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Building a Performance Management Culturea Black & Decker Case Study
October 27, 2009
Black & Decker Overview Five “Evergreen” HR Strategies HHI Case Study
Performance Appraisal Process Strong Organizational Culture - “Winning Culture
Values” Alignment of Systems & Processes Differentiating Performance & Rewards Talent Review Process Employee Communication Additional Performance Management Tactics
Lessons Learned
Inspire Great People
Black & Decker
Founded in 1910 and based in Towson, MD World’s largest producer of power tools & accessories,
security hardware, plumbing products & fastening systems 2009 revenues (est.) of $5B; 20,000 employees Manufacture in 12 countries and sell in over 100 countries Hardware & Home Improvement (HHI) division based in
Lake Forest, CA Revenues of $800M, 3,500 employees in U.S., Canada, Mexico
and China Brands include Price Pfister, Kwikset, Weiser, Baldwin and K2
Grow Through Innovation
Black & Decker
Strong Brand Names
Five “Evergreen” HR Strategies
Talent Acquisition
Employee/Organization Development
Winning Culture
Employee Communications
Performance Management
BDHHI Core Strategies
HHI Performance Management - 2006 Case Study
Annual Development Plan - ADP (Performance Appraisal) 10 Winning Culture Values worth 20/15/10% of overall score
depending on organizational level (Dir., Mgr., Indiv. Contrib.) Goals made up the balance of overall score - up to 25 goals! ADPs (ostensibly) completed in Q1 each year No periodic progress reviews during the year Low accountability for completing ADP process No linkage to other business processes or alignment with a
“performance management” calendar Excel spreadsheet based process
Inspire Great People
HHI Performance Management - 2006 Case Study
“Merit” increases granted on a rolling 13 month basis Not a strong commitment to a “Pay for Performance” culture -
merits, annual bonuses and equity grants Low level of organizational alignment
No Vision Statement Strategic planning process was secret; no group level strategies Strategies poorly communicated and not well understood Up to 32 annual goals/metrics—results weren’t reviewed
regularly by Leadership Team and little accountability The Result: Siloed functional organizations - low
alignment among Vision, Strategies, Functional & Individual Goals, Performance and Accountability
Grow Through Innovation
“Change Creates Opportunity!”
Created a cross functional team in 1/06 Direct reports to Leadership Team members
Advantages of this approach: Greater diversity of backgrounds, ideas and participation
created improved results Performance appraisal process is enterprise-wide; required
participation by employees who are knowledgeable of the process from all functional disciplines
Empowered a team to make improvements to an important core business process
Involvement in revising the process increased acceptance and support for the changes
Accelerate Global Growth
Goals of a Performance Appraisal Process
Set goals and measure results Assess and improve performance Create development plans and enhance skills Career development Help evaluate potential for promotion Change/reward appropriate behaviors Align with company’s vision/values/strategies/goals Differentiate levels of performance and rewards Strengthen a “Pay for Performance” culture
Deliver Operational Excellence
Cross Functional Team - Focus Areas
Role of Winning Culture Values Competencies Rating scale & descriptors IDP/career pathing 360s Forced ranking calibration Design of the “form” and instructions Web enabling the process Communication Training
Inspire Great People
The Solution
Nine month project from team formation to deployment of a web-based solution
Launched tool in 10/06 for 2006 performance appraisal and 2007 goal deployment
Reduced Winning Culture Values from 10 to 4 and rated them on a “pass/fail” basis
Competencies introduced—6 for individual contributors and a 7th for associates with direct reports
50% of overall rating Goals reduced to 5--8 maximum
50% of overall rating Five point rating scale initially introduced and later changed to
4 point to align across all of BDK
BDHHI Core Strategies
The Solution (cont’d.)
