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CREATING A PERFORMANCE-BASED

CULTURE
SESSION 2: THROUGH PROPER
PERFORMANCE MANAGEMENT OF
PEOPLE
CNI’s Journey, Mistakes, and Lessons Learned

Kenny Ong
CNI Holdings Berhad
Contents

1. Key Workforce challenges to achieving


organization performance
2. Managing Performance through People:
Support and Philosophy
3. How to really manage Performance
4. Managing Performance through Incentives
5. Employee Distinctions through Relative
Performance
6. Managing Team performance – collaboration,
innovation
Workforce Challenges

Key Workforce Challenges in Achieving


Organizational Goals (Extremely Simplified
Version):
1. Right Person, Wrong Job (5%)
2. Wrong Person, Right Job (20%)
3. Wrong Person, Wrong Job (1%)
4. Right Person, Right Job, Managed Wrongly
(74%)
Managing Performance through
People: Support and Philosophy
Alignment: 4-Wheels Model

Corporate
Resources
Structure Objective
Performance
Objectives
Philosophies
Leadership

Person
Alignment: Framework

Philosophies • Equal / Fair


• Happy / Productive
• Performance vs Potential
• Retention / Engagement
• Activities / Results
• Leading / Lagging
• Macro / Micro
How to really manage Performance
• Beating a Dead Horse
Most Common Desperate
Performance Improvement
methods
1. Send for more Training
2. Enforce more Incentives (positive/negative)
Mager and Pipe

• Analyzing Performance Discrepancies


Managing Performance through
Incentives
Incentive Problems

Problem with Incentives in managing performance:


• Most people are confused or unsure about
compensation tools
• Some people misuse compensation tools
What to Pay?

• Pay for Service


• Pay for Job
• Pay for Performance
• Pay for Competency
Performance and Incentives

1. Internal Equity
1. Internal Job Rates
2. Performance differentials

2. External Competitiveness
1. External Job Rates - Benchmarking
2. Demand & Supply
What’s the Difference?

• Increment

• Bonus

• Promotion
Compa Ratio Table

Use this if your company:


• Pays for Performance, and
• Pays for Job rates

Def:
Mid-Point = Mid Point of Pay Grade

Grade E2
Min MID Max
RM2,000 RM2,500 RM3,000
Compa Ratio Table

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5

1
Compa Ratio Table

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5

3 5%

1
Compa Ratio Table

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5 9

4 7

3 9 7 5% 4 3

2 2

1 0
Compa Ratio Table

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5 15 12 9 8 7

4 12 9 7 5 3

3 9 7 5% 4 3

2 6 4 2 1 0

1 4 2 0 0 0
Dangers of Direct Incentives

1. lessen internal motivation,


2. switch to mercenary mode,
3. do something and do not do something else,
4. bribe and fraud culture,
5. easier for competitors to recruit,
6. lessen teamwork & helpful culture,
7. less and less impact for same value,
8. mockery of base salary and employment contract,
9. rebellion from non-incentivised staff,
10. end up incentivising everyone for everything?,
Employee Distinctions through
Relative Performance
Employee Distinction?

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5 9 8 7 6 5

4 8 7 6 5 4

3 7 6 5% 4 3

2 6 5 4 3 2

1 5 4 3 2 1
Employee Distinction?

< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3


≤0.9 <1.1 ≤1.3
5 20 15 12 8 5

4 18 12 9 5 3

3 9 7 5% 4 3

2 1 1 1 0 0

1 0 0 0 0 0
Employee Distinction
Average Rating Multiply Example Example
Rating Factor Rating Increment

> 4.1 5 2 4.2 8.4%

> 3.3 – 4.1 4 1.2 3.5 4.2%

> 2.3 – 3.3 3 0.75 2.8 2.1%

> 1.3 – 2.3 2 0.5 1.8 0.9%

≤ 1.3 1 0 1.0 0%
Employee Distinction

• Identify POTENTIAL
2 3 4 5
PERFORMANCE

Group I
5

(Talent Pool)
4
3
2
Employee Distinction

• Identify POTENTIAL
2 3 4 5
PERFORMANCE

Group II Group I
5

( Potential) (Talent Pool)


4

Group IV Group III


3

(Counseling) ( Performance)
2
Curse of the Bell Curve

‘A’ ‘B’ ‘C’ ‘D’ ‘E’


Staff Staff Staff Staff Staff
Managing Team performance –
collaboration, innovation
Managing TEAMS

1. Identify the right ‘levers’


2. Set KPIs for the right ‘levers’
3. Manage the ‘levers’ through performance
systems
4. Balance Individual vs. Team priorities
5. Manage conflicting KPIs, but don’t eliminate
them
TEAM levers

C.O.R.E.
÷
W.L.
Possible TEAM-type KPIs
and incentives
Team Type Possible Incentive Type

Functional •Recognition for exceptional success (usually not in


cash)
•Individual role considered in normal merit increase
process
Process •Team competencies recognised in pay for proficiency
approach
•Gainsharing or operational progress incentives
Project/ Time- •Recognition for exceptional individual contributions in
based spot wards or salary increases
•Project / programme Phantom Stock or Profit Sharing
Network/ •Recognition for exceptional individual or team
Partnerships successes in spot awards or share increases
•Venture profit sharing
Team Incentive Models

1. Fixed Salary Proportion (Fixed Personal,


Variable Team)

Performance Incentive =
Fixed Quantum +
(Balance Sum In Bonus Pool ÷ Headcount)
Team Incentive Models

2. Two-tier Multiplier (Variable Personal, Variable


Team)

Performance Incentive =
Personal Target Achievement +
(Personal Target Achievement x Team
Performance Multiplier)
Team Incentive Models

3. Team Ratio Plan (Variable Personal, Fixed


Team)

Performance Incentive =
Team Ratio x Personal Target Multiplier
Possible Innovation levers

• Product Leadership
• Reduce time to market
• Commercialize new products fast
• Ensure that ideas flow
• Reuse what other parts of the company
have already learned
• Ensure there are multiple sources of
funding
Innovation Levers?

1. Add 10 value increasing properties to each


product or service every 90 days
2. Reduce jointly held inventories and lead time
required by 90% in 24 months
3. Reduce new-product/service development
cycle time by 75% in next 2 years
4. Copy 10 ideas every 60 days form competitors
and noncompetitors
5. Target % Revenue from New Products
(previous 24 months) - start with 50%

Source: The Innovation Challenge, “Thriving on Chaos”, by Tom Peters; Alfred A.


Knopf Inc.
Managing People performance:
A Summary
More Problems….

1. cost of evaluation vs. gains of evaluation


2. defer achievements of a good year to next
3. barely achieve so that next target is not high
4. spread improvements over several years
5. value reducing actions to increase performance
6. most ratings are 4 or 5, new people are 3
Contents

1. Key Workforce challenges to achieving


organization performance
2. Managing Performance through People:
Support and Philosophy
3. How to really manage Performance
4. Managing Performance through Incentives
5. Employee Distinctions through Relative
Performance
6. Managing Team performance – collaboration,
innovation
Before I forget…

• Re-train Appraisers
• Train new Appraisers
Alignment: 4-Wheels Model

Corporate
Resources
Structure Objective
Performance
Objectives
Philosophies
Leadership

Person
Thank You.

soft copy of slides:


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