Like many other organizations in the past few years, SaskEnergy felt compelled to refine its performance management system.
To create a high performance culture, you need a system in place that clearly separates top performers from the rest and rewards those employees who are making the greatest contributions to the company, explains Robert Haynes, vice-president of HR for Saskatchewan’s natural gas distribution company.
“Every organization is under pressure to do more with less, so what you have to do is get the most out of your people,” he says.
Pushing people to constantly strive for improvement can be a sustainable strategy so long as you reward employees for their efforts, he adds. “I firmly believe that people like to be pushed and as long as you recognize people they will rise to the challenge.”
That philosophy led to changes in the compensation strategy at SaskEnergy. In the past, employees were given basic cost-of-living increases, so that even when people didn’t perform well enough to receive a merit pay raise, they would get basic two- or three-per-cent increases. Now to get an increase employees have to meet the objectives they set for themselves that reinforce the larger goals of the organization. “If you are in an organization where you want people to give that extra effort, you have to be able to distinguish between the superior performers and the just adequate performers,” says Haynes. “If you perform you are going to get a higher merit increase.”
For years performance management has been a core responsibility for HR departments. But like so many other HR initiatives, it was seldom considered by anyone outside of the HR department as a useful tool to improve the bottom line. But a working world that prizes efficiency and productivity above all else has brought about a distinct change in attitudes about performance management in recent years, say HR experts.
Ronald Burke, a professor of organizational behaviour and industrial relations at York University’s Schulich School of Business in Toronto, traces the shift to the mid-’90s. A lot of organizations received a rude awakening about ineffective performance management systems when they were under pressure to reduce head count during the economic downturn. As they went through sometimes sweeping downsizings it was clear they didn’t know who should be let go and who should be kept, he says.
“Everyone agreed that some people were not doing well but when they looked at evaluations, everybody was okay. Firms knew very quickly that wasn’t the case,” he says.
And while performance management programs are being applied with more rigour than they once were, the most effective programs focus on developing employee strengths rather than forcing employees to spend time on things they simply aren’t good it. People like working on things they are good at, he says. “There should be more emphasis on building those strengths as opposed to finding the couple of things people are screwing up on,” he says.
Graham Brown, a HR consultant in the Toronto office of Deloitte & Touche, says there is a growing number of CEOs and CFOs who actually believe the old adage about employees being the most important factor in turning a profit and therefore want to ensure people are being as productive as possible, he says.
“I think that a lot of companies have realized that employee productivity is not where it needs to be,” he says. “They just don’t feel that their employees are being held accountable.”
HR faces a couple of key challenges in creating the effective performance management systems CEOs want, says Brown.
The first is to focus on improving the performance of critical employee groups. The organization will get the greatest return for time and money invested in the organization’s value producing positions, he says.
The other key is convincing managers to take ownership of the process. Managers need to see how the program affects their bottom line. Here the crucial challenge facing HR is coming up with accurate measures of employee productivity. It isn’t easy but HR needs to go to managers with numbers that show how much an employee is contributing to the bottom line, preferably as a factor of salary.
For example, HR at an IT operation needs to show how much software engineers contribute to the business and how much they will contribute after going through the performance management program.
Until the line managers can see those kinds of numbers, they won’t be interested in spending the time on performance management and the program will flounder, he says.
At SaskEnergy, one of the biggest challenges has been getting managers to make the tough decisions about who deserves merit increases and who doesn’t.
Under the old system, every business unit drew from one merit increase pool, says Haynes. But if you had one area of the company that evaluated employees with a light touch, they would take a greater portion of the total merit sum than a department that was more honest about poor performers. In a way it let managers off the hook because they weren’t forced to make some of the tough distinctions between performers and reward them accordingly, says Haynes.
Now each business unit has to recommend merit increases based on a sum of money tied to the departmental budget. When the manager has a clear understanding of a limited amount of money to divide among his employees, he is less inclined to give someone an easy mark, says Haynes. “It forces them to really focus on their top performers,” he says.
