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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