Building A Culture of Goal Setting Presented by: Chris Bergeron - Director, Consulting Services, Salary.com July 23, 2010 1

Learning Objectives Defining the goal setting process and how it fits with other processes and programs Reviewing tactics for making goal setting relevant, consistent and impactful Discussing how to get started 2

Start with the Strategic Plan Define Structure and Process Agenda “Organizational” (Executive Team) Start with the Strategic Plan Define Structure and Process Get Beyond Finance Measures Highlight the Manager/Employee Conversation Questions “Individual” (Manager/Employee) Q/A 3

Annual Planning Meeting 4

Start with the Strategic Plan Define Overall Goal Setting Program Objectives and Guiding Principles Help Facilitate the Annual Planning Meeting Set the Timeline for Goal Setting and Related Processes Work with the Executive Team to Create a Goal Setting Framework that is Broad and Diverse 5

Define Guiding Principles - Example Single Combined Process An integrated approach should be provided for goal setting, development planning, mid-year and end-of-year reviews with separate, weighted performance criteria for goals and competencies. Drive performance thru the integration of “What” and “How” Expanded Goal Setting Capabilities The process should emphasize both “results” as well as “contributing” goals. HR should be a facilitator and enabler for helping to build organizational capability, maintaining standards and managing this process. Enhance strategic alignment and planning Collaborative Coaching Conversations Executive and manager focused training for engaging in a goal setting as well as development planning and review discussions needs to be provided. Supporting tools and techniques for guiding collaborative goal setting and management should also be made available. Require dialogue to reinforce individual alignment and development Simple, Clear Guidelines for Compensation The organization should have a consistent approach to incentive pay where the assessment of goals drives the bonus, and the assessment of competencies drives base pay increases. Consider both business results and impact on areas of direct control 6 6

Get Involved and Set the Timeline - Example Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Goal Setting Process Strategic Planning for New Year Year End Results Performance Management Process Goal Cascade Revisit Goal Performance and Development Planning Mid- Year Review and Discussion Year End Reviews (Goals and Competencies) Succession Process Succession Meetings Compensation Merit and Bonus Determinations Payouts and Salary Actions

Define a Framework that Fits Your Objectives Financial Revenue Cost Return/Margin Operational Quality Timeliness Agility Customer Satisfaction Referencability Retention People Engagement Alignment Competency Planning----Execution----Improvement Adapted from The Balanced Scorecard and related works by David Norton and Robert Kaplan 8

Start with the Strategic Plan Define Structure and Process Agenda “Organizational” (Executive Team) Start with the Strategic Plan Define Structure and Process Get Beyond Finance Measures Highlight the Manager/Employee Conversation Questions “Individual” (Manager/Employee) 9

Define Structure and Process Define goal setting terms Set process guidelines Determine rewards and consequences 10

Attributes of a Goal Owner Category Linked Goal Statement, Description and Activities Target Weight

Attributes of a Goal (Cont.) Owner – Individual to be reviewed on the goal Category – Goal alignment to strategy Linked Goal – Impacted higher level goal Statement, Description and Activities – Detail of what will be done and what the result or outcome will look like Target – Measurement and target or target date Weight – Weight for the goal on their performance review of the owner

Goals Are NOT Activities or Job Responsibilities Goals should be defined at a level above the isolated activity or job responsibilities (for example, “taking a training class” or “completing monthly reporting on time” do not constitute a goal). Goals are intended to produce positive change Managers are responsible to test that each goal goes beyond job responsibilities and truly constitutes an effort to creating an improvement or produce a positive change. 13 13

Set Process Guidelines: Goal Numbers, Linking and Weighting Examples Managers and employees should focus on the “critical few” goals that are most important in contributing to the desired results and outcomes As general guidance, goal plans should include from 3 to 7 individual goals for the year Individual goals should be linked to higher level goals Managers should be the ultimate decision makers regarding the number, linking and weighting of goals for their organization and director reports Q/A

What Type of Goal Setting Process Approximately 75 webinar participants, May 2010.

