Performance Management Benchmarking

CORPORATE LEADERSHIP COUNCIL
THE ADVISORY BOARD COMPANY

__________________________________________________________________________________________________
600 New Hampshire Avenue, N.W. Washington, DC 20037 Telephone: 202-672-5600 FAX: 202-672-5700
PERFORMANCE MANAGEMENT BENCHMARKING
NOVEMBER 1996
PERFORMANCE MANAGEMENT PROCESS
360-DEGREE REVIEWS IN PERFORMANCE MANAGEMENT
MERIT REVIEWS AND EMPLOYEE DEVELOPMENT
PERFORMANCE MANAGEMENT FORMS AND IMPLEMENTATION
FACT BRIEF
This project was researched and written to fulfill the specific research request of a single member of the Corporate
Leadership Council and as a result may not satisfy the information needs of each and every member. The
Corporate Leadership Council encourages members who have additional questions concerning this topic to assign
custom research projects of their own design. The views expressed herein by sources contacted may not necessarily
reflect the policies of the corporations they represent.
CORPORATE LEADERSHIP COUNCIL
THE ADVISORY BOARD COMPANY
__________________________________________________________________________________________________
600 New Hampshire Avenue, N.W. Washington, DC 20037 Telephone: 202-672-5600 FAX: 202-672-5700
FACT BRIEF
Performance Management Benchmarking

November 1996
Research Methodology
The Corporate Leadership Council interviewed human resources professionals at seven United
States corporations. These individuals discussed their companies' performance management
programs. In addition, Corporate Leadership Council staff reviewed secondary materials and
sources concerning this topic.
Background Information
Austin Company employs between 20,000 and 60,000 people and generates more than
$10 billion in annual sales revenue in the communications industry.
Brownsville Company employs between 20,000 and 60,000 people and generates more than
$10 billion in annual sales revenue in the heavy manufacturing industry.
Corpus Christi Company employs between 20,000 and 60,000 people and holds more than
$20 billion in assets in the financial services industry.
Dallas Company is a division of a corporation which employs between 20,000 and 60,000 people
and generates more than $10 billion in annual sales revenue in the heavy manufacturing industry.
El Paso Company employs between 7,500 and 20,000 people and generates less than $2 billion
in annual sales revenue in the service industry.
Fort Worth Company employs between 20,000 and 60,000 people and generates more than
$10 billion in annual sales revenue in the service industry.
Galveston Company employs fewer than 7,500 people in the service industry. Current revenue
information is not available for Galveston Company.
PERFORMANCE MANAGEMENT BENCHMARKING PAGE 3
NOVEMBER 1996
Research Findings
Please provide a general description of the company's performance management process.

How many meetings related to performance and/or merit occur each year? Who meets
together during the performance management process?
All profiled companies operate performance management systems in an effort to link employee
activities and competencies with business goals. In general, profiled companies' performance
management processes follow a similar formats in which senior executives identify company
objectives, and then translate those objectives into skills and competencies that employees need
for the business to achieve its goals. From this understanding of business aims, employees either
independently create, or work with their managers to identify, development objectives for the
coming year.
During performance cycles, which generally span one calendar year, employees and managers
meet several times—a minimum of one meeting and a maximum of four meetings amongst
profiled companies—to discuss employees' performance at individual levels and in the context of
the overall business goals.
NOVEMBER 1996
Austin Company conducts its performance management process according to the steps
outlined in the graphic below.
Austin Company's Annual Performance Management Process
Year-end review:
Company executives conduct strategic planning Employees receive feedback from
sessions to identify future external market conditions managers regarding their performance
and customer expectations. Executives establish of identified objectives; reviews
objectives for next year's business and employee incorporate
performance merit discussions
Each employee writes own

performance objectives based
upon company's skill needs and
personal goals
Company conducts 2 quarterly
interim reviews of employees'
performance of personal objectives
Austin also utilizes a 360-degree review process to supplement the standard annual review
procedure.
NOVEMBER 1996
Austin Company conducts four meetings per year related to employee performance.
Meetings occur roughly quarterly and address areas detailed in the diagram below.
Austin Company's Performance Review Process

"Evaluating performance"
"Performance planning period" Managers and employees examine how employee
Employees develop performance accomplished performance objectives;
objectives for coming year; employees receive numerical
work with managers to align performance rating and
personal objectives with discuss merit increases
company needs
1 4
2 3
Interim review:
Managers provides Interim review:
employees with developmental Managers provide employees
and performance feedback with developmental
and performance feedback
NOVEMBER 1996
Brownsville Company's performance management process occurs in three phases,

presented in the graphic below.
Brownsville Company's Annual Performance Management Phases
Phase I: Defining
(late December, early January)
Employees and supervisors discuss company business plan
and expectations company holds for employees' positions
* Determine who should participate in employee's feedback process

* Identify competencies and performance dimensions that are important for job success
* Determine developmental objectives for coming year
Phase II: Developing

(meetings throughout the year)
Employees and supervisors discuss progress of business plan
and employees' roles in achieving the company's goal
Phase III: Reviewing

(performance cycle ends December 31; reviews occur in January and February)
Employees' performance reviews based upon criteria defined in Phase I
Brownsville Company supervisors and employees meet for a minimum of two meetings
(Phase I and Phase III) annually; most employees meet with supervisors three times per year
to discuss performance.
Corpus Christi Company's year-long performance review process links individual goals
with the company's strategic business plans. Employees identify competencies critical to the
success of achieving their individual goals and create development plans to improve upon
these competencies.
Corpus Christi Company plans to formalize a process of four performance appraisal

meetings per year. During these meetings—held quarterly or at business
milestones—employees and supervisors discuss employees' achievement of individual
performance goals and leadership behaviors in the context of the company's overall business
plan. The final meeting—at year's end—consists of a formal appraisal of employees'
attainment of goals and leadership.
NOVEMBER 1996
Dallas Company's cyclical performance management process occurs according to the

timeline presented in the graphic below.
Dallas Company's Annual Performance Management Cycle

