Category Archives: Talent & Performance Management

Give the Gift of Great Performance this Year

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Erik’s note: We’re happy to present another guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

The holiday season has different implications for everyone – the sales team is busy trying to close those year-end deals, managers are juggling their priorities around the vacation many workers take this time of year, and the good old folks in HR are preparing for performance review season. The happiest time of the year – or not, depending upon whether or not like Santa Claus, you have kept a careful list of who has been naughty and who has been nice all year long. For those companies who have invested in performance management, review season isn’t so bad.But what about when it is time to hand out gifts? Pay for performance has been proven over and over again to be on average one of the most effective drivers of real results for companies that have implemented it. Many companies have very loose pay for performance systems, a bit like Christmas, where all the kids get something. While that makes for a nice holiday, it can be very bad company policy. SuccessFactors Research decided to look into the matter, using our own customers as a point of reference. How do companies that only use Performance Management compare to those who use Performance Management and Compensation Management?
The results speak for themselves. SuccessFactors Customers who use Performance Management grew profits on average 36 % last year, beating their industry peers by an average of 20 percentage points. However, SuccessFactors Customers who use Performance and Compensation management grew profits on average 46%, beating their peers by an average of 30 percentage points! In this case, it’s Christmas for the investors as well. The bottom line – if you are implementing a great performance management system, you are not realizing the total potential gain unless compensation is closely integrated into the process.In this study we included all publicly traded companies with at least 500 employees that have been using SuccessFactors for at least 3 full quarters and use either the PM or PM and Compensation module.
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Does People Performance Really Matter?

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Imagine you are on the football field – What if 15% of your performance is dependent on the play you select, and 85% of your performance is dependent on your ability to make the play? Where would you invest most of your time, training your team to pass, catch, run, and block, or picking out the right play?

By and large, studies have found execution is the clear driver of company value and financial performance. How much? Well, about 15% of company’s performance is attributable to strategy – the remaining 85% is attributable to execution, as found by Becker and Huselid’s “ High performance Work Systems and Firm Performance.” Joyce, Nohria, Roberson found a similar ratio in “What really works.”

That’s right – Execution of the strategy is 6 times more important than the strategy itself!

How do you execute on a strategy? In a word: People. At the end of the day, it is the employee who makes things happen, who gets results – not machines, strategies, vendor relationships or what have you. People are your real differentiator and now typically make up 70% of a company’s cost (and growing). This is doubly true in today’s knowledge-focused economy. We see today that about 80% of a company’s valuation cannot be explained by the balance sheet, which shows the growing importance of intangibles and people performance to future cash flow. The value of a company is no longer in its factories, IT systems, or physical assets – it is created by the company’s people.

Your company is in fact already on the field, fighting for customers, revenues, and a competitive position. Instead of “picking out the best play”, focus on what will most help you move downfield toward your goals: people performance, 85% of your success depends on it. Goal alignment, individual accountability, and engagement equal strong execution. Build up these strengths and capabilities of your company to help ensure you can make the big plays. So yes, people performance does matter, because their ability to execute is the key factor in creating value and driving results for your company.

Where is Here?

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Erik’s note: We’re happy to present this guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

I once taught a class designed to introduce senior citizens to computers. By far, the internet was the most difficult concept to explain. Teaching file systems was fairly easy – it is not much of a stretch to visualize files in folders. Start up a web browser and the analogy breaks down. All sorts of questions come up, “this file is on my screen, is it in my computer?” “Is this file on their computer?” The complex amalgam that is a webpage, some bits cached locally, others served up from different data centers around the globe, took some time and effort to explain.

Some of the questions raised by my students were eerily prescient, like “Where is here?” Data made the move into the “ether” a decade ago. In many ways, work is woefully behind – still physically tethered to offices, desks, and phone lines.

Recently, Jim Ware and Charles Grantham, principal founders of The Future of Work, and authors of the recently published book Corporate Agility, joined SuccessFactors Research as thought leader partners for a webinar discussing remote work and productivity. The revelations were profound:

  • Work will be spread throughout the day and week (24×7), no more 8 to 5 work schedules
  • Work will be divided into smaller chunks with cycle times down from months to weeks
  • Work will be accomplished in a wide range of locations, 35% home, 35% office, and 30% in-between

As we me make the transition to knowledge work, “here” is no longer a physical place. “Here” is the where the data is, “here” is where the project is. Virtual meetings take place alongside the data, in the ether, not tethered to the physical office.

This is just one example of several, coming, dramatic shifts in attitudes, demographics and the global economy. In the paper Talent Management 2017, Erik Berggren and Jason Corsello examine these changes and show how talent and performance management will actually drive strategy in the future. From this session, one question really sticks out – How can we better collaborate? With a distributed workforce, how can we even find each other when we need to? Software vendors are just starting to answer these questions. One successful innovation that we have brought to market is our employee profile module. It is just the tip of the iceberg, so to speak, in encouraging collaboration. An early adopter of this tool reported that 94% of their employees started using it immediately after deployment, indicating that interest in connecting people is strong. At the end of the day, how could you drive people performance if people can’t even find each other? Where is here? What are your ideas for bringing people together in a distributed world?

