Retooling HR: How to Focus on the Right Performance

Retooling HR by John Boudreau

Everyone in an organization must decide where improving work performance makes the greatest difference to success.

Every day, managers, supervisors, employees, and leaders make decisions to work on some areas more than others. They set goals that lead to more effort on some things than others, they allocate informal and formal rewards to different tasks, and they decide how to spend their limited time improving some work elements (such as jobs, tasks, roles, competencies, or performance factors).

Which work elements should get more attention? Are you confident that this question gets answered correctly across the thousands of decisions that get made every day? How are the choices made?

Three approaches to improving performance

One way is to assume that all work elements are equally vital, because if they weren’t they wouldn’t exist in the organization. In the same way, every part of a supply chain, manufacturing process, or product is important, or it wouldn’t be there. Yet you don’t pay equal attention to every part of a supply chain, process, or product. Asking, “What’s important?” doesn’t help when you can’t pay full attention to everything.

A second approach might be to rank jobs, roles, competencies, or performance elements according what is “key” or “vital.” Often, work elements are deemed key because they take a lot of time, are done by lots of people, affect lots of customers or stakeholders, or are in highly paid positions.

This definition can also miss something important. At Disneyland, the park cleaners spend most of their time cleaning the park, but they may make their greatest difference to customers when they stop sweeping and answer a guest’s question in an amusing and helpful way. It is important that Disneyland ride design engineers meet high standards in their design engineering capability, but they may make their greatest difference when they invent a song like “It’s a Small World.”

A third approach might be to play to your strengths, focusing on those work areas where employees are strongest and have demonstrated the ability to excel. Yet improving a weak area may make a greater difference.

In the U.S. military, soldiers are hired, developed, and rewarded for their ability to carry out traditional combat activities. These are their strengths. However, given that the dominant conflicts are with insurgents, soldiers may make their greatest difference through diplomacy, cultural sensitivity, and restraint. Commanders may make their greatest contribution by observing, rewarding, and developing these non traditional areas than the traditional war-fighting work elements.

The problem with 70-20-10 ranking systems

Leaders confront the question of where performance makes the greatest difference when they implement forced-distribution performance systems, such as the 70-20-10 system that Jack Welch made famous at GE. In such a system, managers must identify 20 percent as top performers, 70 percent as middle performers, and 10 percent as bottom performers in each role or job and then remove or improve the bottom 10 percent.

Is removing or improving the bottom 10 percent valuable in all cases? Certainly in some situations even the bottom 10 percent are doing an adequate job and are doing better than those who could be hired or promoted.

By definition, continually removing or improving the bottom 10 percent will make the bottom 10 percent more similar to the middle 70 percent and thus make removing the bottom 10 percent less effective in improving workforce quality. Traditional work and performance systems don’t quite answer the question of where a 70-20-10 approach is helpful and where it is harmful.

This question also goes to the heart of goal setting. On which aspects of a job should managers set aggressive goals for employees, and on which aspects should they encourage meeting adequate standards but not more? If employees are striving for excellence where it doesn’t matter and accepting adequate performance where excellence would pay off, that’s a problem.

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Do you need excellence in everything?

Yet does it really make sense for leaders to approach goal setting by striving for excellence on everything? If every work element makes an equal contribution, then employees can be good performers by pursuing any combination of work outcomes. Yet some work outcomes almost always make a greater difference and deserve the greater focus.

In performance management and goal setting, the full effect of decisions is often obscured, and so poor decisions can be made. Well-meaning leaders want to drive performance where it matters most. They are often held accountable for the decisions they make about giving informal recognition, evaluating performance, setting goals, and knowing when performance goals need to change with a changing mission.

However, this kind of performance differentiation requires insight into what matters most, and more time and energy to explain and motivate the proper performance. Lacking a framework for logically focusing where it matters most, leaders understandably often give equal weight to everything or give moderate evaluations and rewards to everyone.

This practice minimizes disruption and gives employees a sense of equality and fairness. It may not even seriously reduce performance in the short term. However, HR leaders and others are often held accountable for related goals, such as investing in performance improvement and rewards where it matters most and uncovering those work elements or talent segments where improved performance has the greatest impact on organization success.

Lessons we can learn from engineering

When unit leaders don’t own the full consequences of their decisions, it is understandable that they are reluctant or unable to make hard decisions about which aspect of performance matters and how best to allocate limited resources. They can be forgiven for avoiding controversy, when that is what they experience most vividly, yet the hidden consequences of such behavior can be extremely harmful.

Engineering has faced this kind of question for a long time. Leaders of manufacturing, product design, distribution, sales, or service are held accountable not for improving everything but for finding out where performance improvement makes the greatest difference.

The tools used by engineers and others to define that question and help stakeholders make better decisions can show HR leaders how they can retool their typical approach to work analysis and performance management and engage HR stakeholders in focusing on the work performance and talent characteristics that matter most.

Reprinted by permission of Harvard Business Review Press. Excerpt from Retooling HR by John Boudreau. Copyright 2010 Harvard Business School Publishing Corporation

John W. Boudreau, Ph.D, is Research Director at the Center for Effective Organizations of the Marshall School of Business, University of Southern California (http://ceo.usc.edu/research_scientist/boudreau.html). He was formerly the director of the Center for Advanced Human Resource Studies at Cornell University, and is a fellow of the National Academy of Human Resources. Contact him at jboudreau@marshall.usc.edu.

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