1st Quarter:
Individuals conduct self assessment to
identify goals and accountabilities
for following year based upon
company objectives
1st Quarter and throughout year:

Employees and managers discuss
4th Quarter: employees' performance against
Company establishes projected goals in informal
short-term and long-range and formal reviews
business plans
Final review of employees'

achievements, preliminary Throughout year:
discussion of next year's 360-degree feedback identifies
self assessment areas for employee development
Dallas Company's performance management process is not an event-based process that

focuses upon specific dates for performance feedback; rather, Dallas encourages on-going
informal feedback throughout the year. In addition to informal meetings, employees meet
with their supervisors at the end of each year to receive formal reviews and discuss future
performance objectives.
El Paso Company employees initiate the personal performance management process by

identifying barriers to overcome in order to achieve the competencies and goals the
company sets forth as critical to business success. Consequently, through employees' annual
progress plans, El Paso ensures that employees orient activities to meet company objectives.
El Paso Company employees meet with supervisors at least quarterly for formal
performance discussions; in addition, staff may meet informally at any time should barriers
to successful performance arise.
NOVEMBER 1996
Fort Worth Company's performance management process incorporates an agreement

between employees and supervisors that identifies key success factors based upon the
company's core competency models.
Fort Worth Company recommends up to four quarterly performance management

meetings per year, although most employees participate in between two and three meetings
annually. Supervisors and employees meet to identify objectives for the coming year, to
conduct one formal mid-year review and to culminate the year with a final formal
performance review. According to Fort Worth's senior human resources consultant, the
company aims to build a culture fostering regular informal performance discussions.
Galveston Company conducts performance reviews once annually on employees'

anniversary dates of hire or promotion. Employees receive reviews customized to their job
level and business unit regarding their performance of identified accountabilities and
responsibilities. In addition, Galveston supervisors receive leadership reviews which focus
upon objectives that relate to company goals, such as associate development and customer
retention.
Does the company's performance review process include 360-degree reviews? If so, please
explain the process. Is the data for the 360-degree review process collected from only internal
staff, or does the company also consider data from external customers?
Six profiled companies utilize 360-degree reviews for employees holding leadership positions. All
of these companies incorporate the feedback reviews listed below.
Downward review
Peer reviews
Self review
Upward reviews
Two companies also incorporate reviews from external parties for employees who work
extensively with people outside of their company.
Austin Company incorporates optional supplementary 360-degree reviews. According to

Austin's project manager for career development, wide variations exist across the company
regarding the administration of 360-degree reviews. Some business units have made them
mandatory, while other departments' employees conduct them voluntarily. The company's
career development department—the "University of Excellence"—suggests that employees
initiate the 360-degree review process biannually in order to supplement their individual
reviews based upon the annual performance planning period.
Austin's proprietary 360-degree review process incorporates seven reviews, including one
downward review, a total of five peer and subordinate reviews, and one self-review.
NOVEMBER 1996
Depending upon the nature of employees' positions, Austin solicits feedback from external
customers in addition to internal staff. The company generally pursues this option for
consultants and other staff working extensively with people outside of the company.
Austin employees request 360-degree review packages from the University of Excellence
and distribute them to their colleagues. The career development department then processes
the data and creates a 10-page report explaining and interpreting the results of the review.
Brownsville Company conducts 360-degree reviews for all supervisory staff every
one-and-a-half to two years. These reviews incorporate downward, self and upward
reviews. Peer reviews are optional, depending upon the nature of an individual's position.
Brownsville's 360-degree reviews examine how employees perceive their colleagues to

perform their jobs. In addition to these reviews, Brownsville conducts 360-degree
competency-based reviews for selected groups of employees whose jobs require specific
personal skills rather than qualities applicable to all employees.
Corpus Christi Company is piloting a new 360-degree feedback tool which works within
the company's performance management process to measure employees' leadership
behaviors. The company administers reviews throughout the year, particularly following
substantial changes in employees' activities and contact groups. Individuals initiate the
process, passing out evaluation forms to relevant colleagues. Corpus Christi's 360-degree
reviews incorporate downward reviews, peer reviews, self reviews and upward reviews, and
depending upon employees' roles, employees may solicit feedback from external customers
or vendors as well. A vendor for Corpus Christi maintains a database of results for
reviewees to access at times of their choosing, frequently prior to formal performance
reviews.
Presently, Corpus Christi conducts 360-degree reviews for development purposes; only
reviewees receive feedback reports so that they may establish their own personal action
plans to address development areas. In 1997, Corpus Christi may link 360-degree reviews
to employees' year-end performance ratings.
NOVEMBER 1996
Dallas Company utilizes self-initiated 360-degree reviews; individuals access 360-degree

