Posts tagged ‘Performance Management’
It is impossible these days to open a HR magazine, go to a HR conference or read a HR book without being overwhelmed by terms such as ROI on HR, HR analytics, KPI’s, measurement and Human Capital Management. These buzzwords which are trying to make HR ‘harder’ have really gained acceptance in the HR world today. In many ways, this is a good thing.
The problem with metrics and KPI’s is however, that they actually do work. That is, if you start to measure people in certain ways and you link their pay to meeting those measures they will in most cases try to meet these goals (KPIs) at the cost of other things.
“What you measure is what get’s done” as the old saying goes. It is therefore imperative that you measure the right things.
I was recently inspired by a Ted-talk about measuring performance. The talk was given by Dr. Chris Shambrook who supports organizations with leadership development. He makes the argument that when organizations talk about performance they are usually talking about results. So when you ask a person about how his performance is, what most people think of is results – how well are you doing against the goals set for you. What performance really means is “doing the things you need to do in order to get the things that you want”. He argues that organizations should focus on performance more than results. I totally agree.
I recently wrote about something similar when I advocated that HR also should track effort in the performance management system. Inspired by John Wooden, arguably the best coach in sport’s history, who famously never talked about winning games and wasn’t focused on the points on the board but instead for him it was about sticking to the fundamentals and making an effort to reach your potential. If you do that, he argued, the points will come.
Jon Ingham is a big more cynical when he state that “the easier something in HR is to measure, the more likely it is to be pretty low value”, but I agree with him. It is easier to measure results but HR should be more focused on measuring performance. However just because it is more difficult does not mean impossible. It just means that you should look somewhere else for your best KPI’s.
I freely admit, that I believe HR can add significant value through good analytics, metrics, ‘true’ evaluation and cleaver KPI’s. However I also believe that they are difficult to get right, and if not done properly you can actually do more damage by using ‘ugly’ KPI’s. If you want to do it, make sure you do it right. In that sense I am not a true ‘Demming’ who believed that “In God we trust, all others must bring data”.
By focusing on performance instead of results you focus on how much potential you have and how you need to develop that. That in return will give you more control over delivering your results. Isn’t that what we are supposed to do?
John Wooden was arguably one of the best coaches in sports history. He won the NCAA championship ten times in 12 years – seven of which were in a row. Not only that, he was also a fantastic player and he is the only person ever to be named basketball All-American both as a player and as a coach. So John knows all about finding and using talent (see this fantastic TED video).
For John performance was clearly important but famously his players have said that they don’t remember John Wooden ever stressing the importance of winning a game. He wasn’t obsessed or even focused on the points on the board. For him it was about sticking to the fundamentals and making an effort to reach your potential. If you do this the points will come and you will win.
I think companies can learn something from this thinking. In most areas of people assessment and evaluation companies are focused – even obsessed – with measuring results (the points on the board) instead of effort.
- Talents are assessed using the famous (notorious?) 9-grid evaluation tool where performance and potential is measured and talents are defined as those scoring high on both. In many cases, performance is equal to results.
- Bonuses are pay increases are often awarded to those who achieve the most i.e. getting the most points.
- Annual reviews are many times nothing more than comparing achievements with stated goals.
There is nothing wrong with focusing on results but I suggest that this should not be the only dimension. Effort should count too. I suggest that the dimensions in the famous 9-grid assessment tool should take into account that ‘performance’ is not just about achieving results but also about applying yourself to the limit of your talent and potential.
I was reminded of this reading this post, which asks the question; “should we reward effort”. My answer is yes, we should also reward effort but not base our evolution purely on effort. You can get results by doing the things wrong or half-heartedly and sometimes you can do everything you can and must and not get the results. The definition of winning is about making your best effort to continuously improve and apply what works – as Coach Wood said. We should reward this in companies too.
If you Google “definition of Human Capital” you will be surprised and overwhelmed. It is a vast and contradictory amount of definitions you will get. And frankly not very helpful as they don’t explain exactly what it is. For example, if you look at Wikipedia under ‘Human Capital Management’ you will find that it redirects to ‘Human Resource Management’. To them it is the same thing.
To me, the definition of human capital is: “all strategic issues of people, performance and culture in an organization”. This is still vague and broad so let me elaborate. This is probably best illustrated in the figure below. HR can be viewed from three levels; strategic, tactical and operational. While it is important to get all three right, it is the strategic element which encompass Human Capital.
The definition of human capital includes two things; the strategic framework and the core strategic activities. This is illustrated in the figure further below.
The strategic framework is the set of principles and guidelines to which all strategic HR activities should adhere. They should be documented and implemented in such a manner that they are aligned with the company’s own mission, and operational so they can be used in the HR processes. The framework covers;
- HR strategy which must be totally aligned with the company’s strategy.
- Performance culture. All companies have a culture, but not all promote high performance and superior customer service. While HR is not the bearer or primary shaper of a company’s culture, it is up to HR to design and implement activities so they promote such a culture.
- Measure & evaluate. HR must measure and evaluate its initiatives constantly in an objective and tangible way. By using tools such as HR Analytics, HR can make better strategic and people-investment decisions, thus making HR more efficient
While all HR activities have an strategic and an operational side to them, there are some activities which are more strategic by nature. Activities which HR must get right to master Human Capital Management and they are core to the definition of Human Capital.
- Leadership Development. Leadership Development is a must-win battle any organization. Leaders shape the culture of the organisation and make the processes stick. Leadership Development must involve top management participation to underline its significance. Leaders, at all levels, must be able to guide and motivate based upon human understanding, respect and responsibility – competencies which must be constantly developed.
- Performance Management is one of the most effective strategic HR activities. Research show that it is directly linked with: 1) higher profits; 2) quicker execution of company strategy; and 3) reduced employee turnover through higher engagement in their work. Goal alignment also makes it possible to establish a true pay-for-performance culture by linking reward systems with both individual and team performance. Also, performance management serves both as a clear measure of individual performance and development, and also provides a clear pipeline to talent identification and succession planning.
- Talent Management. ‘The War for Talent’ is continuing with increased speed despite the current global slowdown. According to The Economist, Board members in global multinational companies single out the ability to attract and retain talent as the single most critical catalyst for growth today. Talent Management is a range of continuous processes and development programs that aim to identify, attract, retain, engage and intelligently deploy the best employees in order to become the future leaders on all levels – a leadership and specialist pipeline.
- Employee Engagement is widely recognized to be major driving force behind many business outcomes. Research clearly shows that engaged employees are more productive, more profitable, more customer-focused and more loyal. Improving engagement requires a constant focus on changing behaviors, processes and systems to anticipate and respond to the organisation’s needs. Improving engagement means measuring and analysing the level of engagement. It is not possible to improve what you cannot measure.
- Succession Planning has two main purposes: one is to mitigate risk by having emergency successors identified, to step in when needed; the other is to have a longer-term development view of how positions are filled. The advantages of doing this well are anchored in business continuity. An effective, proactive succession plan leaves the organisation prepared for the loss of key employees, and prepared for growth, filling new jobs and employee promotions.
This was a long post on the definition of Human Capital but I think it is important to get right. I would be happy to be challenged on the above.