Moving to a Pay-for-performance Strategy? Here Are 7 Ways to Reduce Your Risk

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By Jay Larson, VP of Field Operations

Your employees like to know that their work matters and that their contributions to the organization are noticed. When you link pay and promotions to goal accomplishment, goals become more meaningful for your employees and you create a more consistent, transparent, and fair process for making personnel decisions. However, tying financial incentives and other tangible rewards to goals is a culture shift that can change the dynamics of your workplace. As you navigate the challenges of implementing a goals-based pay-for-performance strategy, use these principles to reduce your risk and get it right:

  • Balance goals vs. competencies. There are two dimensions for measuring performance: what you accomplish and how you accomplish it. Over-emphasizing goals can lead to an unhealthy “ends always justify the means” approach to performance. Employees should not be rewarded for achieving goals if the methods used to achieve them violate company values or involve ethically questionable practices.
  • Protect the intrinsic motivational value of goals. Research shows that goals people pursue voluntarily can become less enjoyable when they are linked to a monetary reward. If employees are accomplishing certain goals without any specific monetary incentives, then attaching financial rewards to these goals might actually decrease the motivation to achieve them.
  • Define the link between goal accomplishment and pay. When employees feel that pay decisions are based on clearly defined and consistently applied procedures, they are much more likely to accept pay outcomes as fair. And if employees understand the measures and time frames used to determine pay, they are more likely to accept the pay strategies as fair.
  • Encourage creativity and risk taking. Innovation means taking risks. Don’t let pay-for-performance make your people timid. Your pay strategies should encourage employees to take on challenging or “audacious” goals even though they may not always achieve those goals.
  • Encourage teamwork and collaboration. Strike a healthy balance between personal and group goals by basing pay on a mix of individual goals and broader team goals.
  • Balance the value placed on financial stability vs. financial opportunity. Because people differ widely when it comes to financial uncertainty, consider your employees’ stability preferences before implementing a pay-for-performance strategy. Some association of pay to performance is almost always desirable, but the amount tied to goal attainment should vary from job to job.
  • Emphasize that goals are about a lot more than pay. Consider downplaying the link between goal accomplishment and compensation. You don’t have to eliminate the association between goals and personnel decisions, just ensure that employees view goal management first and foremost as a tool for driving business strategies.

To learn more about using goals to drive performance, download SuccessFactors’ free white paper “Doing the Right Things: Using Goal Management to Drive Business Execution.”

What’s It Mean for Me? The Business Execution Impact of Cascading Goals

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By Jeff Diana, Chief People Officer

There’s a famous story from the early days of the space race. President John F. Kennedy was visiting NASA headquarters for the first time, in 1961. While touring the facility, he introduced himself to a janitor who was mopping the floor and asked him what he did at NASA. The janitor replied, “I’m helping put a man on the moon!”

That janitor at NASA knew how his work was connected to his organization’s overall goal. In your organization, improving business execution is all about closing the gap between strategy and execution. A business can spend lots of time developing a perfect strategy, but that work means nothing if you are unable to cascade that strategy down to the day-to-day work of your employees.

How can you do it? Let’s look at this example of how to cascade goals in a healthcare organization. If the CEO of a hospital sets a goal to “decrease operating costs by $5 million per year,” what does that mean for everyone else?

As you can see, there is a way to link the dishwashers’ goal back to the CEO. Had the dishwashing employees’ supervisor simply said, “You need to wash the dishes in hotter water because it’s your job,” the request could seem arbitrary and may even create resentment. Compliance would certainly be iffy at best. Cascading goals makes their task more meaningful by putting it in the context of the organization’s overall strategy. Cascading goals can take you places — maybe to the moon, maybe to higher revenue. It’s up to you and what you want to achieve.

Want to learn more about the impact of goal management on workforce productivity? Download the SuccessFactors white paper “Doing the Right Things: Using Goal Management to Drive Business Execution.”

Trying to Bridge the Skills Gap? An Integrated Approach to Talent Management Can Get You There

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By Jay Larson, VP of Field Operations

At a time when unemployment still hovers near its highest point in a generation, the idea of a shortage of skilled labor seems impossible. However, it does exist, as economists and newspaper reports continue to point out. In the U.S. alone, a shortage of 1.5 million college graduates is possible by 2020, according to McKinsey & Company. As public education budget cuts take effect in the U.S. and other countries, employers everywhere expect that there will be fewer of the right people to fill open positions.