review forms via the company's electronic mail system and send the forms to colleagues for
assessment. The company provides pencil and paper review forms in addition to the
electronic format. Dallas's director of human resources notes that 360-degree reviews
occur on an on-going basis and that each reviewee must receive a minimum number of
reviews from peers and subordinates in order to maintain the anonymity of participants.
Dallas only solicits feeback internally from staff familiar with the company's performance
management process.
El Paso Company does not conduct 360-degree reviews. Leaders receive feedback directly
from their supervisors. According to El Paso's manager of training and development, the
company wants to fully integrate the new performance management process into the
organization before introducing 360-degree reviews.
Fort Worth Company conducts 360-degree reviews solely for developmental purposes; the
reviews are not part of the company's performance appraisal process. All leaders receive
reviews, and although Fort Worth encourages its managerial staff to share the results of
360-degree reviews with their subordinates, the company does not require that employees
do so.
Galveston Company utilizes 360-degree reviews for supervisors. According to the human
resources specialist interviewed, the company intends to conduct 360-degree reviews
annually, in addition to the standard performance and merit reviews. Galveston conducts all
360-degree reviews simultaneously, independent of employees' anniversary dates.
Galveston's 360-degree reviews incorporate the feedback listed below.
Downward review
Peer reviews
Self-review
Subordinate reviews
In 1997, Galveston plans to establish 360-degree reviews as an annual process and to

expand their use to employees worldwide.
NOVEMBER 1996
Does the company employ an outside vendor to collect 360-degree review data? If so, which
company? What does it cost to collect data, either internally or externally?
Five of the six companies utilizing 360-degree reviews employ outside vendors for part or all of
the review administration and processing. Of these five companies, two plan to bring 360-degree
review processing in-house in 1997.
Presently, Austin Company collects and processes half of the data from the company's
360-degree reviews. The company utilizes some standard 360-degree review forms from
Minneapolis, Minnesota-based Personnel Decisions, Incorporated (PDI), and Austin
maintains an ongoing relationship with the vendor to process this set of 360-degree reviews.
However, Austin conducts most 360-degree reviews with the company's proprietary
system, and—citing cost and time concerns—the company expects that all administering and
processing will occur in-house beginning in 1997. A comparison between the Austin and
PDI 360-degree reviews is presented below.
AUSTIN COMPANY AND PERSONNEL DECISIONS, INCORPORATED'S

360-DEGREE REVIEW SYSTEMS
Austin Company Personnel Decisions,
Incorporated
Number of questions 40 200
Time required to Not Available 30 minutes
complete review
Time required to Self-paced with 10-page report 4 hours
interpret review interpreting review results
Cost $33 per review packet Not Available
Brownsville Company employs internal consultants and an external vendor—Personnel

Decisions, Incorporated—to collect and process 360-degree review data. Both groups
conduct meetings with managers to explain the review process, inform review participants
and collect and process the data. However, as some managers prefer external feedback, the
company retains PDI to assist these individuals. The practice leader for the organizational
capabilities department notes that the cost and performance of internal and external
consultants are roughly equal. A comparison of Brownsville's internal consultants and
PDI's cost and service on the following page.
NOVEMBER 1996
BROWNSVILLE COMPANY AND PERSONNEL DECISIONS, INCORPORATED'S

360-DEGREE REVIEW SYSTEMS
Brownsville Company Personnel Decisions,
Incorporated
Time required to 30 minutes 1 hour
complete review
Time required to Time required for internal and external interpretations is
interpret review approximately the same, although specific data is unavailable
$1,200 per day for internal $300 per supervisor and direct
Cost consultant, plus nominal reports, plus consultants' fees
processing fees
Corpus Christi Company utilizes an external vendor to administer and process its
employees' 360-degree reviews. The individual interviewed declined to provide the name of
the vendor company.
Dallas Company employs an external vendor—Guerneville, California-based Apple

Consulting—to process its 360-degree reviews. Until recent fee increases, the vendor
charged $15 per feedback report plus fees for clerical support. Dallas' director of human
resources notes that the inexpensive processing fee is the result of the company's
computerized review process.
El Paso Company does not conduct 360-degree reviews.
Fort Worth Company employs an outside vendor—San Rafael, California-based Acumen

International—to collect and process 360-degree review data. The company utilizes a
computerized process, thus eliminating paperwork associated with 360-degree reviews.
According to Fort Worth's senior human resources consultant, the company decided to
outsource the processing of data to reinforce the confidentiality of the reviews. Although
the vendor customizes 360-degree reviews for Fort Worth, it also sells off-the-shelf
360-degree review products.
Galveston Company currently employs two external vendors to process 360-degree review
data; however, Galveston may bring this function in-house in 1997. Galveston employs
Philadelphia, Pennsylvania-based Intelliscan to scan all reviews and Philadelphia,
Pennsylvania-based Data Based Insights to tabulate results and produce employees' review
reports. In 1996, Galveston paid Intelliscan $10,000 to scan 5,500 surveys and Data Based
Insights $4,750 to process all of Galveston's 360-degree review reports.
NOVEMBER 1996
Is the company's performance review based upon competencies? If not, upon what criteria
does the company base its performance reviews?
Six profiled companies consider individual competencies during performance reviews. An