Set Guidelines for Cascading a Goal: Marketing Examples Manager Goal Statement and Supporting Activities Application of Key Principles Direct Report Goal Statement and Supporting Activities Not Cascaded: Improves COGS versus 2008, by achieving Program spend of 10% of Sales Director report has no control over outcome Not applicable, except for coaching discussion about how his/her goals support or otherwise interact. Individual should be aware of how to support manager’s goals and about how own goals interact with non-cascaded goals. Fully Cascaded: Achieves market share at 22.4% in fiscal year 2010, by completion of the following initiatives: Implementation of 16 selling classes, 8 Boot Camps. Manager needs to clarify rationale for fully cascaded goals and how supporting activities will change for that individual. Achieves market share at 22.4% in fiscal year 2010, by completion of the following initiatives: Implementation of 16 selling classes, 8 Boot Camps. Even full cascading requires clear documentation of changes in “supporting activities” for implementation. Partially Cascaded: Implementation of 16 selling classes, 8 Boot Camps. Manager focuses on the key contributing activity of the direct report Delivers 16 selling classes with participant satisfaction ratings of more that 90% and new leads generated 10 % higher than last fiscal year quarterly. Cascaded goal most often represents subset of manager’s goal related to one or more key activities Added for Individual: Facilitating the completion of the various initiatives that improve brand image. Manager focus on the unique functional contribution beyond the manager goals that supports the result. Specifies 3 new classes or dealer learning initiatives during the first 2 quarters of the year that gain approval for implementation by the strategy team. Personal goals are most often related to either functional support activities or personal development goals.

Linking Goals to Compensation and Development Evaluation Process Compensation and Development PERFORMANCE “WHAT” (Achievement of KPI and Objectives during the period) Base Pay Adjustments Ratings (and Comments) Short Term Incentives Employee Ranking (for succession purposes, not to be communicated) Long Term Incentives Overall Rating COMPETENCY “HOW” (Demonstration of Knowledge, Skill and Ability consistent with high performance) Ratings (and Comments) Training & Development

Start with the Strategic Plan Define Structure and Process Agenda “Organizational” (Executive Team) Start with the Strategic Plan Define Structure and Process Get Beyond Finance Measures Highlight the Manager/Employee Conversation Questions “Individual” (Manager/Employee) 18

A Balanced Approach to Goal Setting Communicate that both results and contributing goals are expected Provide coaching and training for managers Highlight the best plans as examples Adapted from The Balanced Scorecard and related works by David Norton and Robert Kaplan and Path-Goal Theory by Robert House. 19

Results and Contributing Measures Focus Area Contributors Results Sales/Marketing Marketing campaign implementation completion level New product sales Sales Customer visits/leads Sales revenue Safety Compliance with safety standards Accident rate Manufacturing Preventive maintenance schedule compliance Manufacturing line “up time” Customer Service Customer complaint responses Product returns Talent Management Key developmental experiences completed Competency change accomplished Coaching Number/quality of coaching conversations Employee retention/motivation level

Measurement Approaches Quality Error rate Customer/client feedback/satisfaction – interviews, surveys, etc. Employee satisfaction Conformance to requirements or specifications Compliments or complaints Brand/product recognition Quantity Usually expressed as the amount of work completed within a time period such as units per day, calls per hour or shipments per quarter Skills level/acquisition Expenditures Sales achieved Services provided New products introduced New customers acquired Sales activity Market share Margins Cost Budgetary guidelines met or exceeded Overtime costs incurred Dollars spent or saved Cost of good/material Timeliness Schedules met Deadlines met Specific timeframes met Efficiency Reduction in cycle time Elimination of waste Elimination of unnecessary steps

Start with the Strategic Plan Define Structure and Process Agenda “Organizational” (Executive Team) Start with the Strategic Plan Define Structure and Process Get Beyond Finance Measures Highlight the Manager/Employee Conversation Questions “Individual” (Manager/Employee) 22