IDP requirement added and linked to BDHHIU courses Online 360s - employees rated on Winning Culture
values and competencies Forced ranking/guided distribution done initially but later
moved to Talent Review process All training and communication done during Q406 Strong support from top management was key - process
accountability now delivers 99% plus completion rate Tool has been adopted across BDK
Inspire Great People
“Strong Organizational Culture - Winning Culture” Values
Before (10) Achieving Commitments Great People Raise the Bar Focus Boundarylessness Attitude High Energy Urgency Risk Taking Impact vs. Activity
After (4) Demonstrate
Unyielding Integrity Inspire Excellence Deliver on
Commitments Win Through
Teamwork
Grow Through Innovation
…Yet Another Cross Functional Team Opportunity
Great People
Alignment of Systems and Processes
Deliver Operational Excellence
HHI Core Strategies
Metrics & Accountability--Our Balanced Scorecard
Differentiating Performance and Rewards
Merit increases - use a matrix of recommended increase %s based on performance appraisal scores
Annual Incentive Plan (AIP) - metric is operating income factored by working capital charge
Brands tied to their own results GMs have 75/25 split to drive line of sight alignment Support staff tied to division results Personal Performance Factor (PPF) as a second level
calculation to leverage bonus from 0 - 150% of actual; range of differentiation is typically 75 - 125%
Equity—annual grant is tied to PPF with wide differentiation All Rewards recommendations reviewed by President & VPHR
We “rack and stack” and give feedback to Leadership Team
Inspire Great People
Organization Assessment Process (OAS) Online employee survey conducted every 2-3 years
Up to 95% response rate HR is process gatekeeper Focus groups make recommendations to management—
accept/modify/reject Follow up action items owned by functional executives Quarterly report out to President and VPHR to ensure
process accountability and continuous improvement Quarterly “pulse” surveys (6 questions) done in the interim—
started in Q1, 2008 50 - 75% response rate Corrective action taken here as well Results are published to employees via HHIOne (intranet)
Grow Through Innovation
LF
Q1
LF
Q2
LFQ3
LF
Q4
HHI
Q1
HHI
Q2
HHI
Q3
HHI
Q4
HHI
FY Goal
I feel safe in expressing my opinions openly without fear of retribution
7.23 7.52 6.86 7.09 6.55
Managers are genuinely involved in helping people develop their potential
7.16 7.25 7.11 7.15 6.60
I have a good relationship with my manager
8.01 8.12 7.60 7.63 7.24
BDHHI generally lives up to the values of the organization, even when times are tough
7.51 7.73 7.51 7.56 6.95
BDHHI does a good job of keeping employees informed about matters that affect them
8.01 7.98 8.10 8.03 7.33
How likely would you be to recommend BDHHI to a friend or colleague as a place to work
7.43 7.76 7.23 7.31 6.91
Q209 Lake Forest
Talent Review Process (Succession Planning) Prior process was a “forms intensive, largely HR oriented” exercise
Low linkage to talent management processes Little accountability for action and follow up
Process was reengineered Number of templates reduced, fewer metrics and rich dialogue
ensued Discussion is now focused around “A” positions, organizational
gaps, hipos/retention and employee development Action items are followed up on
Core business process involving a 4 step, upwardly cascading process: Functional Talent Review Cross Functional Talent Review Commercial Talent Review (Sales & Marketing) Talent Review with Chairman and SVPHR
“Four panel” feedback is shared with all participants
Deliver Operational Excellence
Employee Communication
Strategy driven by Director of Employee Communication Communication philosophy is completely open and transparent
“Frequently, redundantly and using a wide variety of media” Intranet (“HHIOne”) as employee portal President visits all locations for Town Hall meetings annually HHI-wide communications meeting every 2 months Anonymous “OneTeam” questions President conducts skip level meetings with direct reports to
functional leaders 1-800 Ethics Hotline (SOX requirement) Pulse surveys and focus groups Quarterly site newsletters Launching digital signage
Accelerate Global Growth
Additional Performance Management Tactics
Outside psychologist worked with LT and several functional leaders to build high performing teams
Built strong organizational culture Quarterly biz reviews with LT of the 4 brands Quarterly biz reviews with Chairman and CFO Ops reviews in every functional support area Use of self-assessments (Insights Discovery) as
foundation for development plans Extensive use of cross functional teams Associates now “live” our Winning Culture Values…the
foundation for everything we do
BDHHI Core Strategies
Inspire Great People
Recognized in 2008/2009 as one of Orange County’s best places to work . . . .
2008 & 2009 2009
“Lessons Learned”
As always, top management support is critical Must take an integrated, systems approach to effective
employee management processes Initiatives must be aligned with the business’ “operating
rhythm” Business is dynamic and your processes need to evolve Solicit regular feedback from your customers “Cultural change is a “team sport”
“The smart person uses all the help s(he) can get Involve others cross functionally
Remember: The only sustainable competitive advantage is your talent…it must be well led, valued and empowered to make a difference