creating performance based culture

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CREATING A PERFORMANCE-BASEDCULTURE

SESSION 2: THROUGH PROPERPERFORMANCE MANAGEMENT OFPEOPLECNI’s Journey, Mistakes, and Lessons Learned

Kenny Ong

CNI Holdings Berhad

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Contents

1. Key Workforce challenges to achievingorganization performance

2. Managing Performance through People:

Support and Philosophy

3. How to really manage Performance

4. Managing Performance through Incentives

5. Employee Distinctions through Relative

Performance

6. Managing Team performance – collaboration,

innovation

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Workforce Challenges

Key Workforce Challenges in AchievingOrganizational Goals (Extremely Simplified

Version):

1. Right Person, Wrong Job (5%)

2. Wrong Person, Right Job (20%)

3. Wrong Person, Wrong Job (1%)

4. Right Person, Right Job, Managed Wrongly

(74%)

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Managing Performance through

People: Support and Philosophy

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Alignment: 4-Wheels Model

Philosophies

Corporate

Objective

PerformanceObjectives

StructureResources

Leadership

Person

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Alignment: Framework

• Equal / Fair 

• Happy / Productive

• Performance vs Potential• Retention / Engagement

• Activities / Results

• Leading / Lagging• Macro / Micro

Philosophies

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How to really manage Performance

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• Beating a Dead Horse

M t C D t

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Most Common Desperate

Performance Improvement

methods

1. Send for more Training2. Enforce more Incentives (positive/negative)

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Mager and Pipe

• Analyzing Performance Discrepancies

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Managing Performance through

Incentives

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Incentive Problems

Problem with Incentives in managing performance:• Most people are confused or unsure about

compensation tools

• Some people misuse compensation tools

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What to Pay?

• Pay for Service• Pay for Job

• Pay for Performance

• Pay for Competency

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Performance and Incentives

1. Internal Equity1. Internal Job Rates

2. Performance differentials

2. External Competitiveness

1. External Job Rates - Benchmarking

2. Demand & Supply

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What’s the Difference?

• Increment

• Bonus

• Promotion

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Compa Ratio Table

Use this if your company:• Pays for Performance, and

• Pays for Job rates

Def:

Mid-Point = Mid Point of Pay Grade

Grade E2

Min

RM2,000

MID

RM2,500

Max

RM3,000

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Compa Ratio Table

< 0.7 ≥0.7 -≤0.9 >0.9 -<1.1 ≥1.1 -≤1.3 > 1.3

5

4

3

2

1

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Compa Ratio Table

< 0.7 ≥0.7 -≤0.9

>0.9 -<1.1

≥1.1 -≤1.3

> 1.3

5

4

3 5%

2

1

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Compa Ratio Table

< 0.7 ≥0.7 -≤0.9

>0.9 -<1.1

≥1.1 -≤1.3

> 1.3

5 9

4 7

3 9 7 5% 4 3

2 2

1 0

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Compa Ratio Table

< 0.7 ≥0.7 -≤0.9

>0.9 -<1.1

≥1.1 -≤1.3

> 1.3

5 15 12 9 8 7

4 12 9 7 5 3

3 9 7 5% 4 3

2 6 4 2 1 0

1 4 2 0 0 0

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Dangers of Direct Incentives

1. lessen internal motivation,2. switch to mercenary mode,

3. do something and do not do something else,

4. bribe and fraud culture,

5. easier for competitors to recruit,6. lessen teamwork & helpful culture,

7. less and less impact for same value,

8. mockery of base salary and employment contract,

9. rebellion from non-incentivised staff,

10.end up incentivising everyone for everything?,

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Employee Distinctions through

Relative Performance

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Employee Distinction?

< 0.7 ≥0.7 -≤0.9

>0.9 -<1.1

≥1.1 -≤1.3

> 1.3

5 9 8 7 6 5

4 8 7 6 5 4

3 7 6 5% 4 3

2 6 5 4 3 2

1 5 4 3 2 1

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Employee Distinction?

