REINVIGORATING THE PERFORMANCE MANAGEMENT PROCESS Gillian Thomson Reward Manager, Scottish Power Evan Davidge, Head of Reward UKMEA, Arup EB Live 2016
What we will cover How can you make the appraisal process more effective, and eliminate box-ticking Achieving transparent pay grades and structures which demonstrate clear, relatable career progression Technology and performance management
Company Overviews
Who are ScottishPower? ScottishPower are part of the Iberdrola Group 3 operational businesses in the UK: Energy Networks 3.5m customers Renewables UKs largest onshore windfarm Retail and Generation 5.4m customers Employ 6000 employees in the UK
Who are Arup? 1895-1988 We shape a better world
Performance appraisal and other organisation levers Individual and Team Capability Org, team and job design Reward and recognition Strategic Objectives Leadership Results Mgt processes and systems Work processes and business systems Values and Culture Source: Hay Group The key organisational performance levers
What is performance management? The alignment of organizational, team and individual efforts towards the achievement of business goals and organisational success. It includes establishing expectations, skill demonstration, assessment, feedback and continuous improvement. Source: World at Work GR1 Total Reward
The performance management process Define goals and standards Determine reward, recognition and consequences Provide ongoing coaching and feedback Conduct annual performance and professional development discussion Conduct performance dialogue
Where does it tend to go wrong? Leadership Manager Capability No alignment to success factors Too individualistic and divisive Negative focus by Leaders Design Objectives unreal and invalid Ratings inconsistent and unfair Poorly designed form / system Emphasis on box ticking Training Not supported Focus on the wrong things How it links to pay Inadequate motivational value for effort involved
Leadership elements with most impact on overall success Perceived impact on organization Actual driver of organizational impact Pecentage of managers with marginal skills Having a candid dialogue 1 st (perceived highest impact) 3 rd 33% Linking performance to development planning Setting SMART goals 2 nd 1 st (skill with highest impact) 48% (lowest skill level) 3 rd 2 nd 29% Source: Mercer 2013 Global Performance Management Survey Report n= 1,056 organisations in 53 countries
Performance management in practice HR SAP online tool Cascade of Business and Team Goals Smart Objectives Planning, Mid Year, Q3, Year end formal meetings (5 point rating scale) Personal Development Plans Online Training Webex support Contribution Guide (No SMART) Oracle online record Impact plan Past performance review 360 degree feedback Development plan and career conversation Summary No box ticking
Removing appraisal ratings upsides and downsides Upsides Qualitative process Aids development Less threatening Aligns with values / culture Improves trust Holistic with peer review Builds confidence and consistency Less bureaucracy No forced distribution of ratings Downsides Can be ambiguous Managers have to be skilled No cultural fit Difficult to link to performance pay and bonuses Lack of a differentiation measure Lack of scores affect consistency No moderation Requires some other form of talent management process
PAY GRADES, STRUCTURE, AND LINKS TO PERFORMANCE MANAGEMENT
Primary objectives in using pay for performance Encourage employee engagement 4% 16% 19% Pay fairness 6% 16% 15% Allocate scare rewards in an equitable manner 16% 24% 33% Attract and retain right employees 16% 24% 33% Drive employees to higher levels of performance 11% 26% 47% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Source: Mercer 2013 Global Performance Management Survey Report n= 1,056 organisations in 53 countries
Factors influencing compensation Business strategy Life cycle and structure of the organisation Competitive environment Markets you operate in - global / local Economics Collective bargaining / unions Legal compliance
Base pay structure Definition A management tool that reflects the collection and organisation of internal and external compensation data to support job values. A pay structure consists of a series of pay ranges that represent jobs of similar internal and / or external worth Objectives Create alignment between work and rewards Help achieve organizational objectives Reflect desired competitive position
Types of pay structure - ScottishPower & Arup Underpinned by Hay Job Evaluation methodology Different structures for each Collective Bargaining Unit and Personal Contract Employees Benchmarked to Market Median Typical 80% to 120% range Typically narrow grade bands in terms of Hay Points No job evaluation methodology Global grading structure Mapping of jobs to internal / external benchmarks Benchmarked to pay Market Median but Upper Quartile Total Reward employer Typical 80% to 120% range but many outliers with niche skills
TECHNOLOGY & PERFORMANCE MANAGEMENT
The ScottishPower Experience, Why Online? Global HR System Line of Sight Self Service Model Enhance existing process Global Reporting Lines Changing Workforce Growing Workforce Audit & Review Tool to Support
Journey to Online 30% of Templates incomplete at Mid Year Online PM 2015 Mixed management ability 2091 calls to 1HRdirect End Result without the process
What went wrong? Global Design Global Build Limited local knowledge System Communication Too Technical One size didn t fit all Email heavy Impersonal How not why Business Change ongoing Current practices assumed not checked Business readiness
2016 Focus Reinforce Why Continuous Improvement Re-engagement with Performance Management Support Sessions Customer Feedback
Impact Better line of sight on business objectives Call Volumes down 50% 95% Completion Rate Employee Engagement Process Efficiency
Arup Next Steps Restate pay and performance management in the context of a revised global total reward philosophy Rolling out the global online appraisal system with training Development of a career bands grading structure globally Using a refined talent management process to differentiate pay Using gender pay as an opportunity to improve diversity
Final thoughts - implications for pay for performance? Be very clearly on your performance differentiation philosophy Know manager capability and calibration makes a real difference Consider programs in the context of others Performance management, pay levels, incentives, supervision and leadership development all reinforce one another Test whether your PM program is getting you the desired results Use analytics to measure progress Understand what is holding you back Design or implementation issues? Skill or will gap? Pay budgets Meaningful differentiation Fairness perception
Questions