examination of competencies helps profiled companies to answer the basic questions of their
performance management process: what are employees doing, and how are they doing it?
Austin Company bases its employees' performance reviews upon core dimensions that
incorporate objectives and the behaviors required to achieve those objectives. According to
Austin's project manager for career development, the company attempted to separate
objectives and competencies during the performance management process' trial period in
1995. However, this individual notes that Austin found it very difficult to separate
performance review elements that are so intertwined. Consequently, the company decided
to examine objectives and behaviors simultaneously.
Brownsville Company bases its performance reviews upon "dimensions" that address how
employees perform their jobs. Examples of dimensions include communication and
leadership.
Corpus Christi Company bases performance reviews for its exempt employees upon
leadership competencies and the number of goals that employees accomplish. Corpus
Christi identifies 20 leadership competencies for middle to upper-level manager positions
and 21 leadership competencies for all other exempt positions. While many of these
competencies overlap, some distinct competencies exist for each group. For all employees,
Corpus Christi divides its leadership competencies into the four categories presented
below.
Change leadership
Relationship leadership
Results leadership
Thought leadership
Dallas Company bases its performance reviews upon the career stages model's 12
competencies. As employees progress through different stages of their careers,
competencies change to fit their level of responsibilities and nature of activities. For
example, junior-level employees distinguish themselves through their individual
contributions and detail-oriented performances, whereas more tenured staff may utilize skills
more related to managing and motivating other employees.
El Paso Company identifies individual competencies in line with business unit objectives.
Employees receive two reviews annually regarding their competency levels.
NOVEMBER 1996
Fort Worth Company employs one set of 11 competencies for all employees, with an
additional set of 7 competencies for individuals currently in or striving toward leadership
positions.
Galveston Company's human resources specialist notes that the company bases its
performance reviews upon tasks; this individual expects that the company will move toward
competency-based reviews in 1997.
Galveston's leader reviews are based upon an individual's performance of business unit
objectives—such as employee development and customer retention—rather than individual
competencies.
How does the company utilize merit reviews? When and how do these reviews fit into the
performance management process? Upon what criteria does the company base its merit pay
increases?
Four profiled companies conduct performance reviews and merit reviews during different
meetings.
Austin Company's merit reviews occur in tandem with year-end performance reviews. The
manager interpreting the review explains how the company calculates merit increases
according to a performance rating matrix, presented below.
AUSTIN COMPANY'S
PERFORMANCE RATING SYSTEM MATRIX
Employee's Position within Salary Range
Minimum Middle High
1 For example, employees receiving performance ratings of 5—the
2 maximum—and who are also near the minimum of their salary
ranges, may receive significantly higher percentages of merit
3 increases than their colleagues receiving lower ratings or located
4 at higher positions in their salary ranges.
5
However, because Austin funds merit increases from the firm's profits, final merit
discussions occur in January or February once the "merit bucket" has been calculated.
NOVEMBER 1996
Brownsville Company conducts merit reviews through a relative ranking process. In order
to improve open communication between employees and their managers, the company does
not utilize a summary ratings system for its performance reviews. Consequently, during
relative ranking meetings, managers present the results of discussions with employees
regarding their achievements and developmental opportunities. Brownsville's merit review
timeline is presented in the graphic below.
Brownsville Company's Merit Review Timeline

Managers take
written assessments Employee Distribution
Top 10%
to relative ranking Middle 85%
committees to Bottom 5%
determine relative
distribution of
employees'
performance
January/February March April
Final performance Merit pay increases occur

discussions—employees
and managers openly
discuss employees'
performance, both Based upon:
perceived and actual, 1. Performance review
write assessment 2. Relative ranking
3. Position/Salary grade
together 4. Size of annual merit budget
In addition to merit pay increases, Brownsville employees are also eligible to earn up to
16% of their salaries in incentive compensation based upon the success of their business
units, business groups and the company as a whole.
Corpus Christi Company's merit increases are based upon the criteria presented below.
1. Performance—Goal attainment and demonstration of leadership behaviors,

equally weighted
2. Market reference zones—Placement of individual's salary within market
3. Internal equity
4. Amount of merit budget
Although Corpus Christi attempts to conduct separate discussions regarding performance

and merit, due to time constraints managers frequently address performance and merit
during the same meeting. Ideally, Corpus Christi's merit increases would occur according
to the timeline presented on the following page.
NOVEMBER 1996
Corpus Christi Company's Ideal Merit Review Timeline
Performance ratings
approved by company;
incentive bonuses paid
December/January February March
Final performance Merit increases

reviews conducted; effective
goal achievement
and leadership
competencies ratings
determined
Performance reviews play an indirect role in Dallas Company's merit review process. Merit
reviews occur at the end of each year and are conducted separately from performance
reviews.
Dallas Company's Merit Review Process
I. Employee performance (pre-feedback period)
II. Employees solicit feedback through 360-degree reviews
III. Employees create personal development plans
IV. Employee performance (post-feedback period)
V. Merit review based upon employees'

contributions to company
Dallas' human resources director notes that the company's small merit budget limits the
number and size of merit pay increases, causing some employee disatisfaction.
NOVEMBER 1996
El Paso Company does not conduct formal merit reviews; rather, quarterly performance
discussions provide employees with an understanding of their progress and whether they
meet or fail to meet expectations. Although employees are not able to calculate the exact
percentage of their merit increase, they anticipate the range of increases following
performance discussions. El Paso's merit pay allocation process is presented in the graphic
below.
El Paso Company's Merit Pay Allocation Process
Quarterly performance reviews
Annual summary of quarterly performance reviews
Summary forwarded to Human Resources for

documentation and employees' files
Employees categorized into merit increase ranges based upon:

