Building a Performance Management Culture

a Black & Decker Case Study

October 27, 2009
 Inspire Great People

 Black & Decker Overview

 Five “Evergreen” HR Strategies
 HHI Case Study
 Performance Appraisal Process
 Strong Organizational Culture - “Winning Culture
Values”
 Alignment of Systems & Processes
 Differentiating Performance & Rewards
 Talent Review Process
 Employee Communication
 Additional Performance Management Tactics
 Lessons Learned
 Grow Through Innovation

Black & Decker

 Founded in 1910 and based in Towson, MD
 World’s largest producer of power tools & accessories,
security hardware, plumbing products & fastening systems
 2009 revenues (est.) of $5B; 20,000 employees
 Manufacture in 12 countries and sell in over 100 countries
 Hardware & Home Improvement (HHI) division based in
Lake Forest, CA
 Revenues of $800M, 3,500 employees in U.S., Canada, Mexico
and China
 Brands include Price Pfister, Kwikset, Weiser, Baldwin and K2
Black & Decker
Strong Brand Names
BDHHI Core Strategies

Five “Evergreen” HR Strategies

 Talent Acquisition
 Employee/Organization Development
 Winning Culture
 Employee Communications
 Performance Management
 Inspire Great People

HHI Performance Management - 2006 Case Study

 Annual Development Plan - ADP (Performance Appraisal)
 10 Winning Culture Values worth 20/15/10% of overall score
depending on organizational level (Dir., Mgr., Indiv. Contrib.)
 Goals made up the balance of overall score - up to 25 goals!
 ADPs (ostensibly) completed in Q1 each year
 No periodic progress reviews during the year
 Low accountability for completing ADP process
 No linkage to other business processes or alignment with a
“performance management” calendar
 Excel spreadsheet based process
 Grow Through Innovation

HHI Performance Management - 2006 Case Study

 “Merit” increases granted on a rolling 13 month basis
 Not a strong commitment to a “Pay for Performance” culture -
merits, annual bonuses and equity grants
 Low level of organizational alignment
 No Vision Statement
 Strategic planning process was secret; no group level strategies
 Strategies poorly communicated and not well understood
 Up to 32 annual goals/metrics—results weren’t reviewed regularly
by Leadership Team and little accountabili ty
 The Result: Siloed functional organizations - low alignment
among Vision, Strategies, Functional & Individual Goals,
Performance and Accountability
 Accelerate Global Growth

“Change Creates Opportunity!”

 Created a cross functional team in 1/06
 Direct reports to Leadership Team members
 Advantages of this approach:
 Greater diversity of backgrounds, ideas and participation
created improved results
 Performance appraisal process is enterprise-wide; required
participation by employees who are knowledgeable of the
process from all functional disciplines
 Empowered a team to make improvements to an important core
business process
 Involvement in revising the process increased acceptance and
support for the changes
 Deliver Operational Excellence

Goals of a Performance Appraisal Process

 Set goals and measure results
 Assess and improve performance
 Create development plans and enhance skills
 Career development
 Help evaluate potential for promotion
 Change/reward appropriate behaviors
 Align with company’s vision/values/strategies/goals
 Differentiate levels of performance and rewards
 Strengthen a “Pay for Performance” culture
 Inspire Great People

Cross Functional Team - Focus Areas

 Role of Winning Culture Values
 Competencies
 Rating scale & descriptors
 IDP/career pathing
 360s
 Forced ranking calibration
 Design of the “form” and instructions
 Web enabling the process
 Communication
 Training
BDHHI Core Strategies

The Solution
 Nine month project from team formation to deployment of a
web-based solution
 Launched tool in 10/06 for 2006 performance appraisal and
2007 goal deployment
 Reduced Winning Culture Values from 10 to 4 and rated them
on a “pass/fail” basis
 Competencies introduced—6 for individual contributors and a
7th for associates with direct reports
 50% of overall rating
 Goals reduced to 5--8 maximum
 50% of overall rating
 Five point rating scale initially introduced and later changed to 4
point to align across all of BDK
 Inspire Great People

The Solution (cont’d.)

