Performance Management Appraisals “Pass or Fail”

Based on several recent articles in various management journals, human resources, and total reward publications, there are a growing number of organizations that have decided to eliminate performance management appraisal processes or revamp the process by placing greater weight on top performing skills and achievement toward team goals. As business, human resource and compensation consultants, and SAAS human resources technology developers and advocates, we are keeping a close eye on the Pay for Performance “Pass or Fail” saga and the potential evolution toward more effective performance management systems and processes that will drive higher levels of organization and individual results.

Dan Pontefract, a Forbes / Leadership contributor who focuses on collaboration, leadership, engagement and purpose at work wrote a short article on Performance Management Appraisals’ effectiveness from 2000 to 2015. Dan references three research reports on performance management: one in 2000 conducted by the Society for Human Resource Management (SHRM), the second in 2012 commissioned by Towers-Watson, and the third in 2014 with SHRM checking to see if any progress had been made in performance management effectiveness since its 2000 survey study.

Mr. Pontefract shared an insightful statement from the SHRM 2000 report Executive Summary. “Stronger executive support for performance management and increased employee participation in development activities is needed in order for performance management systems to truly become a tool to help attract and retain talent.” Dan mentions in his article that leaders did not support performance management appraisal systems as an effective management tool.

The article continues with Mr. Pontefract’s furthering his case by sharing insight from a Towers-Watson 2012 Global Workforce Study entitled “Engagement at Risk: Driving Strong Performance in a Volatile Global Environment”.   Dan stated in his article that based on the study results, only 44 percent of organizations do an effective job of using technology to deliver the performance management process itself. He laments that a decade of technology improvements and additional management feedback systems should have allowed enough time and change for more effective performance management processes.

Dan provides insight on SHRM’s 2014 research report – HR Professionals’ Perceptions About Performance Management Effectiveness. He quotes a disturbing report outcome statement, “More than one-half (53 percent) gave their organizations a grade between C+ to B and one-fifth (21 percent) chose a C, and only 2 percent gave an A in performance management to their organizations.”

At the end of Dan’s article, he states, “After 15 years of survey after survey, and research report after research report, we’re no further ahead with respect to improving the performance management process, program or behavioral model in our organizations. “ He concludes his article by offering some key parting thoughts that should be considered when designing and implementing a performance management appraisal system that is enhanced by technology for greater efficiency and productivity.

  • “Performance management isn’t a score. It’s a frequent, ongoing coaching conversation.”
  • “Performance management isn’t an annual meeting. It’s a development opportunity that occurs as necessary.”
  • “Performance management isn’t bound by technology. It’s a behavioral attribute that puts the employee at the center of his or her growth.”
  • “Performance management isn’t a hammer. It’s an opportunity to use all the tools in the toolbox.”
  • “Performance management isn’t managing performance. It’s the leader’s responsibility to help build up and then release the enhanced performance of an employee.”

Performance management is becoming more than the annual sit-down session between the employee and their supervisor. The following content represents some policy language from the University of New Hampshire’s Performance Management handbook.

“ONGOING FEEDBACK AND PERFORMANCE MANAGEMENT”

Benefits of Providing Ongoing Feedback & Coaching

“During the year, you are responsible for coaching and mentoring your employees to assist them in reaching their goals and achieving optimal performance. Ongoing feedback and coaching are used to communicate about and correct performance deficiencies, to reinforce appropriate behavior, to teach the employee new skills, to motivate high performance, and to mentor employees so they understand their role in the Department and University.”

  • “Regular feedback and coaching will make your job as a supervisor/manager easier when employees build their skills and independence.”
  • “Feedback and coaching also increases productivity, the quality of work and the effectiveness of the work group.”
  • “Employees’ motivation and initiative is increased with effective feedback and coaching.”
  • “Creativity and innovation in problem solving increases with effective feedback and coaching.”
  • “Feedback and coaching can prevent problems from occurring.”

WorldatWork released an article in their weekly newsline titled, “North American Employers Give Pay-for-Performance Programs Low Marks.” This statement supports findings from a recent Willis Towers Watson survey. The WorldatWork article included the following quote, “Employers continue to make significant investments of time and money in their traditional pay-for-performance programs, primarily annual merit pay increases and annual incentives,” said WorldatWork member Laura Sejen, global practice leader for rewards at Willis Towers Watson, in a press statement. “Unfortunately, these reward programs are falling short in the eyes of many employers.”