Gaining of competencies
Performance
Size of merit pool
Fort Worth Company bases its employees' merit increases upon the criteria listed below.
1. Performance
2. Market-based salary
3. Level of experience
4. Internal equity
Forth Worth's departments receive annual merit increase budgets; line managers
collectively assess employees according to performance categories—e.g. outstanding,
contributor and needs improvement—for the performance component of merit reviews.
Although development attained due to the performance management process provides the
foundation for pay recommendations, Fort Worth's compensation policy is changing as the
company moves to a broadbanding system.
NOVEMBER 1996
Galveston Company conducts merit and performance discussions during the same annual
review. Galveston bases merit pay increases upon performance of accountabilities and job
responsibilities.
How many forms does the company utilize during the performance review process? How
many forms per individual? Do forms vary across the company? Does the company
customize review forms according to job family? By which families?
Profiled companies utilize a variety of formats for their performance review forms. Formats
include those listed below.
Electronic forms sent via electronic mail to colleagues for completion and the external
vendor for processing
Multi-part paper-based forms that follow employees through all stages of the annual
performance cycle
Standard format forms that employees complete during each review
Profiled companies utilize standard forms for most employees, with some exceptions for leaders
or groups with specialized competencies. For these particular groups, companies add extra
competencies to the standardized set expected of all employees.
NOVEMBER 1996
Austin Company utilizes two forms during the performance review process: performance
appraisal forms for year-long performance management and 360-degree review packages.
Austin's performance appraisal forms include the components presented below.
Austin Company's
Performance Appraisal Form
(7-8 pages in total)
I. Company objectives
II. Definitions of core dimensions for position
- 7 key behavioral areas
III. Choose key dimensions/sub-dimensions
for future development
- at interim review, compare actual behvaior
with key dimensions
IV. Individual Development Plan
- employees work with manager to identify
3-4 activities to develop
V. Additional documentation
- employee comments
- definitions of numerical ratings
- 4 signature slots for employee and
supervisor to sign at each performance
management meeting during year
Austin's 360-degree review contains seven surveys for completion by individuals requesting
the review, as well as peers, subordinates and supervisors. In addition to the actual review
forms, Austin's career development department created a reference guide for employees to
consult with questions regarding the performance management process.
Austin does not customize review forms according to job family. However, for major job
families with several hundred employees, Austin works to improve the consistency of
development objectives.
NOVEMBER 1996
Brownsville Company employees utilize one four-part form throughout the performance
review cycle. The company provides standardized forms in electronic or paper format.
Brownsville's performance review forms contain the sections listed below.
Brownsville Company's
Performance Review Form
(4 pages in total)
I. Roles and accountabilities
II. Objectives
III. Identification of additional

participants in review process
IV. Performance dimensions and

competencies
V. Plans to address development issues
VI. Final evaluation
A few of Brownsville Company's job families possess specific competencies and the
company has developed performance management forms to reflect these distinctions.
Whereas all employees' performance review forms list "teamwork" as a competency, groups
with specific competencies receive review forms customized to their particular job
responsibilities.
NOVEMBER 1996
During Corpus Christi Company's 1996 reengineering of its performance management

process, the company pared down the requisite paperwork to four forms per person. These
forms—which are standard across the company—contain the elements listed below.
Development planning form (2 pages)—plan between employees and

supervisors identifying leadership competencies to develop and how to address
them
Goal-setting form (1 page)
Leadership form (14 pages)—defines all leadership competencies with
behavioral examples of all performance-level categories
On-going performance assessment form (2 pages)—filled out each time
employees and supervisors meet to discuss performance
Corpus Christi Company does not currently customize review forms according to job
family, as employees write their goals and leadership competencies on the standardized
forms. In the future, Corpus Christi may add unique competencies to these groups'
performance management forms.
Dallas Company's director of human resources asserts that performance management is not
about forms, but about employees' contributing to and developing their performance.
Consequently, Dallas utilzes standard forms for all employees, providing them with an
opportunity to describe how they contributed—and the effectiveness of their
performance—to the company.
El Paso Company's performance management form—which is the same across the

company—provides space for employees to fill in information specific to their own positions
regarding objectives and competencies. Due to this open-ended format, employees' review
forms may be several pages long.
Fort Worth utilizes the same performance management process forms for all exempt,
non-unionized employees. Unionized employees may or may not participate in the
performance management process, depending upon negotiated contracts. The components
of Fort Worth's performance management forms are listed below.
Development and career planning

Employee expectations
On-going review
Reviewing overall results
NOVEMBER 1996
Galveston Company utilizes two performance review formats—one based upon

accountabilities and the other based upon leadership competencies. These forms differ
across the company according to different departments' accountabilities and whether or not
employees possess leadership roles. In addition, forms for Galveston's 360-degree reviews
vary according to employees' positions.
How does the company link performance management process to employee development and
succession planning?
Individuals from profiled companies state that companies link performance management processes
directly with employee development, particularly through employees' identification of
development areas and activities they may pursue to improve performance.
In contrast with the strong links between performance management and employee development,
profiled companies do not maintain such strong connections between performance management
and succession planning. Individuals interviewed cite the areas listed below as potential obstacles
to effective utilization of performance management processes as tools in succession planning.
Decentralized human resources activities, i.e. performance management falling under

one area and succession planning under a different area
Lack of company-wide databases for tracking high-performing employees
However, several profiled companies plan to strengthen the connection between their
performance management processes and succession planning in the future.
Austin Company links employees' individual development plans directly with the company's
University of Excellence and the business units' training programs. The University of
Excellence employs account managers for each of the company's business units; these
individuals ensure that the university provides training that addresses the specific needs of
each division.
Presently, Austin organizes its performance management and succession planning activities
through different functions within human resources. The employee development group
conducts performance management, while the human resources operations group oversees
succession planning. According to the project manager for career development, Austin
intends to integrate performance management and succession planning in the future.
NOVEMBER 1996
According to Brownsville Company's practice leader for the organizational capabilities

department, employee development is an integral part of the performance management
process. The process allows employees to identify development areas and provides them
with an opportunity to obtain training or experience to improve performance. Brownsville
promotes employee development through formal and informal training aimed at immediate
development for employees' current positions, as well as long-term education for career
growth. For example, Brownsville offers a workshop entitled "Managing Personal Growth"
that links back to the performance management system.
Brownsville's practice leader for the organizational capabilities department states that
companies need databases to track employees' skills and capabilities in order to develop
effective succession planning processes. While Brownsville's business units each maintain a
database, due to Brownsville's decentralized operation, the company maintains few
processes to advance formal succession planning for the entire organization.
According to Corpus Christi Company's director of performance management, employee

