Business 2.0 talks to Google CEO Eric Schmidt about goal alignment (even if they don’t use the words). Here’s "the … formula he uses to stay on track while innovating: Spend 70 percent of your time on the core business, 20 percent on related projects, and 10 percent on unrelated new businesses."

In Schmidt’s words: "the test that I apply — and we do this every day, 70/20/10 — is to ask how a feature will extend the core, the adjacent, or the innovative stuff to fulfill our mission. That’s the sort of drug that we all take, and it works really quite well."

Goal alignment takes many forms. It’s interesting to see how a hot company like Google thinks about keeping it’s employees, and indeed, the entire company, on the right track.

Watson Wyatt released a study today which shows that while employers are leveraging best practices when designing their performance management programs, they are falling short in the implementation of those programs.

From the study’s summary:

In designing their performance management programs, most employers have adopted best practices — including providing a formal yearly review (98 percent), helping poor performers improve (96 percent) and offering coaching and feedback (91 percent) — but they have been less successful in implementing them. For example, while 92 percent of programs are designed to link pay to performance, only 79 percent of employers say that managers at their organization are moderately or greatly effective at it. Employees see even more room for improvement with only 52 percent indicating that their managers tie pay to performance.

The best program in the world can’t reach it’s potential if it’s not intelligently put into place. It’s software’s achilles heel and another reason why you’ve got to be really careful when choosing a performance management partner. The best package will not mean anything if people don’t understand it, have a hard time using it, or it simply doesn’t work right. At SuccessFactors, we have an entire professional services team dedicated only to implementing our applications and ensuring our customer’s success.

One suggested remedy from Watson Wyatt: training.

Only 36 percent of organizations have a formal training program to enhance managers’ ability to manage rewards. However, managers at companies that offer such a program are more effective at providing coaching and feedback, providing formal periodic performance discussions and helping poor performers improve.

BusinessWeek highlights "Electronic Scorecards" used in the banking industry. The article tells the tale of a Kansas City based bank called UMD Financial that’s using performance management to align goals and pay for performance.

From the article:

In the past the bank paid people based primarily on seniority and cost-of-living adjustments. Now a substantial part of compensation for managers depends on how they perform against scorecard goals.

It’s interesting that the article doesn’t tell what processes or which software the company is using to do this. I know I’d be interested – and from the comments, so are other readers.

Things are getting good. A raft of new posts over at worstreview.com. If you’re not hip to the contest, it’s a little game we’re playing to find the worst performance review ever. Prizes, fun and games. Like a carnival.

Go check it out – tell us a story or post some comments to the contest blog.

Stop kidding us, we know you’ve got a worst review story.

Been traveling today (back to good old NYC), so I haven’t had a chance to post anything of substance, but I thought I would take a minute to wish a happy thanksgiving from all of us at SuccessFactors to all of you.

Enjoy the Turkey. Smile a Lot. See you next week.

The Leadership Now blog talks about what can only be deemed a terrifically bad 360 process at a fortune 500 company. Don Blohowiak recounts the sad tale of a manager with so many 360’s to do, he and his team basically submit a boilerplate response to everyone. To boot, HR uses the 360’s to help determine bonuses – and doesn’t make that known to people who only find out after the fact.

There are a lot of disturbing things here, but one on which I have a comment. The number of 360 reviews is an issue at many companies. It is without question difficult to provide valuable feedback in each and every one when there are so many to get through (and work to do besides). But the only value in the process is in the customized, specific feedback the 360’s are supposed to facilitate. When the process degrades to boilerplate responses, it’s really not worth doing.

Recently, we at SuccessFactors went through our own 360. We, of course, used our own application to conduct them and, with 360’s, managers can have the ability to add or reject proposed reviewers to help keep the process manageable. Reviewers also have the chance to refuse to conduct a 360 if they feel they are not appropriate, or they simply have too many to do.

Once the process was complete, the manager, a "coach" from within the company and the employee sat down to review the results. This provided the opportunity to make sure that everything was clear agreed upon and also provided the foundation for an individual development plan. These few tactics helped to keep the process valuable for us. I’m sure there are other techniques as well.

What strategies have you used to keep 360’s manageable and valuable? 

HR Blogger, DubDubs, who writes a fantastic, focused HR Tech blog sat in recently on a SuccessFactors webinar and posted his thoughts.