Based on the survey report, only 20% of the North American companies reported merit pay as “effective” at driving higher levels of individual performance, and 32% believe that their merit pay programs are effective with differentiating pay based on individual performance.

The performance management processes are not making passing grades and the survey report indicates that organizations are making changes to improve the effectiveness of their performance management programs by

1) adopting more forward-looking performance goals,

2) placing greater emphasis on demonstrated knowledge and skills required for employee’s roles,

3) applying greater weighting to the critical roles,

4) aligning company goals with top performing employees , and

5) rewarding achievement of team goals.

The emphasis on performance management improvement has become a noticeable initiative with WorldatWork and its total rewards members. WorldatWork is hosting a performance management practices forum to raise the visibility and bar of performance management.

Getting Pay Right

Over the past several years, the Obama Administration has pushed for equal pay between men and women. On January 29, 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009, an equal pay law. Last Friday on the anniversary of Lilly Ledbetter, the President promoted a new EEOC (Equal Employment Opportunity Commission) proposed regulation that would require businesses with more than 100 employees to provide W-2 earnings pay data that can be sorted by gender, ethnicity, age, job category, pay ranges, and hours worked. The EEOC will use this data to determine if employers are engaging in pay discrimination and this proposal would affect at least 63 million U.S. employees.

Since 1986, the Johanson Group has worked with clients in most business sectors to implement an internally equitable and externally competitive base compensation program titled Job Evaluation and Salary Administration Program (JESAP). This program integrated job descriptions, job valuing, employee pay data and market data to produce pay ranges and the ability to show where each employee was located in their respective pay range. Starting in 2001, we converted the JESAP program into a SaaS product and released it to our clients in 2005 with a new name DBCompensation as part of a new HR software company we established, DBSquared.   The DBCompensation process improved our efficiencies by 500% over the past technology of Microsoft Word and Excel.

As far as we know, none of our clients have had to deal with pay discrimination issues after the implementation of the JESAP/DBCompensation system. Our program color-codes and graphs employee base pay data by gender, ethnic background, and age. This important data provides our clients with a visual review as well as hardcopy statistical data so they can correct, or at least start to correct, any pay equity issues that are identified.

With over 75 clients using the DBCompensation system and a retention rate well over 90% since 2005, we are passionate about our clients “GETTING PAY RIGHT” and being a resource to them as they seek to be “internally equitable and externally competitive.” Our approach is proactive and should meet or exceed any regulation requirement that has been passed since the Equal Pay Act of 1963.

We would love to increase our footprint across America and hope you will become our next software client. We also offer compensation and total rewards consulting.

COMPENSATION MANAGEMENT – Internal Job Valuing and External Market Salary Comparisons

An informative article written by Fred Hilling, President of Sander Consulting Services was published in the 2nd Quarter 2015 WorldatWork Journal. The article was titled, “Salary Pay Options for Control and Accuracy”. Mr. Hilling makes a case in this article based on two primary statements:

1) “The only relevant goal for a salary administrator is to define and administer a competitive salary level for each position.”

2) “The level of support for managers making pay decisions varies by the level of control embedded in the salary policy and accuracy of the prediction of a competitive pay level for an individual position.”

Mr. Hilling continues his position in this article by listing compensation management policies that provide control and accuracy. They include:

  • The definition of job content
  • The method of establishing internal equity
  • The definition of salary grades and ranges
  • The procedure for progression in the salary range

Mr. Hilling makes a case for accuracy based on the methods that support internal job valuing that are aligned or validated by external salary market comparisons.   He describes various methods for internal job valuing which include Classification, Point-Factor Equity Plans, Point-Factor Competitive Plans, Regression Models, and Salary Market Comparisons.

We support Mr. Hilling’s position for greater compensation management accuracy by utilizing an internal job valuing process and an external market pay comparative analysis to validate the internal job placement in the salary structure and to ensure pay competitiveness with the defined salary market.

Mr. Hilling concludes the article with several statements that summarize his position on compensation management with pay options for control and accuracy. One of the statements that resonate with our compensation management philosophy follows: “Salary administrators have a fiduciary responsibility to shareholders/taxpayers. They have to balance this obligation with the continuing advice and opinions from management and employees. The best way to achieve this balance is to implement accurate measurement of competitive pay levels.”

The compensation management team at DBSquared has developed an automated and integrated internal job valuing (internal) and market salary analysis (external) system. We focus on simplifying Human Resources and Compensation Management processes through proven systems and technology.

