Title: Implementing a PM System Some key members of an organization and an external consultant worked together to thoroughly communicate and actually implement a new performance management system. As one of the first steps to implement performance management, the CEO announced that he wanted to implement a forced distribution performance management system in which a set percentage of employees would be classified into each of several categories (e.g., a rating of 1 to the top 20 percent of performers; a rating of 2 to the middle 70 percent of performers; and a rating of 3 to the bottom 10 percent of performers). A global HR team was put in place to design and implement the new system. The first task for the design team was to build a business case of the new system by showing that if the new organizational strategy was carried down to team goals or objectives and team goals or objectives were translated into individual goals, then business goals would be met. Initially, the program was rolled out as a year-round people management system that would raise the bar on performance management at the company by aligning individual performance objectives with organizational goals and by focusing on the development of all employees. The desired outcomes of the new system included raising the performance level of all employees, identifying and retaining top talent, and identifying low performers and improving their performance. The firm also wanted the performance expectations for all employees to be clear. The design team received the support of senior leadership by communicating that the performance management system was the future of the firm and by encouraging all senior leaders to ensure that those reporting directly to them understood the process and also accepted it. In addition, the design team encouraged senior leaders to use the system with all of their direct subordinates and to demand and utilize output from the new system. The team also explained the need for standardization of performance management across all divisions. Finally, the team asked senior leaders to promote the new program by involving employees in the training of talent management and by assessing any needs in their divisions that would not be addressed by the new system. The companys global performance management cycle consisted of the following process: 1. Goal cascading and team building 2. Performance planning 3. Development planning 4. Ongoing discussions and updates between managers and employees 5. Annual performance summary Training resources were made available on the companys intranet for managers and individual contributors, including access to all necessary forms. In addition to the training available on the intranet, one- to two-hour conference calls took place before each phase of the program began. After the transition into the new system, part of the training associated with the performance management system revolved around the idea that the development planning phase of the system was the joint year-round responsibility of managers and employees. Managers were responsible for scheduling meetings, guiding employees on preparing for meetings, and finalizing all development plans. Individual contributors were responsible for documenting the developmental plans. Both managers and employees were responsible for preparing for the meeting, filling out the development planning preparation forms, and attending the meeting. With forced distribution systems, there were a fixed number of employees that had to fall into each rating classification. As noted, in the company system, employees were given a rating of 1, 2, or 3. Individual ratings were determined by the execution of annual objectives and job requirements as well as through a comparison rating of others within a similar level at the company. Employees receiving a 3, the lowest rating, had a specified time period to improve their performance. If their performance improved, then they were released from the plan, but they were not eligible for stock options or salary increases. If performance did not improve, they could take a severance package and leave the company, or they could start on a performance improvement plan, which had more rigorous expectations and timelines than did the original action plan. If performance did not improve after the second period, they were terminated without a severance package. Individuals with a rating of 2 received average to high salary increases, stock options, and bonuses. Individuals receiving the highest rating of 1 received the highest salary increases, stock options, and bonuses. These individuals were also treated as high potential employees and given extra development opportunities by their managers. The company also made significant efforts to retain all individuals who received a rating of 1. Looking to the future, the company planned to continue reinforcing the needed cultural change to support forced distribution ratings. HR Centers of Expertise within the company continued to educate employees about the system to ensure that they understood that the company still rewarded good performance; they were just measuring it in a different way than in the past. There was also a plan to monitor for and correct any unproductive practices and implement corrective policies and practices. To do this, the company planned on continued checks with all stakeholders to ensure that the performance management system was serving its intended purpose.

Now that the new performance management system was implemented, the consultant decided to evaluate the system to see if and how further implementation of the performance management was needed. To do so, the consultant considered the following questions that deal with characteristics of an ideal performance management system discussed in the chapter.

Question

1. What is your overall impression on the degree of overlap between the companys system and the ideal system performance management system?