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Organisation Performance

Lecturer: Prof. Lorraine Uhlaner

A Strategic HRM (or organization performance) Model


It starts at the top with goals of (or challenges faced by) the enterprise;
not at the bottom with a question of what human resources should measure.

Human resources is charged with helping people make a greater contribution to the organizations overall strategy and mission.

At McKinsey
The Organization Health Index (OHI) is used to establish a baseline and identify any obvious problems (and strengths). Implementation of a new strategy may be hampered because the firm:
Lacks alignment of goals/clear shared vision Does not have the proper talent to carry out the plan Measures the wrong metrics for performance

The OHI can spot key areas which require correction; where the firm is underperforming.

The Organization Health Index (OHI) in more detail


Nine organizational performance outcomes were identified, which together make up the organization performance profile. The average of all nine outcomes, together, is a measure of organization performance. This index of organization performance is a very good predictor of financial performance. Furthermore, each outcome is associated with one or more clusters: alignment, execution, and/or renewal.

OHI identifies four practices which may enhance the motivation outcome:
Values: Motivating through company culture (colloboration). Leaders: Motivating by leaders charisma. Opportunities: Motivating by job design, autonomy. Incentives: Motivating by financial rewards or recognition.

The Nine key outcome areas grouped by cluster


Cluster 1: Alignment 1. Direction 2. Environment, values (culture) 3. Leadership (also execution and renewal) Cluster 2: Execution 4. Accountability 5. Capabilities 6. Coordination, control 7. Motivation Cluster 3: renewal 8. External orientation 9. Innovation (also execution)

Alignment: The ability of the firm to create and align its employees with the same vision
Direction: Do people understand and are they aligned with its strategy; i.e., where the company is heading and how it plans to get there? Environment/values/culture: Does the quality of employee interactions (e.g. Culture) foster a shared understanding of core values? Leadership: Do leaders at all levels shape and inspire the actions of employees to drive better performance?

Execution: The ability of the organization to turn ideas into action


Accountability: Are there clear and explicit reporting relationships and performance measurement to ensure that all people are accountable for business results? Capabilities: Does the company have sufficient internal skills and talent to support its strategy and create competitive advantage? Coordination, control: (How well) are business performance and risk measured and reported? Motivation: Are employees inspired to perform and encouraged to stay with the company?

Renewal: Is the organization changing at the rate required by its industry?


External orientation: Does the company have constant 2-way interactions with customers, suppliers, partners or other external groups to drive value? Innovation: Does the company generate a flow of ideas and embrace change so that it can sustain itself, survive and grow over time.

Furthermore, each outcome is linked with 3-4 practices to achieve that outcome
For example: Coordination and Control can be achieved by: 1. Managing via HR systems (people) 2. Use of Key performance indicators (KPIs), targets and metrics 3. Managing financial performance (budget reports, etc.) 4. Values/standards: managing actions through ethics, boundaries.

OHI Basics, continued: Practices vs. Organization Performance Outcomes


Outcomes & relationship

OHI Basics, continued: Practices vs. Organization Performance Outcomes


Outcomes & relationship

OHI Basics, continued: Practices vs. Organization Performance Outcomes


Outcomes & relationship

THE BASE CASE


Proved most effective for over half the cases Approaches the following three outcomes
Direction: by articulating a compelling vision of the future Accountability: via clear roles within a structure matched to the needs of the business Culture: by developing an environment that encourages trust, openness and challenge.

Direction-a critical outcome in the base case


General description (aspect of alignment):
People understand and are aligned with where the company is heading and how to get there.

Three common practices and which is best:


Visionary: A top-down, attractive, broad, stretching, and personally meaningful vision Directive/strategic: Detailed top-down specifics for reaching end state Engagement: driven by input from below.

AccountabilityA second critical outcome in the base case


General description (aspect of execution):
Reporting relationships and performance measurement set up to ensure that people are accountable for business results.

The Four accountability practices and which is best:


Formal structures creating role clarity Explicitly stated performance contracts Consequence management: Rewards, penalties Implicit agreement on whats involved.

Environment, values (culture)-a third critical outcome in the base case


General description (also aspect of alignment):
The quality of employee interactions (e.g. Culture) fosters a shared understanding of core values.

