real purpose Performance Management and Succession Planning Overview S o c i a l E n t e r p r i s e L e a d e r s h i p P r o g r a m m e

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1 real purpose S o c i a l E n t e r p r i s e L e a d e r s h i p P r o g r a m m e Performance Management and Succession Planning Overview

2 Performance management - an overview In all organisations the way individuals and teams are aligned to its objectives and equipped to achieve them is a key factor in the organisation s success. Developing an authentic performance management culture is a powerful business strategy to deliver this. Effective performance management should provide businesses with: A clear line of sight between business performance and team and individual contribution. Challenging, realistic and measurable objectives for both teams and individuals. Continuous and constructive dialogue with individuals about business and personal performance Real-time, continuous and robust performance data. Individuals who are motivated to achieve their potential, develop and grow. Can-do culture inspired by strong leadership. Sound Familiar? It is year end at Acme Progressive. Apart from wrapping up the accounting, managers and employees are going through the annual dance of the performance appraisal, as they call it. Michael manages fourteen employees directly, so he is going to busy meeting with each of them, filling out forms and gulping antacid. Since the personnel department are pushing him to get all his forms in on time, he is going to have to figure a way to get this all done as fast as possible. And he does so. He sends a copy of the appraisal form to all his employees via . After employees complete the forms, he meets with each of them for about fifteen minutes to discuss the forms and signs them. Viola! Problem solved. The paperwork gets done in time, the personnel department is content and everyone goes back to their real work. From Performance Management by Robert Bacal Annual performance management cycle Performance management operates on a cyclical basis and is aligned with the annual strategic and financial planning process. This diagram shows that effective performance management is more than an annual form filling exercise. It can focus the whole organisation, teams and individuals on delivering the strategic plan and goals. This toolkit supports End of year accounts. businesses in creating a successful performance management culture and provides you with templates and guidelines to implement each element of the cycle. Reward & Recognition. Quarterly Performance Review. Agree Development Plan. Monthly 121s. Forecast and revise budgets for the year ahead. Q1 Q2 Revise budget for Q4 and set for next year. Begin operational planning. Half Year Appraisal. Realign Development plan. Monthly 121s. Operational plans and budget Q4 Q3 cascaded. Annual Appraisal Ratings & Calibration. 360 Feedback. Monthly 121s. Quarterly Performance Review. Review Development Plan. Reward & Recognition. Monthly 121s Half year accounts. Revise budgets & plan. Strategic planning for next year.

3 Working together in partnership to create a performance culture Performance contracts are a formal record of the discussion and agreement between individual and line manager about what the individual, with coaching and support from the line manager, intends to achieve in the coming period. Performance contracts are usually set for either six or twelve months and are reviewed at the end of that period in a meeting, often know as an appraisal. Performance contracts will contain a range of performance objectives which allow the individual to set out clearly what needs to be achieved and by when. To work well, these objectives must be both meaningful and measurable. Great contracts provide real stretch and detail both WHAT needs to be achieved and HOW it needs to be achieved. Development plans sit alongside the performance contract and support individuals in developing their skills and behaviours to achieve their performance objectives. It is vital that plans are owned by the individual and also detail career goals and actions to fulfil those ambitions. It is important that performance contracts and development plans are reviewed regularly. This is usually done as part of a monthly one-to-one meeting. Monthly meetings are the cornerstone of developing a performance led culture. Ideally, line managers put aside at least one hour each month to review performance, provide feedback and offer coaching. The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark. Michelangelo, Italian sculptor, painter, architect & poet. Performance ratings, distribution and calibration forums Most organisations ask managers to agree an overall performance rating from a specified scale with individuals during the appraisal meeting. If monthly one-to-one discussions are taking place, there should already be a clear and shared understanding of performance and to agree an overall rating should be straightforward. To ensure results are achieved in the right way many organisations are now rating performance against both the WHAT and the HOW (see diagram opposite). There is a working example of a ratings scale in the appraisal document template. Performance Ratings Distribution % 17% 50% 17% 8% % of overall population Task delivery (what) Poor Average Good Performance Ratings Poor Average Good Behaviours (how) Some organisations use a ranking system to force the distribution of performance ratings, but this often fails to recognise exceptional circumstances. Most organisations choose to establish an expected distribution of ratings that mirrors the standard distribution curve (shown opposite) and use flexibility and judgement to ensure fairness. Calibration forums are facilitated mediation usually held immediately after all performance ratings have been agreed. They involve key leaders from across the whole organisation and review all performance ratings together to ensure distribution corresponds to actual performance and differentiates the best from average.

4 Performance contracts and appraisals As discussed earlier, the performance contract and the appraisal or review meeting creates a formal opportunity for line managers and individuals to get together once or twice a year and engage in a dialogue about performance and development. It is essential that this is not a top down process or a one-way conservation. It should be a free flowing discussion in which a range of views are exchanged. We have included an example of a performance contract as part of this toolkit. As you can see this is a formal document which is dated and sets out the objectives for the period, evidence of achievement against those objectives, feedback on how the performance has been achieved and an overall rating agreed upon. A constructive appraisal meeting is one which: Is planned in advance, giving plenty of time for preparation. Individuals do most of the talking. Line managers listen actively to what is said. Review is objective and based on evidence. Performance is analysed not personality. The whole period is reviewed and not just recent or isolated events. Achievement is recognised and reinforced. Improvements are discussed and development plans agreed. Ends with agreed objectives for the next period. Performance feedback The challenge for organisations is that, as valuable and as desirable as constructive feedback is, it is not a regular occurrence or done well in many workplaces. To be completely effective performance feedback should form part of a regular one-to-one monthly conversation. This way there are no surprises in performance review meetings or annual appraisal. To supplement ongoing performance feedback, a more formal 360 degree feedback is valuable once a year to assist in performance review and create development plans. We have included a template for this in the toolkit. The key to getting performance feedback right as a line manager is to ask great questions. Most people know when they are performing well or not, so give them the opportunity to express this. Sometimes you will have to initiate feedback, when you do ensure that your timing is good and your intent is positive. If your intent is to humiliate or tell off then no matter how well worded your feedback, that is how it will come across. If you feedback on every little thing you will get a reputation for being picky, colleagues will tune you out and you will lose impact when you have something important to say. It is important to remember that the majority of highly motivated and capable people are those that hear how well they are doing from their line manager regularly.