To build the workforce of the future, employers must come to terms with the fact that they must be part of the solution. In some sectors — such as the energy industry — this may mean attracting talent to engineering fields before college, then nurturing that talent with internship and development programs during college, years before an employee’s first day of work. However, there are many other opportunities for employers to address the skills gap. With an integrated approach to talent management and a specific focus on individual development, an organization can:

  • Recruit and onboard with care and precision. It’s extremely expensive to hire people only to have them quit early in their tenure. Candidate turnover within the first year should be considered a recruiting or onboarding failure. Was there something about the job and the candidate that clearly did not match? Were the employees not onboarded properly and assimilated into the culture? To find out more about how to create a seamless recruiting and onboarding experience, download the white paper “Getting the Right People: 8 Critical Design Questions for Securing and Keeping the Best Hires.”
  • Get managers to assign goals with development in mind. Managers need to approach goals as a tool for engaging and developing employees, not merely getting work done. Effective goal setting is not just about telling employees what the company needs them to do. Instead, it requires striking a balance between what the organization needs to accomplish, what employees can do, and what employees want to get out of their jobs. It’s about assigning goals so employees understand how they will benefit from achieving them. For more information on this topic, download the white paper “Doing the Right Things: Using Goal Management to Drive Business Execution.”
  • Identify and address skills gaps. Smart organizations know that succession management isn’t only for senior executives. It’s crucial for employers to understand which positions are both pivotal (jobs where small differences in performance significantly impact company profitability) and critical (jobs that are necessary to maintaining company operations and where there is a significant shortage of talent). For these roles, identifying and developing candidates early in their educational careers, often years before they would be ready for a new role, is essential.
  • Use learning and compensation effectively to improve retention. Retention after a year is more a function of how employees are managed and if they can see career opportunities. The main reasons that high-performing employees quit include a perceived lack of career growth opportunities or a sense of inequity around pay, promotion, and staffing decisions. Making decisions about development and compensation based on transparent, objective criteria can go a long way to reduce the flight risk around your best employees. To find out more about identifying skills gaps or calibrating consistent results between performance, succession, and compensation, download the white paper “How to Motivate and Retain Key Employees.”

There are no easy answers to address the skills gap. It takes hard work and an integrated approach to talent management that includes recruiting, onboarding, performance, learning, succession, collaboration, workforce planning, and analytics. Equipped with these effective tools and insights, your work will be far easier. Let us know if we can help.

The Age of Big Data: 3 Ways Workforce Analytics Can Improve Business Execution

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By Dmitri Krakovsky

VP, Global Product Management

Thank you, Brad Pitt, for doing something seemingly impossible — you made data cool. Even though using data to make decisions is hardly new, the movie Moneyball has people everywhere talking about how data can guide decision making when it comes to building a winning team, both on and off the baseball field.

In the world of talent management, we use data in ways that would make sense to Billy Beane and the Oakland A’s. Simply put, data allows any organization to improve business execution because decisions are based on facts, not supposition. The only difference is that we call it workforce analytics.

As a recent New York Times article pointed out, there is a direct connection between Big Data and business execution. Professor Erik Brynjolfsson, an economist at Massachusetts Institute of Technology’s Sloan School of Management, and two other colleagues studied 179 large companies and found that those adopting “data-driven decision making” achieved productivity gains that were 5 to 6 percent higher than other factors could explain.

Why is the use of workforce analytics so powerful?

  • It improves the quality of your data. When SuccessFactors implements workforce analytics in your organization, we design systems and processes to make both data capture and analysis easy. If you have legacy programs and data, we start with an audit of existing processes and look for opportunities to streamline your processes and clean up historical data. For the end user, this often means saving time and reducing costs.
  • It focuses your thinking. Access to data is not a problem for most businesses — most businesses are drowning in data. How do you focus on the key metrics that matter? For many SuccessFactors clients, it means starting with the right questions. Our analytics staff starts with a business question in mind, then combines measures, segments, and non-workforce data to determine the answer. Asking the right questions is a crucial step toward getting key metrics that are unique to your organization.
  • It changes your culture. Armed with high-quality data focused on the right questions, you will be able to use the insight you gain to guide your actions and influence the way you do things. At Comcast, the key metric was high turnover in customer service representatives. As this video shows, they were able to use workforce analytics data to target areas for retention efforts. Hanging on to experienced CSRs meant Comcast was able to deliver a better customer experience and increase customer service satisfaction scores by 10 percent in one year.