A spoonful of sugar

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Dion Hinchcliffe, a well-known blogger and thought leader in the Enterprise 2.0 space wrote a post recently in which he talked about the next generation of business software – social, interactive tools easily delivered over the Web – and how they can make a dramatic impact on the hierarchy and culture of businesses. These new tools, Hinchcliffe said, can tear down traditional knowledge barriers and walls within an organization by making information fluid, collaborative and accessible to everyone who wants it, leaving the power of that knowledge in the hands of everyday workers and not just managers and executives. That’s pretty powerful, and the catalyst for this dramatic transfer of power and virtual flattening of an organization, he said, lies in these simple, lightweight next-generation tools:

“Because they are highly democratic and egalitarian; anyone can deploy (Enterprise 2.0) tools, anyone can quickly learn to use and benefit from them, and they can be used to communicate and collaborate openly with anyone else inside (and often outside) the organization, are inherently viral, they literally tear down the barriers that would normally impede their forward movement and adoption inside the organization. And, anecdotally at least, this seems to be happening.”

This is a great piece of insight. In the past, there was always a barrier between every day workers and the information they worked with. To use a practical, HR-related example, take first-generation performance management tools – they were useful, but in order to get real value out of them in the form of analytics, they had to be sorted out either by hand by HR managers or run through a database by IT folks. Useful, but not efficient or at all egalitarian. Enterprise 2.0 gets rid of that gatekeeper.

As a general philosophy, SuccessFactors has always advocated transparency and the free flow of information – both are core doctrines written into our software and promoted as part of our own workplace culture. With SuccessFactors NEXT Labs, we’re trying to help promote that openness on both the technology and cultural fronts. NEXT Labs is a Trojan horse of sorts, designed to introduce Web 2.0 technologies and concepts – blogging and tagging capabilities, social networking and sharing – that render the adoption and repeated usage of an enterprise application painless for people accustomed to using such tools in their personal lives.  

Rather innately, Performance & Talent Management systems are the ultimate in-house Enterprise 2.0 tools: They help employees easily see their performance by harnessing the power of collaboration, communication and visibility, giving them the knowledge they need to make what they want out of their careers. In a way, NEXT Labs is our ”spoonful of sugar.” It  helps companies and employees eaily swallow what is all too often a bitter dose of medicince – the adoption of a new enterprise-wide software system.

Close to crazy

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Max’s note: We’re proud to present this guest post by SuccessFactors’ Director of Customer Results, Erik Berggren.  It is in response to a previous entry posted here by Dr. Jac Fitz-enz.

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The idea of seeing the future is always appealing, but as Dr. Jac suggests (and as we know from our horoscopes), not all that easy. Even so, I’d argue it’s worth the effort when it comes to people. Not attempting to understand your complete talent picture – so that you can stay ahead of the curve – is, in my opinion, downright stupid. Seeing and understanding but not acting is equally bad.

In our work, we see forward looking companies starting to take the idea of predictive HCM seriously. But most organizations are waiting. Waiting for the economy to turn, or waiting to realize they are no longer attracting and retaining critical talent. Waiting to find out they can’t protect their margins or even stay competitive because they don’t have the right people in place. They haven’t yet figured out that calamity is just around the corner and are waiting to do anything meaningful about their talent situation.

Maybe it’s that they are too comfortable, or too oblivious, but a recent McKinsey Quarterly article exposes this widespread lack of strategic planning around talent:

“Executives’ concerns about executing and aligning strategy are likely exacerbated by a perceived lack of integration between the company’s strategic-planning group and its human-resources group. When asked to consider strategic planning’s integration with several major corporate functions, respondents rank HR as second-to-last in terms of degree of integration. Respondents who are dissatisfied with their company’s strategic planning see the least integration. Of these, only 14 percent say planning is completely or mostly integrated with HR, and 59 percent say the two groups are integrated slightly or not at all.”

Simple supply and demand planning with some scenario analysis is commonly made in all other areas but HCM. To me, that’s a bit silly if only for the simple reason that people are your biggest asset (or biggest expense – depending on how your look at it). It’s truly time for that to change, and I welcome Dr. Jac’s initiative and look forward to continue working with him this year.

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Erik Berggren is SuccessFactors Director of Customer Results. He has worked on strategic consulting service engagements with more than 30 different companies across Europe and the US. He has held positions with Ernst & Young in Stockholm and New York and most recently worked with Capgemini in the Nordics.

The age old virtues of meritocracy

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The Atlantic Monthly has been running excerpts from old issues as part of their 150th anniversary celebration. Reading over an issue this weekend, I came across an article written by a Colonel R. Williams about a decade after the civil war ended – in 1878. His issue? That the military’s practice of promoting those with the longest tenure was “fostering apathy” rather than bravery or a commitment to excellence.”

Amazing that the same battles we fight today for meritocracies were equally well articulated 150 years ago.