5 Succession planning and talent management Succession planning is typically defined as a process by which one or more successors are identified for key posts and career moves and/or development activities are planned for these successors. However, organisations are generally moving away from traditional succession planning and adopting approaches that are much wider in vision and integrated with talent management processes. This is occurring for many reasons, but notably due to increasing speed of change in the external environment, scarce leadership resource, flatter management structures and escalating recruitment costs. It is essential that effective succession planning and talent management processes are in place to ensure that organisations can fill key positions with the right people with the right skills at the right time. Effective talent management will include the following: Recruit well, balance the short-term needs with longer terms strategies Ensure that you develop all people early and give them stretch in their role Identify talent at every level in an organisation and create an effective pipeline Use effective engagement and retention strategies (do not assume loyalty) Ensure that all managers own the talent agenda, this is not just an HR issue Promote and create a coaching ethos and a stronger, values-based culture Identify key roles and ensure that you have effective succession plans in place. The Leadership Pipeline The focus of accountabilities and results need to change as people move up an organisation. Development plans need to help people let go of behaviours and create new capabilities as they move up the pipeline. The performance potential matrix The Performance Potential Matrix (PPM) was first introduced into organisations more than 30 years ago as a method of looking at the relationship between performance and potential in the context of annual succession planning and talent development programmes. High Medium Low Performance Rating At level Some Potential Clear Potential Potential Rating To use the PPM effectively, organisations will need to develop the capability of line managers at every level of the organisation to manage performance appropriately and to recognise the indicators of potential. The PPM can be used to review all employees, or all managers at a certain grade or all people in a specific department. It is important to know that ratings change as people grown and develop.

6 Development Plans Development plans which are aligned to both the organisational goals and individual aspirations will have far more purpose, deliver enhanced performance and develop potential for the future. To achieve real personal learning and change, plans require three things: Challenging tasks: real-life important job demands trigger a motivation to learn. Feedback: frequent, repeated feedback and coaching promotes change. Learning something new: the raw material of learning. Without some new to-dos, change cannot occur. Each of the above provides a source of growth. However, the real power lies in combining them all together. Individual aspirations & motivation On the job stretch projects & assignments Process for creating a development plan 360 Feedback (formal and informal) Line Manager feedback & coaching Organisation skills & capability requirement SMART Development Objectives Self directed learning & development Performance objectives in current period Internal training & development opportunities Organisation succession planning External training & development opportunities Create an effective plan by carefully considering input from both the individual and organisational perspective. Remember development works best when a small number (two or maybe three) development objectives are worked on at once. Linking performance and reward Total Reward Structure Other benefits Training & coaching Basic pay Total Reward Quality of work life Bonuses & incentives Career & challenge An increasing number of highly successful organisations are achieving improved results and greater engagement by linking reward at all levels, and in all functions of an organisation directly to performance. Reward is one of an organisation s most powerful operational tools. To be successful in linking reward to performance management, the structure and the kinds of incentives offered must clearly signal desired behaviour and performance. You will need to create a total reward structure that will entice people to go all out to execute organisational strategy effectively and achieve objectives in the right way. Vital to the success of a performance-based reward system is to ensure that all employees understand, ahead of time, the precise relationship between performance and the incentive. One size does not fit all when it comes to reward and in designing an appropriate structure, a key question to ask yourself is: How can we objectively ensure that reward, recognition, and promotions are given to those who deliver for us and that high performing individuals we can t afford to lose are retained?

7 Performance Improvement improvement plans Process From time to time your ongoing performance management conversations will not result in the desired outcomes and at that stage a performance improvement process can be used to support the normal processes. This is not a disciplinary action, nevertheless organisations should still have a clear policy and process in place to support managers, as it is their responsibility to identify any recurring performance issues and manage them in an appropriate way. A performance improvement plan is a great tool to manage continual performance issues. Managers can use these plans when an individual consistently misses performance objectives despite receiving sufficient coaching and support during their monthly one-to-one meetings and through their personal development plan. Performance review meetings give managers an opportunity to review the specific areas that require improvement in a systematic way and plan a way forward in conjunction with the individual. The frequency of the meetings will depend upon the individual and the nature of the issue, but ideally these are weekly and are in addition to the normal monthly one-to-one meeting. We have included a template for a performance improvement plan and guidelines on how to conduct a Performance review meeting in this toolkit. Creating a performance-led culture Creating the right organisational culture to improve the effectiveness of performance management is essential but can be notoriously difficult to describe or plan to change Apart from developing a systematic approach to managing the performance of your organisation, teams and individuals, you will also need to focus on the development of exceptional leadership and employee engagement. At Real Partners we believe that at the core of a performance-led culture is a heightened level of ownership and empowerment, where each individual is motivated to do all they can for the benefit of their internal and external customers and for the success of the organisation as a whole. If you need further assistance in developing a performance-led culture in your organisation, please contact us. Real Partners 126 Nottingham Road Stapleford Nottingham NG9 8AR Info@realorganisation.co.uk real people real performance real imagination