The Manager/Employee Conversation Clearly define roles and responsibilities Build the process around the goal setting conversation Emphasize ownership and (authorship) 23

Define Roles and Responsibilities People Manager Employee “Set direction for goal setting, and define areas of emphasis” “Define specific goals, activities and tasks” Present and discusses organizational goal Work with direct reports to define relevant goals for the coming year, related to the organizational goals Document goal progress observed throughout the year and provide timely feedback Coordinates mid-year review discussion Completes mid-year review Adjusts objectives as necessary for the reminder of the year Coordinate end-of-year review discussion Complete end-of-year review Coach and re-directs behavior as required for the coming year Meet with manager to discuss individual goals for the coming year Help develop appropriate supporting goals and activities Coordinate mid-year review discussion with manager Complete mid-year self assessment Meet with manager for mid-year follow-up discussion Coordinate end-of-year review discussions with manager Complete end-of-year self assessment Meet with manager for end of year review Goal Setting Mid-Year End-of-Year

Collaboration Discussion Manager’s Agenda for Goal Setting Discussion: Review organizational strategy Review higher level goals Propose or review (if completed by the employee) individual goals for the employee Confirm alignment to higher level goals Propose or review (if completed by the employee) weighting Reinforce that goal achievement should be consistent with the Values and Behaviors of the organization (e.g. defining both the “what” and the “how”) Confirm times for periodic review of progress Q/A

Standards of Goal Quality, Going Beyond the “Critical Few” Optimum number - Focus on the critical few factors that enable realistic prediction of performance. Balances contributions and results - Balance measures for predicting the future and analyzing past actions. Balanced level of precision - Value generated is precise enough to define information that can lead to productive actions. Ease - Easy to measure in terms of effort and simplicity. Right level of accuracy - Provides reliable, valid data for tracking business performance and making decisions. Consistency - Provides consistent data that can be interpreted for each measurement. Cost effectiveness - Is not too costly to gather and analyze, and aligned with business requirements. Right frequency - Balance timing for data collection that provides meaningful information in a timely manner.

Do You Use Quality Standards Today? Approximately 75 webinar participants, May 2010.

What Would be Useful in the Future? Approximately 75 webinar participants, May 2010.

SMART Goals SMART Goals are… Specific – the goal includes exactly what you will do Measurable – the goal can be measured, for example number of errors or rejects or percentage of cost savings Attainable – the goal can be accomplished; it is not too difficult Relevant – the goal supports the overall objectives of the department and division Time-bound – the goal includes a specific period of time for completion Q

Implementation Change Phases for Goal Setting Organization Impact Area Building a Foundation (Year 1) Creating Sustainable Practices (Year 2) Leveraging Human Capital Systemically (Year 3) Goal setting mastery Clarification of goal setting approach for indviduals (SMART) Development of methods for linking individual and organizational goals Development and implementation of the consistent goal cascading approach Development of mastery around key principles and practices of goal setting (mix of leading/ lagging indicators; creation and application of goal types/pick list) Process mastery Establishment of common approach and process for whole organization Demonstrated ability to follow process consistently Managers and team members providing positive suggestions for improving the process and practices End user acceptance Key stakeholders enrolled in approach End user groups fully understanding approach and impact on them Managers demonstrating ability to take charge of the process Team members actively participating in process End users acknowledging individual and team benefit of the approach Coaching conversation capabilities Clarification of coaching guidelines Communication and training for conducting the process delivered Consistent coaching conversations delivered Ongoing feedback provided Fully-engaged, collaborative conversations provided throughout year

Start with the Strategic Plan Define Structure and Process Agenda “Organizational” (Executive Team) Start with the Strategic Plan Define Structure and Process Get Beyond Finance Measures Highlight the Manager/Employee Conversation Questions “Individual” (Manager/Employee) 31

Thank You for Joining Today Chris Bergeron Director, Consulting Services Salary.com (781) 851-8302 (904) 994-9072 cbergeron@salary.com

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