Re-imagining Performance SAP SAP SE or an SAP affiliate company. All rights reserved.

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1 Re-imagining Performance SAP 2016 SAP SE or an SAP affiliate company. All rights reserved.

2 Disclaimer This presentation is not a commitment and is not subject to your license agreement or any other agreement with SAP. This document contains only possible plans strategies, developments, and functionalities of the SAP products and or initiatives and is not binding upon SAP for any particular course of business, product strategy, and/or development. Please note that this document is subject to change by SAP at any time without notice. Any rates, levels of effort, timelines, revenue or savings projections or other content are estimates based on certain assumptions and are only provided for informational purposes. Such estimates are not binding on SAP regardless of whether the assumptions are correct. Further, the contents of this presentation and any inferred, proposed or referenced commitments of any kind shall have no effect and are not binding upon SAP. SAP assumes no responsibility for errors or omissions in this document.

3 OUR HR FOCUS AREAS A Reflection of what the business and our people need to be successful Transform to become THE Cloud Company Grow our talent Simplify our organization Lead our people One learning experience Accelerate winning in HR People Sustainability 3

4 At SAP, we believe everyone is a talent 4

5 SUPPORTING SAP s GROWTH PLAN AND DIGITAL WORKSPACE We need to focus on development and performance rather than ratings and appraisal goals and accomplishments in ongoing conversations rather than an annual event and being agile and simple rather than rigid and complex. HR INTERNAL 5

6 WHAT BEST IN CLASS 1 COMPANIES DO FOR PERFORMANCE MANAGEMENT? 1. 89% 2 of leading organizations have recently changed their performance management process or plan to change it within 18 months. 2. Focus on continuous performance feedback throughout the year rather than annual event 3. De-emphasize ratings and rankings 4. Development focused, versus purely appraisal focused 5. Flexible, agile and simple 6. Continue Pay for Performance. Research supports that companies can still successfully pay for performance without performance ratings 3 1. Example best in class companies derived from NeuroLeadership Group 2. Bersin by Deliotte, 2015 Talent Management Research Report 3. Additional information on Pay for Performance in Appendix

7 OUR OWN RESEARCH From November May 2015, we conducted our own market, internal, and external research on the evolution of Performance Management and to evaluate the readiness for SAP. We found: Full investigation of both positive and negative experiences of other organizations and of internal stakeholder concerns, SAP is in a good position for a pilot. Ongoing feedback during the process should be considered to build an optimal process. In 2016, we conducted a study with Baylor University in 2016 and found that managers and employees want it to go beyond annual reviews to truly support regular discussions. Millennial Myth- they aren t as different as we once thought. Performance Conversations- how often is often? Positive Feedback v. Negative Feedback Managing Employees as individuals- one size does not fit all HR performance management tools are helpful! 2015 Whitepaper: Impact and Organizational Readiness for Evolving Performance management at SAP 2016 SAP & Baylor University Study: Continuous Performance Management: Focusing on Employees and Managers in the Ever-Changing World of Work

8 A NEW APPROCH THAT EXEMPLIFIES OUR HOW WE RUN BEHAVIORS How We Run is a set of behaviors that describe how we get things done at SAP, and gives us direction for making decisions and driving our work every day. How We Run was created from the input of thousands of people across SAP who sent it their ideas and feedback.

9 OUR NEW FOCUS - CONVERSATIONS Moving away from a once a year performance discussion. shifting towards more frequent, future-focused conversations on progress, accomplishments, ideas, and needs, enabled by our own SuccessFactors tools.

10 Introducing SAP Talk, our evolution of Continuous Performance Management, shifting our culture towards future-focused, continuous dialogue

11 For employees, this means regular discussions and continuous feedback. For leaders, this means continuous coaching and development. For everyone, this means more frequent, meaningful conversations on accomplishments, ideas, and needs with a tool to track progress along the way. Each conversation is an opportunity for development and growth

12 Our New End-To-End Process

13 Continuous Dialogue Future-focused conversations are at the heart of SAP Talk. Frequent Conversations should happen throughout the year, not just as a once-a-year event. Flexible They can occur weekly, biweekly, monthly, ad hoc, or quarterly at a minimum, as best suits you and your manager. Both manager and employee are responsible for having conversations. Different from Your 1:1 Traditional 1:1s are backward-looking and business-focused. SAP Talk conversations include: Your personal development Tasks, projects, and goals Your working environment Remember, goal setting still happens but you should review and refresh on a regular basis. Getting and sharing constructive feedback and learning from experience is the basis for future growth. Just like in any sport, it is the ongoing, real-time feedback that drives performance during the game that is critical to succeed.

14 SAP Catalysts Who? An employee whose contribution to SAP stands out. These individuals generate business results and success, look for simple solutions to complex problems, and demonstrate the motivation to assume more responsibility. How? Managers identify SAP Catalysts once a year in their team and discuss them in the Roundtables based on predefined criteria available to them. The designation of SAP Catalysts is made in Success Map. What? SAP Catalysts have access to an exclusive development program for one year.

15 Roundtable What is a Roundtable? The Roundtable is the opportunity for HR and managers to discuss development opportunities for: SAP Catalysts Employees nominated as successors for businesscritical positions as part of succession planning in the meaning of the Works Agreement on Succession Management Employees who need opportunities for development in other areas of SAP. When? The Roundtable takes place once a year between April and July. Who? The Roundtable participants include: HR Representative and managers from the same team. Dates may vary according to WoC agreements

16 PAY FOR PERFORMANCE SAP Talk Maintains Our Pay for Performance Philosophy Employees No longer need a rating to know where they stand. Employees will: Know how they are performing no surprises and no formal reviews Have more natural, frequent, meaningful conversations about performance, goals, and development Focus on their professional development and growth Managers No longer need a rating to determine performance-based compensation decisions. Managers will: Have full discretion when making merit increase decisions Have deeper knowledge of their direct reports performance and its impact on compensation Have information such as country budget percentage and compensation metrics Have guidance on how to use information to make compensation decisions

17 HOW SAP TALK STACKS UP AGAINST CHALLENGES CEB RECOMMENDATIONS FOR SUCCESS VS. SAP TALK SAP Talk Approach Our Focus is that process change is a by-product of the culture of continuous dialogue we want to build. Tool is only a guidance SAP Catalyst is designed to ensure we recognise high performance with high potential Our approach is not about informal conversations, but formalised feed-in, feed-back and feed-forward, minimum once a quarter Joint accountability of emp and mgr to ensure conversations are happening Quarterly upward feedback is designed to measure the occurrence and quality of conversations. This will help us in ensuring personalised and targeted enablement together with a robust change management plan Our approach is designed to be holistic view on contribution: the what and how Our dream of creating a real-time 6-box employee contribution summary will help in ensuring not everyone is in the middle

18 Long overdue, I think *this* is the single most important HR process change in a long while! Great initiative! Performance ratings get in the way of many conversations and rarely do they bring tangible value. This is a great improvement, especially the Roundtables focused more on future potential, development and career moves for the employee. Thumbs up! It will be hard to break old habits, and the road will be bumpy, but the journey will be worth it! Awesome initiative! Continuous engagement and improvement is the way forward. What Employees Are Saying Quotes from SAP Talk Article on SAP News June 7

19 THANK YOU