Here’s an excerpt:

Our army presents the only known example of a business or profession, either public or private, in which incompetency and want of zeal bring the same substantial rewards as energy, capacity, and active attention to duty. Such a system of promotion is in violation of all the rules of common sense by which men are governed, as well as of those by which they are incited to strive for superior excellence, and the condition of our army at the outbreak of the rebellion affords an excellent example of its inevitable result. At that time the superior grades of the army were filled by old men, who, having outlived all above them, had been regularly promoted, in accordance with this system, to the positions which they occupied, regardless of the well-known fact that in the majority of instances they were unfitted, both by age and infirmity, to perform any military duty whatever. The spectacle was so pitiable, and the lesson it taught so apparent, that it might be supposed the government would have profited by such crushing experience, and been led by it to the adoption of wiser measures. Such, however, was not the case. Our system of army promotion is the same to-day as before the rebellion, and we are slowly, but surely, approaching the same result, from which the same experience, disastrous as it was to the country, must necessarily follow. At the close of the rebellion, and with the sad experience it had taught still before us, some effort at a change was made. The army was reorganized, and many young officers who had acquired experience, both of the regular and volunteer force, and who had especially distinguished themselves, were deservedly placed in high positions; but this spasmodic effort at reform was deemed sufficient, and we have again fallen back into the system of promotion by seniority, which, unless some dire necessity forces a change, must render the condition of our army equally as deplorable as when the rebellion commenced, by filling its superior grades by worn-out and superannuated old men. It seems needless to describe the effect which this system must produce upon the subordinate and junior officers of the army. In most instances it is deadening to all effort at improvement or professional skill, and suggests the natural conclusion: that, as superior rank is obtained only by longevity, each should strive to avoid all exposure, hardships, or dangers by which health may be impaired or life risked.

President Bush wants pay for performance

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Not for himself, of course, but rather for America’s corporate executives. In New York City today, Bush spoke on Wall Street about his belief that “the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.”

So often, pay for performance is a concept assumed to be applicable only to the rank and file. It’s a worthy cause to elevate it to the c-level as well and it’s great that Bush is pushing the idea.

It just makes you wonder what HIS salary would be if we applied pay for performance thinking to his $400k “guideline.” Given his approval ratings, it would be an interesting exercise indeed.

Findings from our Research on the Impact of Competencies in Financial Performance

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A guest post by Josh Bersin – CEO, Bersin & Associates

Competencies are one of the most difficult and under-utilized part of performance management.  Bersin & Associates research shows that only 36% of organizations with performance management process rate their use of competencies “excellent” or “good.”

But we also found that effective use of competencies can have a huge impact:  organizations that rate themselves world-class in the use of competencies for performance management are 4-times as likely to have a strong performance-driven culture.

Why?  Because the process of identifying and implementing critical competencies in itself drives a clear understanding of what performance means, how to obtain it, and how to communicate it.

As you can read in our recently published research, thoughtful and strategic use of competencies can have a significant impact on financial performance.  A few of the highlights from our research with SuccessFactors on how the use of competencies affects financial performance:

* Competencies should be customized for your business and should focus on management and leadership-level skills, not just job requirements

* There are two types of job-level competencies:  “hygiene” competencies which establish the basic requirements for a job (ie. customer service), and “performance” driven competencies, which, if executed, will not only help an individual perform their job but will help them grow and excel.

These “performance” or “critical” competencies vary from company to company and industry to industry.  

Read more from our research with SuccessFactors.

The sins of our bosses

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DDI and Badbossology.com (that’s actually a real site) did a survey of 900+ employees to determine the worst (and best) qualities of a manager. And, the survey says:

A bad manager:

  • Tries too hard to be everyone’s friend
  • Micromanages
  • Ignores conflict
  • Arrogant
  • Wishy-washy
  • Impulsive
  • Unable to delegate
  • Impatient
  • Stubborn
  • Unprofessional

You’ll have to read the article as written up on CNN.com to find out the best qualities and to take the quick “how good a boss are you?” survey.

It’s easy to dismiss this stuff as just for fun – but when you consider that employees often leave jobs due in whole or in part to their relationship with their managers, this kind of thing takes on real meaning. And it’s also fun.

Poll: Make salaries public? NO!

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PublicsalariesThe poll we’ve been running here for the last few weeks has been asking “Would you be in favor of an “open salary” policy at your company in which everyone’s salary was published for all to see?”

As you can see from the responses (nearly 200 of them) 60% of respondents said fuhggedaboudit (AKA no). Originally based on this post from the Chief Happiness Officer, the poll was an attempt to see if people agreed with Alex who argues that there are a number of very compelling reasons to do away with the secret salary system.

While I, too, balk at the idea of publishing my salary, in many ways doing so would represent the natural evolution of something we already do at SuccessFactors: make our goals public. The idea behind pay for performance is that those who perform best get paid the most – thereby incentivizing increased performance. But if people don’t know what others are getting paid, there is a disconnect. I know what Joe did or did not accomplish from his public goal plan, but I don’t know if he got paid more or less (and how much more or less) as a result. There is a perception of pay for performance, but no proof-laden pudding to support it.

I guess my question then becomes – can you realize the ultimate promise of pay for performance without open salaries?