development is an integral part of the company's performance management process.
Through the performance management process, employees identify leadership competencies
requiring further development; managers then work with their staffs to help employees
achieve their objectives.
Corpus Christi maintains a database that tracks leadership competency ratings for all
senior-level employees. This database helps identify employees with strong leadership skills
for succession planning purposes.
Dallas Company links its performance appraisals and employee education through efforts
to provide employees with opportunities to engage in work activities that develop their
abilities. Dallas' director of human resources notes that training does not necessarily equal
development, and that the best development occurs through hands-on experience.
El Paso Company's manager for training and development states that the performance
management process's focus upon employees' competencies drives the company's employee
development and succession planning. For example, the company identifies competencies
that indicate managerial capabilities and maintains a database of employees who rate highly
in these areas for training and succession planning purposes.
Fort Worth Company utilizes its performance management process to identify current
development needs and focus efforts for future succession planning. Three
hundred-sixty-degree reviews identify development opportunities that employees can pursue
with the company's human resources consultants through on-the-job experiential education.
In addition, Fort Worth's learning center updates its training curricula according to
employees' needs assessments.
Fort Worth employs a top-down approach to succession planning—managers identify high

NOVEMBER 1996
potential employees through discussions, and consider evidence from these employees'
performance management process reviews to support succession planning decisions.
Galveston Company maintains informal links between its performance management

process and employee development and succession planning. For example, employees'
individual development plans are a separate process and are not tied to their performance
reviews; however, these plans indicate to employees and their managers with areas where
training and additional development would be beneficial.
Galveston considers employees' performance for succession planning purposes, but the
company does not operate any formal processes to link performance management with
future staffing efforts. Galveston's human resources specialist notes that the company is
moving toward more concrete processes to link these activities.
Please explain how the company initiated its performance management process. How long
did the process take to implement? Did the company implement the process in phases? How
did the company communicate the changes? What types of training did the company provide
for managers and for all employees?
Profiled companies implemented their performance management processes across periods ranging
between one and three years. These companies introduced performance management in phases,
either training senior executives before other employees, or piloting the entire process with
groups of employees. Two profiled companies worked with external consultants during the
development and implementation phases, in order to obtain outside expertise and to add
credibility to the new process.
Profiled companies communicated the changes in performance management through the

techniques listed below.
Articles in company newsletters

Company-wide memorandum
Guidebooks to the new performance management process, for managers and
all employees
Toll-free telephone hotline to answer employees' questions
Training for all employees, with some additional training for managers
Videotapes introducing process
Voicemail notification for all employees
Austin Company initiated its performance management process in 1994; the process will
affect all employees by 1997. The graphic presented on the following page summarizes the
major objectives of each year of Austin's performance management implementation.
NOVEMBER 1996
Austin Company's
Performance Management Roll-out Timeline
Year 1:
Pilot with 3,000 employees (12 months)
Year 2:
Introduce system to one business unit at a time
-begin with exempt employees, then roll-out to all staff
Year 3:
- Complete training of all employees in
performance management processes
- Continue to align training with performance
objectives
- Begin to integrate performance management
with succession planning
Austin communicated the changes in performance management utilizing the method

presented below.
Austin Company's
Performance Management Implementation and Communication
Training for senior executives in

performance management
process benefits
(3-4 hour sessions conducted by
University of Excellence staff or
internal consultants)
All personnel notified of changes through

company-wide and business unit newsletters
Training for business unit staff

(6-8 hour sessions taught by
University of Excellence staff)
NOVEMBER 1996
In 1990, Brownsville Company began the implemention of its performance management

system in the three phases presented below.
Brownsville Company's
Performance Management Implementation Phases
DESIGN: Convened cross-functional task force of senior-level line managers
and consultant from USC Center for Effective Organization
* surveyed employees
* benchmarked against 40 other firms
* designed performance management
system to fit company needs
DEVELOP: Mid-to-senior level
managers and Hewitt Associates
INTRODUCE: Line managers DESIGN consultant developed plan for pilot
and company-wide implementation
trained to conduct performance (6 months) * developed training materials
management training within own
business units and review forms
* 5-day training sessions for
625 line manager trainers
(3 days of train-the-trainer DEVELOP
classes, 2 days to learn (6 months)
performance
management
specifics)
* 2-day training
for all
employees
INTRODUCE TO
EMPLOYEES
(6 months)
Brownsville utilizes company newsletters and training to introduce employees to the new
performance management system. Two-day training addresses the areas presented below.
Background on performance management process

Explain reasons for developing a new performance management process
Build committment among supervisors and employees
Reduce resistance to change
Skill building
How to fill out performance management forms
Salary exercise
Employees rank their colleagues in the merit pay performance categories
A senior oversight committee monitors the effectiveness of implementation and operation of

Brownsville's performance management system.
NOVEMBER 1996
Corpus Christi Company initiated its current performance management system in 1992;
the company continously revises the process to suit company needs and concerns.
Corpus Christi introduced the program in mid-1992 and utilized the performance
management processes during that year's final reviews.
Corpus Christi is in the process of communicating changes in its performance management

and related compensation programs through the vehicles listed below.
Articles in the monthly company newsletter