Please contact us for help with automating your job descriptions, job valuing, market salary analysis and compensation management processes and structures.

Show Me The Money!

At this time of year, we have several clients working hard to determine what adjustments they are budgeting as far as pay increases for their employees. Between 2008 and recent years, many organizations were not in a position to provide increases due to the weak economy. With a couple years of growth and improved bottom-lines, employees are saying, “Show me the Money!” They want to see increases in the areas of merit, cost of living, market pay for those employees under market midpoint, longevity, bonus, certifications, 401(k), etc. Employee pay has been frozen for the most part, benefits such as 401(k) contributions had been suspended, and the increased cost of health insurance has been passed on to the employee. The most valuable asset lost its status during the recession years. Employees are telling employers that enough is enough and want to see the increases in their pay like they enjoyed in the pre-recession years.

Our clients have come to us over the past 42 years (Johanson Group, HR/Management Consulting established in 1973) and the past 10 years (DBSquared, HR software) to assist them in determining how best to pay their employees with the resources that they have to work with. Whether an organization was large or small, the employees agreed during the recession that their pay increase would be small or none, but that period of time has come and gone.

We are currently working with a municipality that didn’t provide any increases over the past several years, and when we recently completed their market analysis and set their pay ranges using our DBCompensation software program (job descriptions, job point ratings, employee data and market data), they were 20% behind market. We worked with the leadership team and City Council to formulate a pay plan over the next few years that will help them to make up that deficiency as well as keep their pay range structure current with market. With this plan in place, the employees will spend less time thinking “Show me the Money!” and will start spending more time being engaged and committed to make a difference for their organizations.

Job Valuing is Regaining Velocity

A recent W@W Workspan published article (September, 2015) titled, “JOB EVALUATION – Relevant, Robust and Reimagined” was written by Hay Group executives Phil Johnson, Tom McMullen and Mark Royal. The article began with an historical perspective of job valuing being a popular job measurement tool from the 1960’s to the 1980’s. The authors noted that since the recent economic downturn and slow recovery period, job valuing has regained momentum as a valuable management process in determining relative internal job worth as it relates to its contribution and impact on company goals and outcomes. Johnson, McMullen and Royal made the following insightful statement in their job valuing article, “Many organizations woke up to the fact that a process that analyzes the work that needs to be done can provide much more than the way to link to market and determine appropriate pay levels.”

DBSquared’s DBCompensation software has a proven proprietary job valuing system with a 1985 origin. With this efficient and easy to use HR technology, job descriptions and job valuing are simultaneously developed and displayed in a job evaluation chart. The job valuing chart offers a high-level job fine-tuning and valuing feature and a link to automatically align final job descriptions with final job values. DBSquared’s compensation professionals support the philosophy of validating internal job valuing and proposed pay structures with external market pay comparisons. The combination of internal job valuing and external market pay analysis produces a more precise and comprehensive pay structure where all jobs have a value on the company’s internal pay line and pay structure.

Recently, we had a VP of HR and Administrative Services of an electric utility company make a comment about the professional integration of internal and external job valuing processes in the DBCompensation software. He was pleased with the recent job classification and compensation study and how the software simplified the process without losing creditability, validity and transparency.

DBCompensation Software Updates Coming Soon!

We have been busy this year making many improvements to our DBCompensation flagship product. Many of the improvements were made “under the hood” so to speak, including numerous performance and technology enhancements.

These improvements have been completed under the DBCompensation 9.0 version number. After much deliberation, the principals at DBSquared have decided to complete a second group of enhancements through the end of the year. This second group of enhancements includes predominantly user-requested features, and we expect to roll out the next software update as DBCompensation 10.0 in the first quarter of next year. This release will include a combination of all the features from versions 9.0 and 10.0.

As usual, we will plan to host user meetings to demonstrate all of the new features, obtain feedback from our valuable customers, and answer any questions. So be sure to watch for more information in upcoming newsletters.

We look forward to delighting you with many great new features. Thanks, as always, for your continued business.

