular interactions re goal achievement) Reviewing Performance (formal feedback and ratings – evaluating performance) Rewarding of performance (increases, bonuses, incentives, etc)

Performance Management Model Planning Performance: Setting objectives Outlining development plans Getting commitment Reward Performance: Link to pay Results = performance PERFORMANCE MANAGEMENT PROCESS Reviewing Performance: Formal reviews Assess against objectives Maintaining Performance: Monitoring performance Coaching Feedback Business strategy, stakeholders, key economic wealth drivers

PERFORMANCE MANAGEMENT Planning – 80% of the process Planning includes: Identifying Key Value Drivers of stakeholders Defining Key Performance Areas (KPA’s) Defining Objectives Defining Targets Devel a training & development plan

PERFORMANCE MANAGEMENT STRATEGY, STAKEHOLDER EXPECTATIONS – THE CHALLENGE OF ALIGNMENT “With no harbour, no wind will be the right wind” Between 92-97% of Companies have a vision and some strategy statement. Only between 3-7% of staff know and work by it.

A Model for establishing/building a performance management process Deriving key value drivers from Strategic direction and KPA’S Determining and assigning KPA’s Determining organisational objectives Determining and assigning individual objectives Execution Measuring & Evaluating performance against organisational objectives Measuring, evaluating and rewarding Performance against individual objectives Reassessing and adjusting business strategy Reassessing KPA’s and adjusting Objectives to reinforce strategy Review

PERFORMANCE MANAGEMENT Benefits: A well implemented performance management process is beneficial to the company, its managers and employees. The advantages being: Integration  Open Communication  Improved Performance  Training and Development  Clarity of Standards/Requirements  Placement of Individuals  Increased Objectivity  Remuneration  Promotability  Career planning

PERFORMANCE MANAGEMENT Selecting and evaluating a Performance Management System: Level of employee participation and involvement? Competency-based? Is it form-driven or REAL performance management (daily) Is linked to rewards AND development? Does it focus on both the “what” and the “how” of result achievement? Does the process incorporate training (both process and soft skills)? Is it generic, and can it be customised to your organisation’s needs and culture?

PERFORMANCE MANAGEMENT Some Key Building Blocks Success factors in implementing Performance Management: “If you are not managing performance, what are you managing?” Some Key Building Blocks Feedback Training Reward & Compensation Review Process Process Design Competencies Goal Setting Strategy Focus

PERFORMANCE MANAGEMENT Success factors in implementing Performance Management: Fundamental Requirements/considerations: Relevance Link to strategy, clear job goals, up-to-date job profiles Reliability Consistent measurement, rating errors Discriminability Ability to discriminate between good and poor performance Freedom from contamination External factors should not influence measurement (resources, line of sight) Practicality Easy to use, understandable, manageable administration Acceptability Perceived legitimacy, involvement Legal compliance Labour law compliance, EE Act, substantive and procedural fairmess

PERFORMANCE MANAGEMENT Coaching and mentoring are crucial components of the Maintaining of Performance Phase: Planning Performance: Setting objectives Outlining development plans Getting commitment Maintaining Performance: Monitoring performance Coaching Feedback Reviewing Performance: Formal reviews Assess against objectives Reward Performance: Link to pay Results = performance PERFORMANCE MANAGEMENT PROCESS Coaching is a formal process. It is the day to day process of helping employees recognise opportunities to improve their performance and capabilities. Coaching = Give a man a fish a day, and you fed him for a day; teach him to fish, and you fed him for life. Confucius

PERFORMANCE MANAGEMENT COACHING: Give Feedback (EEC Model) Ask for ideas and suggestions Discuss Use the following questions: Where? What is happening now? What are u going to do next? Coaching provides immediate feedback on performance HOW DOES COACHING DIFFER FROM MENTORING?

PERFORMANCE MANAGEMENT PERFORMANCE AUDITS Case Study 1: Mining Company in Southwest Africa Case Study 2: Global Company Key topics: What do you audit How do you audit Performance Management? What can you expect?

PERFORMANCE MANAGEMENT PERFORMANCE AND REWARD What gets measured gets done What gets rewarded is sustained Measures give rewards relevance, and rewards give measures meaning (TB Wilson) The majority of workers want recognition for achievement Dilemma’s in reward: Objectivity Transparency Affordability Baggage Retention Value NB

PERFORMANCE MANAGEMENT A Reward Matrix: Rating 25th Percentile 50th percentile 75th Percentile 5 17% 15% 10% 4 12% 8% 3 6% 2 1

PERFORMANCE MANAGEMENT LINK TO PAY: Why does it often fail? Lack of objective and quantitative measures Poor link between pay and performance (no immediate reinforcement) The aspects that get rewarded are not linked to strategy – the “wrong” behaviours and achievements are sustained Poor communication re objectives, benefits and procedures (the “rules of the game”) Level of performance-based-pay not proportionate to effort Resistance to change Union perceptions and involvement

PERFORMANCE MANAGEMENT The Psychology of INCENTIVES: KEY IMPACT KEY OBJECTIVE SECONDARY OBJECTIVES Hygiene Factors Competitive in Market Internal Equity Cost Management Flexibility Fixed Package Motivational Drive Behaviour Return on Bottom Line Reward specific behaviour/results Variable Package

PERFORMANCE MANAGEMENT REMUNERATION COMPONENT: Attract Retain Skills X X X X X X X X Guaranteed Package Short-Term Incentives Long-Term Incentives

PERFORMANCE MANAGEMENT How do you link Performance Management to Training & Development Initiatives? Desired performance The “Link”: Measurement Vision Mission Strategy Value Drivers Actual performance Development

PERFORMANCE MANAGEMENT PERFORMANCE MANAGEMENT IN SMME’S Key Challenges: Strategy not always clear, defined or formalised Decisions are not taken to lower levels (“family business” syndrome) There often are: Little time Few resources and finances Little support Not adequate skills The “we do fine” syndrome

PERFORMANCE MANAGEMENT Q & A