Information kits for managers
Toll-free telephone hotline to answer questions; hotline is operated by an
external vendor
Training for line managers conducting year-end reviews
Workshops to teach employees how to write development plans
Dallas Company worked with Provo, Utah-based Novations to design and implement
Dallas' performance management process. In the order presented below, Dallas introduced
its employees to the new process.
1. Senior managers
2. In-house trainers ("champions")
3. All exempt and non-exempt employees
According to Dallas' director of human resources, the company relied upon champions to
publicize and reinforce the new process within their work groups. In addition, the human
resources department submitted articles to the company newsletter to promote the new
performance management system.
NOVEMBER 1996
El Paso Company implemented its performance management process according to the

order presented in the graphic below.
El Paso Company's
Performance Management Process Implementation
Cross-functional team organized to develop new performance management system
and requisite training materials (6 months)
Team trained all employees in new performance management process (4 months)
Team trained high-performing employees to conduct training sessions
Training modules:
1 day for all employees
* Performance management process—writing assessments
* Communication skills required by performance
management process
Extra 1/2 day for managers
* Coaching process
In addition to training modules, El Paso utilized articles in the company's monthly

newsletter and extensive communication with managers to promote the changes in the
performance management process.
Fort Worth Company began implementing its performance management process in 1993
and completed integration in 1994. Fort Worth utilized the tools listed below to
communicate the performance management changes to employees.
Articles in company newsletter

Manuals for supervisors
Training for line managers who participate in the process
Videotapes
NOVEMBER 1996
Fort Worth's senior human resources consultant notes that the company no longer utilizes
all of these communication tools now that the performance management process is
well-established. Employees may now access extensive information regarding the process
through the company's intranet system.
Galveston Company modified its performance management process in 1991 and 1992, and
introduced 360-degree reviews in 1994. To educate employees about the 360-degree
reviews, Galveston conducted the communication and training efforts listed below.
Memorandum regarding the three areas listed below:

1. Cover letter to associates filling out reviews for their supervisors
2. Explanation of 360-degree process and why Galveston chose to implement the
process
3. Review interpretation
4. 360-degree review question and answer form—provided to managers so they
could answer their associates' questions
Training for new leaders to introduce performance management and counseling
processes—conducted on an ad hoc basis several times per year
Voicemail notification for all company employees
Did the company experience any resistance to the new performance management system?
How did the company handle this resistance?
Most profiled companies experienced some resistance to changes in their performance

management systems, although individuals interviewed note that the amount of resistance their
firms experienced was not unexpected. In general, profiled companies addressed employee
concerns with additional communication regarding the reasons for implementing the performance
management system and its impact for all employees. In addition, individuals interviewed
emphasize the role of line managers in bringing the process to employees; in situations where
profiled companies organized line managers to provide training to their own business units,
employees were significantly more likely to approve of and actively participate in the new
performance management process.
NOVEMBER 1996
Austin Company's project manager for career development notes that the company
experienced resistance from employees at all levels. However, Austin relied upon support
from the areas listed below to combat this resistance.
Executive support—Austin's chairman advocates the performance management

system, asserting that the organization needs horizontal alignment as well as
vertical alignment within business units
Fact-based data—Austin conducted numerous surveys of its pilot group to

determine the new performance management system's effectiveness
Return-on-investment evaluations—Austin determined that the performance

management system identified specific areas where training could provide a
significant impact; through its performance management system, Austin identified
cost-saving opportunities and methods by which to increase the company's market
share.
In response to internal resistance against the new performance management process,

Brownsville Company adopted three tactics, listed below.
1. Created a position entitled "Director for Performance Management" as a central

focal point for the company's performance management process. This individual
identifies issues or concerns regarding the process and brings them to the
attention of the senior oversight committee for resolution.
2. Demonstrated how non-technical characteristics can significantly impact business
performance
3. Conducted extensive employee surveys in 1990 and 1992 to determine the
effectiveness of the process structure and implementation; in response to
feedback, the company conducted more than 60 presentations of survey results
and introduced upward reviews in 1993.
To avoid resistance to performance management changes, Brownsville's practice leader for

the organizational capabilities department recommends that companies remain flexible and
incorporate elements of the activities listed below.
1. Conduct surveys to identify emerging issues and concerns

2. Modify performance management components and processes to address
employee concerns (for example, Brownsville introduced upward reviews)
3. Offer training as needed to address issues from employee surveys
4. On-going communication and clarification of company goals
NOVEMBER 1996
Corpus Christi Company's director of performance management notes that the company
received substantial resistance to its performance rewards system. Most employees objected
to the late implementation date—Corpus Christi introduced the program in mid-1996 for
utilization in the same calendar year. Additionally, some employees believed that the
performance management system would adversely affect them; the company utilized
additional newsletter articles and workshops to educate employees about the positive
implications of the new performance management system and has succeeded in reducing
resistance.
To preempt internal resistance, Dallas Company utilized focus groups prior to modifying
the company's performance management process. Feedback regarding employees' likes and
dislikes in the previous performance appraisal system provided Dallas with the support to
change the entire process.
According to El Paso Company's manager of training and development, some employees

were uncomfortable with developing their own performance objectives and planning their
own careers. To combat this resistance, El Paso offered training modules focusing upon
employees responsibilities in the new process.
Fort Worth Company received a mixed response from its management staff—some
managers approved of the change to a less structured performance management system,
while other managers resisted the modifications. However, Fort Worth's senior human
resources consultant believes that the company experienced internal resistance comparable
to that which occurs with many organizational changes.
In order to provide the system with more credibility than if it was a program orchestrated
solely through the human resources department, Fort Worth actively worked to involve line
managers in the new performance management process.
Galveston Company's human resources specialist states that the company experienced
nominal internal resistance to changes in its performance management system. Many
employees sought further clarification of the process so that they could fully participate.
NOVEMBER 1996
What would the company do differently if it could develop its performance management
system again? What does the company identify as critical success factors in its performance
management system?
Individuals from profiled companies provide a variety of thoughts regarding the ways their
organizations could better implement new performance management processes. Several
individuals note the importance of support from all employees—particularly senior executives and
line managers—for successful implementation of new performance management systems.
Austin Company's project manager for career development would like to see the company
shift away from five-point numeric rating scales.
This individual notes that the critical success factor in Austin's implementation of a new
performance management system was executive leadership and support. Business unit
executives provide the strategic vision for other employees to utilize in determining their
individual performance objectives.
Brownsville Company's practice leader for the organizational capabilities department notes
that Brownsville conducted numerous organizational and strategic changes concurrently
with the performance management program implementation. This individual believes that
the performance management implementation might have occured more smoothly had the
company staggered the implementation of important organizational decisions.
In addition, this individual believes that Brownsville's performance management process