Performance Appraisals: PAINFUL to JOYFUL

Why do supervisors and managers dread receiving emails and/or phone calls from Human Resources about employee performance appraisals that are due or past due? Some of the typical reasons stated by these performance evaluators follow:

• I do not want to rock the boat and tell the truth about an employee’s poor performance
• I’m not prepared to complete the performance appraisal(s)
• Performance appraisals take too much time
• I have not documented any good or poor performance actions during the past year
• I would rather fix a machine than talk to an employee about their performance
• I do not like conflict and it is easier to rate all employees with a “meets expectation” rating
• If confronted by the employee for performance examples, all I can remember are recent events
• Maybe I can outlast HR’s request for completion of the performance appraisal, probably not

How will Companies and HR professionals turn performance management appraisals from PAIN to JOY?
Most management tools or actions are not meant to be painful. In fact, if administered in a confident and personable manner, performance management appraisals and feedback sessions can change a company’s culture and its productivity. If managers or supervisors believe in on-going performance management, they will provide regular feedback and address employee issues before they become identifiable “poor” performance outcomes. Effective managers and supervisors believe in setting goals, providing timely feedback and developing employees’ talents.
How can HR, Managers and Supervisors take the angst out of performance appraisals (P.A.)?

• Use of technology for efficient and timely retention of on-going performance actions/events
• Portable technology to capture employee actions/events during daily MBWA observations
• Use of practical and user friendly forms that are as simple as obtaining cash from an ATM
• Set clear goals for performance or for improving an employee’s performance
• Offer feedback regularly so that the P.A. session is a summary and not a surprise!
• Simplify the performance appraisal process and time for completion
• Reward and recognize supervisors for effective performance management actions
• Teach and model effective performance management actions and appraisal work
• Help performance evaluators prepare for employee feedback sessions

 

2016 Salary Increase Projections

The average adjustment for 2016 will be three percent (3%) based on data from the following compensation/consulting groups:

You need a third party to evaluate your organization’s current compensation practices and establish a fair, objective, defensible and competitive compensation structure including outside market data for your industry. Please contact us today to learn how we can help.

COMPENSATION PROGRAM COMPLIANCE REACHING DOWN TO MID-SIZE EMPLOYERS

Bruce Johanson, one of the principals for DBSquared was invited to conduct a webinar on the HRsoft™ Talent Takeaways Series. Bruce presented a one-hour webinar on Compensation Program Compliance “Integrating Internal Equity with External Competitiveness using proven compensation job valuing, market pay studies and regression line analysis”. For a copy of the PPT slides please contact Brian Sharp. DBSquared and HRsoft are strategic partners in the Compensation and HR software technology sector.

Brian Sharp with HRsoft™ | Chief Marketing Officer | Email: Brian.Sharp@hrsoft.com | Web: http://hrsoft.comHRsoft™ – High Impact Talent Management™ Software

FLSA Overtime Rules Out Soon: Be Proactive and Ahead of the Curve!

In order for a two week vacation to be relaxing and fun, it takes a certain amount of pre-planning. Our family completed a two week vacation out West with various overnights and stops at famous places in Kansas, Utah, Wyoming, Montana, South Dakota, and Missouri. We had set times and days for certain events and some flexible time for what we might discover along the way. Our children were involved in the planning and it by far was the best vacation our family has taken to this day.

When you hear the acronym FLSA, it is not a favorite term that rates as high as a two week vacation. However, they are similar as they both require proactive planning so the outcome will be positive. The proposed FLSA changes following President Obama’s directive to expand the eligibility for more employees to receive overtime pay is imminent. The World at Work organization estimates 6,000,000 exempt salaried U.S. employees could become non-exempt hourly workers. Based on several sources, the salary test and primary duties test for determining whether a job is classified as exempt or non-exempt will be impacted. The current annual exempt salary level of $23,660 will probably be increased to $52,000 or $1,000 a week. The primary duties test is projected to require that at least 50% of the essential duties be considered as exempted level duties.

Our automated web-based job description writer, DBDescriptions, will help organizations with the primary duties test. Job duties and tasks can be reviewed to determine what positions may be at risk as our software tool allows you to enter in a percentage of time and frequency for each essential duty. With the collaboration feature, managers and employees that live and perform the job can and should weigh in to confirm the makeup and requirements of the job. In the future, there is a strong likelihood that the Department of Labor will actually want to observe an employee in their position to verify what the job description states compared to actual performance. Making sure that the job description is right and matches with what the employee is doing will be a normal function of the company’s compliance efforts.

DBDescriptions was created in 2008 and introduced to the public in 2009. The 1100 pre-loaded job descriptions and the position analysis questionnaire help to create FSLA and ADA compliant job descriptions in minutes. We believe that we are the first SaaS-based job description management tool and our annual per user fee for unlimited access is only $295. This is inexpensive insurance which will give you a peace of mind equal to your next two-week vacation