< 0.7 ≥0.7 -≤0.9

>0.9 -<1.1

≥1.1 -≤1.3

> 1.3

5 20 15 12 8 5

4 18 12 9 5 3

3 9 7 5% 4 3

2 1 1 1 0 0

1 0 0 0 0 0

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Employee Distinction

Average

Rating

Rating Multiply

Factor 

Example

Rating

Example

Increment

> 4.1 5 2 4.2 8.4%

> 3.3 – 4.1 4 1.2 3.5 4.2%

> 2.3 – 3.3 3 0.75 2.8 2.1%

> 1.3 – 2.3 2 0.5 1.8 0.9%

≤ 1.3 1 0 1.0 0%

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Employee Distinction

Group I

(Talent Pool)

     2

     3 

     4

     5 

     P     E     R

F     O      R

      M     A      N

     C E

2 3 4 5POTENTIAL• Identify

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Employee Distinction

Group I

(Talent Pool)

Group II

( Potential)

Group III( Performance)

Group IV(Counseling)

2 3 4 5

     2

     3 

     4

     5 

     P     E     R

F     O      R

      M     A      N

     C E

POTENTIAL• Identify

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Curse of the Bell Curve

‘A’

Staff 

‘B’

Staff 

‘D’

Staff ‘E’

Staff 

‘C’

Staff 

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Managing Team performance –

collaboration, innovation

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Managing TEAMS

1. Identify the right ‘levers’2. Set KPIs for the right ‘levers’

3. Manage the ‘levers’ through performance

systems

4. Balance Individual vs. Team priorities

5. Manage conflicting KPIs, but don’t eliminate

them

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TEAM levers

C.O.R.E.

÷

W.L.

P ibl TEAM t KPI

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Possible TEAM-type KPIs

and incentives

Team Type Possible Incentive Type

Functional •Recognition for exceptional success (usually not incash)

•Individual role considered in normal merit increaseprocess

Process •Team competencies recognised in pay for proficiencyapproach

•Gainsharing or operational progress incentives

Project/ Time-

based

•Recognition for exceptional individual contributions in

spot wards or salary increases•Project / programme Phantom Stock or Profit Sharing

Network/Partnerships

•Recognition for exceptional individual or teamsuccesses in spot awards or share increases

•Venture profit sharing

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Team Incentive Models

1. Fixed Salary Proportion (Fixed Personal,Variable Team)

Performance Incentive =

Fixed Quantum +

(Balance Sum In Bonus Pool ÷ Headcount)

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Team Incentive Models

3. Team Ratio Plan (Variable Personal, FixedTeam)

Performance Incentive =Team Ratio x Personal Target Multiplier 

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• Product Leadership• Reduce time to market

• Commercialize new products fast

• Ensure that ideas flow

• Reuse what other parts of the company

have already learned

• Ensure there are multiple sources of funding

Possible Innovation levers

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Innovation Levers?

1. Add 10 value increasing properties to eachproduct or service every 90 days

2. Reduce jointly held inventories and lead timerequired by 90% in 24 months

3. Reduce new-product/service developmentcycle time by 75% in next 2 years

4. Copy 10 ideas every 60 days form competitorsand noncompetitors

5. Target % Revenue from New Products(previous 24 months) - start with 50%

Source: The Innovation Challenge, “Thriving on Chaos”, by Tom Peters; Alfred A.

Knopf Inc.

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Managing People performance:

A Summary

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More Problems….

1. cost of evaluation vs. gains of evaluation2. defer achievements of a good year to next

3. barely achieve so that next target is not high

4. spread improvements over several years5. value reducing actions to increase performance

6. most ratings are 4 or 5, new people are 3

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Contents

1. Key Workforce challenges to achievingorganization performance

2. Managing Performance through People:

Support and Philosophy

3. How to really manage Performance

4. Managing Performance through Incentives

5. Employee Distinctions through Relative

Performance6. Managing Team performance – collaboration,

innovation

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Before I forget…

• Re-train Appraisers• Train new Appraisers

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Alignment: 4-Wheels Model

Philosophies

Corporate

Objective

PerformanceObjectives

StructureResources

Leadership

Person

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Thank You.

soft copy of slides:

www.totallyunrelatedrandomanddebatable.

blogspot.com