Data may be cool right now because of one movie, but workforce analytics will make a difference in your organization in the long run. That’s the BizX difference.

5 Reasons Why Social Technologies Won’t Replace Traditional Performance Management

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By Steven T. Hunt, Ph.D., SPHR
Director of Business Transformation

In tech and HR circles, you hear a ripple of conversation about the death of traditional performance reviews. The idea is that social technologies are so much more fun and engaging for managers and employees that traditional performance reviews can’t compete. While there are lots of great ideas from video games and Facebook that are being used to augment talent management systems (including those from SuccessFactors), I doubt that these ideas will ever replace them.

 

Remember when people said that the Internet would be the end of brick-and-mortar retail stores? It wasn’t. In fact, one of the world’s best-known online brands — Apple — has actually opened several retail locations. What did happen is that it changed the way that people shopped. I believe the same is true for social technology and “traditional” performance reviews.
I’m a huge believer in the value of social technology for coaching and ongoing communication. But when it comes to making formal evaluations of someone’s value to the organization, these tools have a lot of problems, including:

  1. Poor measurement. Social technology usually emphasizes informal evaluations based on anecdotal comments. One could argue that social technology is more about impression management, popularity, and knowing who to ask for feedback than rigorous, consistent measurement. There is also a distinct absence of explicit performance criteria in most of the social technology systems I’ve seen (such as well-defined goals or competencies).
  2. Lousy analytics. Social technology tends to rely heavily on qualitative statements instead of quantitative ratings. This is a strength from a coaching and feedback perspective, but it’s a problem from the perspective of calibration, measurement consistency, and workforce analytics.
  3. Too lightweight for competitive environments. People competing for limited resources might distrust or actively try to “game” social technology. I also wonder how well it works in cultures with norms against giving critical feedback.
  4. A high potential to create disruption in the company. One of the things people often joke about Facebook is that it’s not possible to “dislike” something. Yet constructive feedback requires sharing negative comments from time to time. I cringe to think what might happen when someone posts “Joe’s work sucks” or “Jane is an idiot” in a social performance technology system.

6 Steps to Becoming a Goal-Driven Organization

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By Jeff Diana
Chief People Officer

If you really want to drive business execution in your organization, start with effective goal management. Becoming a goal-driven organization doesn’t have to be hard. Start with these six steps:

  1. Establish clear goals for everyone. From the CEO to the most junior person in your organization. Everyone plays! These goals should be clearly defined, tailored to the specific job but also linked to the overall strategy of your organization. This last piece is critical to motivating and engaging your people by showing exactly how their work contributes to the overall success.
  2. Hold managers accountable for setting and delivering on their goals. Managers must be evaluated based on both the quality of the goals assigned to the people they manage and their performance against achieving these goals.
  3. Define clear processes to align strategic goals with operational goals. Translate long-term strategic company goals related to profit, growth, and other business outcomes into near-term, tactical goals that specific departments and employees must achieve. Think of it this way, doing lots of small steps well has you running and winning the race.
  4. Regularly review performance against goals. Once a year is not enough. Goals should be reviewed on an ongoing basis throughout the year to guide decisions about business strategies, resource allocation, and project coordination. The speed of change is far too fast and we must manage accordingly.
  5. Adjust goal plans as needed throughout the year. Change happens. You should update goals to reflect changes in business strategies or operational tactics. Communicate the “why” behind the changes and how the new focus fits with your organization’s game plan.
  6. Use goal performance data to guide your people decisions. Make missing or reaching goals meaningful. Decisions regarding pay, career development, promotion, and hiring should be take the important insights on goal performance you will now enjoy.

Want to find out more about using goals effectively in your organization? Download the SuccessFactors white paper “Doing the Right Things: Using Goal Management to Drive Business Execution.”

The countdown to SuccessConnect 2012 is on!

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The countdown to SuccessConnect is on! Whether you are new to SuccessFactors products or an experienced user, our six tracks and 50+ conference sessions offer a wealth of information. You’re guaranteed to leave with new tools and ideas relevant to your role! View our full SuccessConnect agenda! Don’t forget to register for the Pre-Conference Training, led by our SuccessFactors University training team.

Early bird registration ends April 15, 2012 – register now and take advantage of the discount!

Next Generation Recruiting

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With SuccessFactors and Jobs2web you can deploy a recruiting execution strategy on one platform that powers talent attraction, talent engagement and talent selection engine. Are you ready for the next generation approach to hiring better talent?