HBS’s Working Knowledge recently published an article on using Forced Ranking in performance management. I’ll get into the conclusions of the article, but first – what is Forced Ranking? Well, Forced Ranking is a method by which managers evaluate employees relative to the performance of other employees. It’s a little like the curve I had in college.

With the dreaded curve, all test scores for a particular exam were plotted along a pre-determined curve of how many people should get A’s, B’s and so on and then adjusted to fit. This way, no more than say, 20% of people could get As and no more than 20% could get B’s and 20% were, in fact, forced to get C’s, D’s and F’s so as to fit the pre-determined curve (In all fairness to my alma mater, NYU, I’m not sure if this was exactly the curve they used, but as an example, it suffices).

The thinking goes that people will be motivated to work as hard as possible because small differences in scores can lead to large differences in grades. Likewise, in performance management, Forced Ranking ensures that managers will differentiate between talent and eliminates the possibility of review inflation becuase employees cannot all recieve excellent or even good reviews. If, for example, a company used a 1-5 rating scale and we followed the curve cited above, 20% of employees would get a 1, 20% would get a 2 and so on.

What follows is that now that the top 20% (relative to the rest of employees) and the bottom 20% (again, relatively) have been identified, they can be so dealt with. The top performing employees can be amply rewarded so as to make sure they stay with the company and are motivated to continue to perform. The worst performing employees can be… fired. This is commensurate with the whole idea of Forced Ranking. By removing the worst performing employees and replacing them with the best potential replacements from some applicant pool, the overall performance of the organization can be elevated.

(more…)

Is the era of traditional enterprise software (Hardware, Software, Configure, Integrate, Test, Deploy) ending? Our customers think it is, we think it is, and now Wall Street is coming around, too. In an article on thestreet.com called "Software’s Eve of Destruction," Kevin Kelleher talks to Gordon Ritter – a Partner at Emergence Capital (one of our investors) – about the downfall of the old, expensive enterprise software model that’s already underway.

From the article: 

"The whole software industry is being disrupted by the software-as-a-service approach," says Gordon Ritter, an Emergence partner and a former vice president at IBM . Ritter says that the rise of Salesforce.com came shortly before the decline of Siebel, and its subsequent purchase by Oracle — and it’s no coincidence.

"Salesforce.com is taking down Siebel and pulling biz from it. You have a giant coming to its knees with a start-up disrupting them with a better value proposition," Ritter says. "We see new entrants coming in with this software-as-a-service approach. We see a giant industry with disruptive forces hitting it."

Software as a Service (SaaS) is a catchy way of describing the model that companies like SuccessFactors and Salesforce.com use to deliver our applications. But, the important part is not the name. The important part is the reason that the model is so disruptive – that customers get a total experience that is simpler, less costly, less time consuming, more usable and generally better than the old way.

SaaS companies have to work harder to make sure their customers are happy. You know why? Becuase if the customers don’t like it, they SHUT IT OFF.  They export their data and move along. Of course there are some costs associated with switching, but they aren’t abandoning some huge implementation investment like they would be with old school enterprise software.

SaaS companies are often compared to utilities becuase you switch on the services when you want, and shut them off when you stop needing them. But SaaS companies are innately more customer focued and friendly. They have to be – you can’t shut your electricity off, can you? Or your gas? Of course not. You can’t switch, or do with out them. But with SaaS, you can shut off your CRM system and move to another one you like better.

So what we’re left with is that SaaS is a business model that’s completely dependant on customer satisfaction. Traditional enterprise software meant that customers spent so much money implementing and customizing (see the difference between customizing and configuring) that the cost of switching to another system was so high that it virtually never happened. They had you locked in.

On the other hand,  SaaS companies MUST do what they do faster, simpler and better. Saas companies MUST stay focused on keeping their customers happy. Saas companies MUST provide real value consistently – or else their customers shut them off. How’s that for a win-win proposition? That’s the real value of SaaS for customers and at least one reason why SaaS is becoming such a disruptive force in software.

Regina at Bnet’s HR’s Brand New Experience blog thinks we should be having a best review contest in addition to a worst review contest. I like the angle, and she’s got a post about her best review ever. I’d like to get a "comforting basket," the night before my review,  too! Some good ideas for conducting a c-level review, perhaps.