Aside from the bottom-line benefits for employers, recruitment and retention also get a boost because employees want to work for organizations with good performance management programs in place, says Wayne Phillips, a former HR professional with IBM Canada and Celestica and now independent HR consultant. In fact, performance management should be viewed as an essential component of any retention strategy.
“Companies are looking at how they can not just attract people but hold on to them and the only way they can hold on to someone is to prove they are appreciated,” he says.
Perks like pool tables in the office and even financial awards will only drive commitment in the short term. Top performing employees won’t stay with a company if they aren’t treated like top performers, he says. “If you are the best you should be rewarded accordingly.”
Employees appreciate a well-constructed, formal performance management system because it gives them a clarity of purpose and a good understanding of what expectations they have to meet, says Linda Weichel, a partner with Toronto-based public relations and communications consulting agency Media Profile.
As a small company with an informal workplace culture, Media Profile was always very focused on results but there was little in the way of formal programs or policies to document how they were achieving those results. “It was always just make it happen and get it done,” explains Weichel.
There was a “very casual” performance management program, but as the organization grew and new people came on board, it often wasn’t clear what was expected of them and how they could achieve the results the company coveted.
“There needed to be clearer guidelines and expectations about how we were going to deliver the results that we have always focused on,” she says.
With just 30 employees, Media Profile has no HR person so an HR consultant was brought in to offer guidance. From that a team of four people, led by Weichel, was tasked with gaining input from every employee about what changes they would like to see.
Job descriptions were rewritten, a chart was created to detail the technical skills for each position and another chart shows how each person is expected to maximize profit for the firm.
Tangible measures were developed so every employee can see how they are contributing to the financial health of the organization, how well they are satisfying clients and colleagues.
“It is all about how efficient they are and how well they manage their time and how well they manage their expenses,” says Weichel. “We created charts which made it very clear what we expected from people both on skills and what contributions they were making to the company and to each other.”
Every employee is now assessed on how well they are performing against those objectives, plans for improvement are created and will be checked on every three months. The process was only begun last summer and the first reviews conducted in November, but there has been a noticeable improvement in the atmosphere around the office, she says. “I think people now have the tools they need to do their jobs. They have clear and tangible guidelines about what is expected of them.”
To create a high performance culture, you need a system in place that clearly separates top performers from the rest and rewards those employees who are making the greatest contributions to the company, explains Robert Haynes, vice-president of HR for Saskatchewan’s natural gas distribution company.
“Every organization is under pressure to do more with less, so what you have to do is get the most out of your people,” he says.
Pushing people to constantly strive for improvement can be a sustainable strategy so long as you reward employees for their efforts, he adds. “I firmly believe that people like to be pushed and as long as you recognize people they will rise to the challenge.”
That philosophy led to changes in the compensation strategy at SaskEnergy. In the past, employees were given basic cost-of-living increases, so that even when people didn’t perform well enough to receive a merit pay raise, they would get basic two- or three-per-cent increases. Now to get an increase employees have to meet the objectives they set for themselves that reinforce the larger goals of the organization. “If you are in an organization where you want people to give that extra effort, you have to be able to distinguish between the superior performers and the just adequate performers,” says Haynes. “If you perform you are going to get a higher merit increase.”
For years performance management has been a core responsibility for HR departments. But like so many other HR initiatives, it was seldom considered by anyone outside of the HR department as a useful tool to improve the bottom line. But a working world that prizes efficiency and productivity above all else has brought about a distinct change in attitudes about performance management in recent years, say HR experts.
Ronald Burke, a professor of organizational behaviour and industrial relations at York University’s Schulich School of Business in Toronto, traces the shift to the mid-’90s. A lot of organizations received a rude awakening about ineffective performance management systems when they were under pressure to reduce head count during the economic downturn. As they went through sometimes sweeping downsizings it was clear they didn’t know who should be let go and who should be kept, he says.
“Everyone agreed that some people were not doing well but when they looked at evaluations, everybody was okay. Firms knew very quickly that wasn’t the case,” he says.
And while performance management programs are being applied with more rigour than they once were, the most effective programs focus on developing employee strengths rather than forcing employees to spend time on things they simply aren’t good it. People like working on things they are good at, he says. “There should be more emphasis on building those strengths as opposed to finding the couple of things people are screwing up on,” he says.