implementation was successful because line managers introduced the process to their own
business units. Consequently, the process was perceived as coming from within the business
unit as a management tool, rather than as an external imposition from the human resources
department.
Corpus Christi Company's director of performance management believes that it is difficult

to eliminate resistance to policy changes; however, this individual states that had Corpus
Christi introduced the performance program changes in the first quarter of 1996, the
company might have averted some of the resistance to the timing.
Corpus Christi's leadership competencies comprise one of the critical success factors for
the company's performance management system. The company's director of performance
management notes that a change in culture—to one that is much more cognizant of the
leadership required to drive the business—has occurred due to the inclusion of leadership
competencies as a component of Corpus Christi employees' reviews.
NOVEMBER 1996
Dallas Company's director of human resources cites no areas where Dallas would pursue a
different approach if implementing its performance management system again. However,
this individual emphasizes the importance of support for performance management process
changes across all levels of the company; companies cannot rely solely upon support from
senior management, but must actively solicit support from middle-managers and
non-managerial staff.
El Paso Company's manager of training and development states that a formal brochure
introducing the changes in performance management would have aided the company in
educating employees and gathering support for the new process. This individual believes
that companies should market their new performance management systems in the same way
that they would promote any other company-wide program.
Key elements in the success of El Paso's performance management process implementation

are listed below.
Active participation of line managers to take the process out of human

resources and to make it a reality for the entire company
Executive support
Face-to-face training within business units
According to Fort Worth Company's senior human resources consultant, the company
would implement its performance management process in the same way again. The
company's human resources staff examined whether the system required modifications in
1995, but decided it was successful and opted not to modify the process.
This individual emphasizes the involvement of Fort Worth line managers as a critical
success factor. Line managers provide the system with credibility and clearly explaine the
impact of performance management process changes for employees.
Galveston Company's human resources specialist was not with the company when
Galveston introduced its performance management process and is unable to provide
information regarding changes in its implementation effort. However, in the future, this
individual expects that Galveston will increasingly incorporate competencies into its
performance management reviews.

Performance Management Benchmarking

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Performance Management Benchmarking

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CORPORATE LEADERSHIP COUNCIL

THE ADVISORY BOARD COMPANY

PERFORMANCE MANAGEMENT BENCHMARKING

PERFORMANCE MANAGEMENT PROCESS

360-DEGREE REVIEWS IN PERFORMANCE MANAGEMENT

MERIT REVIEWS AND EMPLOYEE DEVELOPMENT

PERFORMANCE MANAGEMENT FORMS AND IMPLEMENTATION

Performance Management Benchmarking

Please provide a general description of the company's performance management process.

Austin Company's Annual Performance Management Process

Each employee writes own

Austin Company's Performance Review Process

Brownsville Company's performance management process occurs in three phases,

Brownsville Company's Annual Performance Management Phases

* Determine who should participate in employee's feedback process

Phase II: Developing

Phase III: Reviewing

Corpus Christi Company plans to formalize a process of four performance appraisal

Dallas Company's cyclical performance management process occurs according to the

Dallas Company's Annual Performance Management Cycle

1st Quarter and throughout year:

Final review of employees'

Dallas Company's performance management process is not an event-based process that

El Paso Company employees initiate the personal performance management process by

Fort Worth Company's performance management process incorporates an agreement

Fort Worth Company recommends up to four quarterly performance management

Galveston Company conducts performance reviews once annually on employees'

Austin Company incorporates optional supplementary 360-degree reviews. According to

Brownsville's 360-degree reviews examine how employees perceive their colleagues to

Dallas Company utilizes self-initiated 360-degree reviews; individuals access 360-degree

In 1997, Galveston plans to establish 360-degree reviews as an annual process and to

AUSTIN COMPANY AND PERSONNEL DECISIONS, INCORPORATED'S

Brownsville Company employs internal consultants and an external vendor—Personnel

BROWNSVILLE COMPANY AND PERSONNEL DECISIONS, INCORPORATED'S

Dallas Company employs an external vendor—Guerneville, California-based Apple

El Paso Company does not conduct 360-degree reviews.

Fort Worth Company employs an outside vendor—San Rafael, California-based Acumen

Six profiled companies consider individual competencies during performance reviews. An

Brownsville Company's Merit Review Timeline

January/February March April

Final performance Merit pay increases occur

1. Performance—Goal attainment and demonstration of leadership behaviors,

Although Corpus Christi attempts to conduct separate discussions regarding performance

Corpus Christi Company's Ideal Merit Review Timeline

December/January February March

Final performance Merit increases

Dallas Company's Merit Review Process

I. Employee performance (pre-feedback period)

II. Employees solicit feedback through 360-degree reviews

III. Employees create personal development plans

IV. Employee performance (post-feedback period)

V. Merit review based upon employees'

El Paso Company's Merit Pay Allocation Process

Quarterly performance reviews

Annual summary of quarterly performance reviews

Summary forwarded to Human Resources for

Employees categorized into merit increase ranges based upon:

I. Roles and accountabilities

III. Identification of additional

IV. Performance dimensions and

V. Plans to address development issues

VI. Final evaluation

During Corpus Christi Company's 1996 reengineering of its performance management