 IDP requirement added and linked to BDHHIU courses
 Online 360s - employees rated on Winning Culture
values and competencies
 Forced ranking/guided distribution done initially but later
moved to Talent Review process
 All training and communication done during Q406
 Strong support from top management was key - process
accountability now delivers 99% plus completion rate
 Tool has been adopted across BDK
 Grow Through Innovation

“Strong Organizational Culture - Winning

Culture” Values
…Yet Another Cross Functional Team Opportunity
Before (10) After (4)
 Achieving Commitments  Demonstrate
 Great People
Unyielding Integrity
 Raise the Bar
 Focus  Inspire Excellence
 Boundarylessness  Deliver on
 Attitude Commitments
 High Energy
 Win Through
 Urgency
 Risk Taking
Teamwork
 Impact vs. Activity
Great People
 Deliver Operational Excellence

Alignment of Systems and Processes

HHI Core Strategies
Metrics & Accountability--Our Balanced Scorecard
 Inspire Great People

Differentiating Performance and Rewards

 Merit increases - use a matrix of recommended increase %s
based on performance appraisal scores
 Annual Incentive Plan (AIP) - metric is operating income factored
by working capital charge
 Brands tied to their own results
 GMs have 75/25 split to drive line of sight alignment
 Support staff tied to division results
 Personal Performance Factor (PPF) as a second level
calculation to leverage bonus from 0 - 150% of actual; range
of differentiation is typically 75 - 125%
 Equity—annual grant is tied to PPF with wide differentiation
 All Rewards recommendations reviewed by President & VPHR
 We “rack and stack” and give feedback to Leadership Team
 Grow Through Innovation

Organization Assessment Process (OAS)

 Online employee survey conducted every 2-3 years
 Up to 95% response rate
 HR is process gatekeeper
 Focus groups make recommendations to management—
accept/modify/reject
 Follow up action items owned by functional executives
 Quarterly report out to President and VPHR to ensure
process accountability and continuous improvement
 Quarterly “pulse” surveys (6 questions) done in the interim—
started in Q1, 2008
 50 - 75% response rate
 Corrective action taken here as well
 Results are published to employees via HHIOne (intranet)
 Q209 Lake Forest
LF LF LF LF HHI HHI HHI HHI HHI
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
Goal

I feel safe in expressing my 7.23 7.52 6.86 7.09 6.55

opinions openly without fear of
retribution

Managers are genuinely involved 7.16 7.25 7.11 7.15 6.60

in helping people develop their
potential

I have a good relationship with my 8.01 8.12 7.60 7.63 7.24

manager

BDHHI generally lives up to the 7.51 7.73 7.51 7.56 6.95

values of the organization, even
when times are tough

BDHHI does a good job of keeping 8.01 7.98 8.10 8.03 7.33
employees informed about matters
that affect them

How likely would you be to 7.43 7.76 7.23 7.31 6.91

recommend BDHHI to a friend or
colleague as a place to work
 Deliver Operational Excellence
Talent Review Process (Succession Planning)
 Prior process was a “forms intensive, largely HR oriented” exercise
 Low linkage to talent management processes
 Little accountability for action and follow up
 Process was reengineered
 Number of templates reduced, fewer metrics and rich dialogue
ensued
 Discussion is now focused around “A” positions, organizational
gaps, hipos/retention and employee development
 Action items are followed up on
 Core business process involving a 4 step, upwardly cascading process:
 Functional Talent Review
 Cross Functional Talent Review
 Commercial Talent Review (Sales & Marketing)
 Talent Review with Chairman and SVPHR
 “Four panel” feedback is shared with all participants
 Accelerate Global Growth
Employee Communication
 Strategy driven by Director of Employee Communication
 Communication philosophy is completely open and transparent
 “Frequently, redundantly and using a wide variety of media”
 Intranet (“HHIOne”) as employee portal
 President visits all locations for Town Hall meetings annually
 HHI-wide communications meeting every 2 months
 Anonymous “OneTeam” questions
 President conducts skip level meetings with direct reports to
functional leaders
 1-800 Ethics Hotline (SOX requirement)
 Pulse surveys and focus groups
 Quarterly site newsletters
 Launching digital signage
 BDHHI Core Strategies

Additional Performance Management Tactics

 Outside psychologist worked with LT and several functional
leaders to build high performing teams
 Built strong organizational culture
 Quarterly biz reviews with LT of the 4 brands
 Quarterly biz reviews with Chairman and CFO
 Ops reviews in every functional support area
 Use of self-assessments (Insights Discovery) as foundation
for development plans
 Extensive use of cross functional teams
 Associates now “live” our Winning Culture Values…the
foundation for everything we do
 Inspire Great People
Recognized in 2008/2009 as one of Orange
County’s best places to work . . . .
2008 & 2009 2009
 “Lessons Learned”
 As always, top management support is critical
 Must take an integrated, systems approach to effective
employee management processes
 Initiatives must be aligned with the business’ “operating rhythm”
 Business is dynamic and your processes need to evolve
 Solicit regular feedback from your customers
 “Cultural change is a “team sport”
 “The smart person uses all the help s(he) can get
 Involve others cross functionally
 Remember: The only sustainable competitive
advantage is your talent…it must be well led, valued
and empowered to make a difference