Four culture practices and which is best:


Open, trusting, collaborative, transparent Competitive Operational/disciplined, process driven Entrepreneurial/creative/innovative

Summary of the ideal or base case


Setting direction with a clear broad vision: A topdown, attractive, broad, stretching, and personally meaningful vision Accountability through formal structures creating role clarity A culture/Environment that fosters trust, openness, experimentation

The notion of a metric


What we can measure. Should have strategic value to the organization
give it competitive advantage by lowering cost/increasing quality/innovation/productivity

Individual performance Company productivity Employee turnover (separation) rates Engagement


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The Organization Health Index has three categories of metrics


Measures for each of the 34 practices (which practices are used at that firm). Measures for each of the 9 organization performance outcomes (direction, accountability, innovation, motivation, etc.) (How well is this outcome being met, regardless of the practice used. Measures for financial performance outcomes (EBITDA, Growth in net income/sales, etc)

Revising Coordination and Control, for example


The outcome:
To what extent are business performance and risk measured and reported? (How well is coordination and control achieved).

Practices: How is this achieved?


1. People: Managing via HR systems (people) 2. Operational: Use of Key performance indicators (KPIs), targets and metrics 3. Financial: Managing financial performance (budget reports, etc.) 4. Values/standards: managing actions through ethics, boundaries.

Financial Metrics used in the McKinsey study


For Financial performance:
EBITDA: Earnings before interest, taxes, depreciation and amoritization Growth in enterprise value/book value Growth in enterprise value/sales Growth in book value/sales Growth in enterprise value Growth in net income/sales

Providing Feedback

Feedback: An introduction
Feedback:
Any communication to a person that gives him or her information about some aspect o his or her behaviour and its effect on you.

Importance of being skilled at feedback:


it can increase employee performance

Tips for giving feedback


1. Focus on specific behaviors WRONG: You have a bad attitude. Im really impressed with the good job you did. Both are vague. They dont explain why you are being critical or complimentary.

1. Focus on specific behaviors


Examples of getting it right: Bob, Im concerned with your attitude toward your work. You were a half hour late to yesterdays staff meeting and then told me you hadnt read the preliminary report we were discussing. OR Jan, I was really pleased with the job you did on the Phillips account. They increases their purchases by 22% last month based on your recommendations.

2. Keep it impersonal
WRONG: There you go again. I notice your left eye is twitching. (said by supervisor to subordinate upset about her contract; trying to change the subject) RIGHT: So Janice, I understand you wanted to see me about your contract renewal.

3. Keep it goal-oriented
Be sure that the feedback relates to the persons work, not just wanting to air your own grievances.

4. Make it well timed


It is helpful to give feedback shortly after the performance
so that the circumstances are fresh in both peoples minds So that the recipient can quickly correct his or her mistake (vs. Waiting for the annual review).

However, it should be done in a private place. If this means waiting, then do so.

5.Ensure understanding
Be sure the recipient understands. Pause after a key point rather than only hearing yourself speak. Ask the recipient to paraphrase what you just said, to see if it captures your meaning. WRONG: Did you understand what I just said to you? RIGHT: Could you put in your own words what I would like you to do?

6. Be sure the behavior is controllable by the recipient


Is the feedback something the recipient can do something about?
In the eye-twitching example mentioned earlier, the subordinate had just had major surgery on her eye and her eyelid was partly swollen. This may be the reason her boss thought she was giving him strange looks. It may be helpful if a suggestion is made for improvement.

7. Tailor the feedback to fit the person


Consider the persons past performance and your estimate of his future potential. Poorer performers in need of improvement without being fired may need closer attention than average or top performers.

Review these guidelines


1. 2. 3. 4. 5. 6. 7. 8. 9. Get your emotions under control. Find a private place. Consider timing. Focus on the actions, not the person. Be direct. Describe specific behaviors Stop talking and seek confirmation. Reaffirm your faith in the person. Define positive steps, provide possible solutions and be goal oriented. 10. Document the feedback for future reference.

Some other dos and donts:


Try to avoid evaluative terms (good/bad) or abstract terms (irresponsible). Use behaviorally descriptive terms instead. Be sure to give feedback in private. Be sure behavior the recipient can do something about Limit to 1-2 behaviors at a time.

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