Graham Brown, a HR consultant in the Toronto office of Deloitte & Touche, says there is a growing number of CEOs and CFOs who actually believe the old adage about employees being the most important factor in turning a profit and therefore want to ensure people are being as productive as possible, he says.
“I think that a lot of companies have realized that employee productivity is not where it needs to be,” he says. “They just don’t feel that their employees are being held accountable.”
HR faces a couple of key challenges in creating the effective performance management systems CEOs want, says Brown.
The first is to focus on improving the performance of critical employee groups. The organization will get the greatest return for time and money invested in the organization’s value producing positions, he says.
The other key is convincing managers to take ownership of the process. Managers need to see how the program affects their bottom line. Here the crucial challenge facing HR is coming up with accurate measures of employee productivity. It isn’t easy but HR needs to go to managers with numbers that show how much an employee is contributing to the bottom line, preferably as a factor of salary.
For example, HR at an IT operation needs to show how much software engineers contribute to the business and how much they will contribute after going through the performance management program.
Until the line managers can see those kinds of numbers, they won’t be interested in spending the time on performance management and the program will flounder, he says.
At SaskEnergy, one of the biggest challenges has been getting managers to make the tough decisions about who deserves merit increases and who doesn’t.
Under the old system, every business unit drew from one merit increase pool, says Haynes. But if you had one area of the company that evaluated employees with a light touch, they would take a greater portion of the total merit sum than a department that was more honest about poor performers. In a way it let managers off the hook because they weren’t forced to make some of the tough distinctions between performers and reward them accordingly, says Haynes.
Now each business unit has to recommend merit increases based on a sum of money tied to the departmental budget. When the manager has a clear understanding of a limited amount of money to divide among his employees, he is less inclined to give someone an easy mark, says Haynes. “It forces them to really focus on their top performers,” he says.
Aside from the bottom-line benefits for employers, recruitment and retention also get a boost because employees want to work for organizations with good performance management programs in place, says Wayne Phillips, a former HR professional with IBM Canada and Celestica and now independent HR consultant. In fact, performance management should be viewed as an essential component of any retention strategy.
“Companies are looking at how they can not just attract people but hold on to them and the only way they can hold on to someone is to prove they are appreciated,” he says.
Perks like pool tables in the office and even financial awards will only drive commitment in the short term. Top performing employees won’t stay with a company if they aren’t treated like top performers, he says. “If you are the best you should be rewarded accordingly.”
Employees appreciate a well-constructed, formal performance management system because it gives them a clarity of purpose and a good understanding of what expectations they have to meet, says Linda Weichel, a partner with Toronto-based public relations and communications consulting agency Media Profile.
As a small company with an informal workplace culture, Media Profile was always very focused on results but there was little in the way of formal programs or policies to document how they were achieving those results. “It was always just make it happen and get it done,” explains Weichel.
There was a “very casual” performance management program, but as the organization grew and new people came on board, it often wasn’t clear what was expected of them and how they could achieve the results the company coveted.
“There needed to be clearer guidelines and expectations about how we were going to deliver the results that we have always focused on,” she says.
With just 30 employees, Media Profile has no HR person so an HR consultant was brought in to offer guidance. From that a team of four people, led by Weichel, was tasked with gaining input from every employee about what changes they would like to see.
Job descriptions were rewritten, a chart was created to detail the technical skills for each position and another chart shows how each person is expected to maximize profit for the firm.
Tangible measures were developed so every employee can see how they are contributing to the financial health of the organization, how well they are satisfying clients and colleagues.
“It is all about how efficient they are and how well they manage their time and how well they manage their expenses,” says Weichel. “We created charts which made it very clear what we expected from people both on skills and what contributions they were making to the company and to each other.”
Every employee is now assessed on how well they are performing against those objectives, plans for improvement are created and will be checked on every three months. The process was only begun last summer and the first reviews conducted in November, but there has been a noticeable improvement in the atmosphere around the office, she says. “I think people now have the tools they need to do their jobs. They have clear and tangible guidelines about what is expected of them.”
