Breaking new ground, people performance management takes familiar disciplines and integrates them across functional lines to maximize results.
|Overview||Rewards and Recognition|
|Leadership that Moves People||Measurement|
|People Relationship Management||Technology|
|Alignment and Communication||Where to Start|
|Training||Rewards of People Performance Management|
Even in today’s soft economy, there’s a competitive edge overlooked by many organizations: People Performance Management. That’s the term for putting a strategic focus on achieving financial success through loyal customers and motivated employees. Justification for people performance management is supported strongly by these statistics:
- Companies with a strong link between enterprise strategy and rewards programs generate a shareholder return almost 40 percent higher than competitors without such strategies (source: Aberdeen Group Inc.).
- 82 percent of customers will stop using your product if they lose trust in your company (source: Harris Interactive).
- Disengaged workers cost the economy $300 billion or more a year (source: The Gallup Organization).
These and other compelling reasons make it clear that people performance management will become the predominant business strategy in the coming years. “Customers, both retail and industrial buyers, are getting smarter about the value of service,” note William Davidow and Bro Uttal in their book, Customer Service: The Ultimate Weapon. “They’re increasingly frustrated and more willing than ever to take their business elsewhere.”
Loyal customers help reduce selling and processing costs and generate more incremental revenue and referral business. “Companies that score higher than their competitors in customer satisfaction and repeat business have the upper hand in financial performance,” say Davidow and Uttal, citing a hotel chain that has profit margins 13 percent higher than its competitors just because customers like it better. The biggest tool this company uses to generate superior service, explain the authors, “is the way it trains and motivates its lowliest workers.”
People performance management involves disciplines familiar to most businesspeople, but puts them together in a way that cuts across traditional organizational boundaries. Fred Smith, CEO of Federal Express, underlined the importance of this strategy when he said, “How can we deliver world-class service without world-class people?”
People performance management doesn’t cost more money or add a new level of bureaucracy. It redirects resources to focus on what counts the most: motivating every employee, salesperson and reseller to do as much as possible to attract and keep customers.
Here’s a guide to the Seven Steps to Success through People Performance Management.
What do Bill Gates and Jack Welch have in common with such renowned leaders as Napoleon and Gandhi? The ability to make things happen by motivating people. There is no way to get the best out of customers and employees without leadership and management.
“Leadership provides the passion, management the system,” notes Daniel Stowell, author of Sales, Marketing & Continuous Improvement. For him, leadership starts with a vision of where the organization is going; actively listening to customers, employees and associates; providing regular feedback; recognizing and rewarding people for accomplishments; and implementing performance measures that clearly align customer needs, compensation and employee priorities.
Others expand on this view. “Transformational leaders provide a more nurturing, and in most cases motivational, environment,” say the authors of High Performance Sales Organizations: Creating Competitive Advantage in the Global Marketplace. They point out that successful leaders inspire admiration, respect and trust, leading by example and “continually modeling and reinforcing desirable attitudes and behaviors. They empower their good performers….”
People performance management requires leaders who understand the fundamental role played by people – customers, employees, resellers – and who recognize that like any great leader in history, their primary job is to motivate and inspire everyone in the organization.
People performance management puts customer relationships and employee relationships on the same platform.
“The best customer-centered strategy in the world is only as good as the employees’ ability and desire to implement it,” says James A. Unruh, former CEO of Unisys and author of Customers Mean Business. “Organizations have to develop pro-customer employees – employees who proactively serve customers. This development takes place through staffing, communication, education, empowerment and reward and recognition programs.”
People performance management takes the concept of customer relationship management and integrates it with employee relationship management. In Customer Loyalty: How to Earn It, How to Keep It, Jill Griffin describes a national automotive service chain that implemented a customer retention program. “In a year, the company increased its retention rate by seven percentage points and reduced mechanic turnover to a fraction of former levels,” she writes. “If an employee is dealing with satisfied customers, he or she is likely to enjoy the job more, do a better job and remain with the company.”
Combining consumer and employee motivation requires integrated external and internal marketing that rarely exists in organizations. It involves linking customer needs to the process of motivating all the employees in a position to help meet those needs.
Communication starts with fostering vertical alignment, which is about “rapidly moving the company strategy through the organization, turning intentions into actual work,” note George Labovitz and Victor Rosansky in The Power of Alignment: How Great Companies Stay Centered and Accomplish Extraordinary Things. “It gets strategy down to the ground where it can do some good.” The best way to do this is to have a strategy that “reflects the contributions of the work force and is executed rapidly and effectively,” say the authors, and that, in turn, aligns “activities with the intentions of the business and invigorates employees.”
Alignment is supported by continuous communication, which can include such methods as “management by walking around” to get face-to-face contact with all employees (a favorite of consultant Tom Peters); regular meetings; and print and Internet communications supported, if necessary, by incentives and promotions.
Employees perform best when they have a clear understanding of how their performance affects customer satisfaction and corporate success. Companies dedicated to people performance management understand the need to market to their internal audiences as much as to their customers.
Effective communication has an even more practical purpose: People need to know what’s going on throughout the organization so that their “work stays coordinated and mutually reinforcing,” notes Jeanie Daniel Duck in her book, The Change Monster: The Human Forces that Fuel or Foil Corporate Transformation & Change.
“Sales executives and training managers at top-performing organizations agree that the best sales training decisions are linked to an organization’s key business objectives,” say the authors of High Performance Sales Organizations. These companies “create a common language in which all employees discuss the organization’s sales strategy and develop activities that support that strategy. Creating this kind of unity requires tremendous focus, discipline and leadership.”
People performance management recognizes the critical role played by training, not only in supporting the alignment process, but in equipping employees at every level with the knowledge necessary to support their role in satisfying the customer. Programs should explain all aspects of customer service management, from providing improved service to the consumer to streamlining processes that reduce costs or improve value.
People performance management puts a new twist on training by recognizing the importance of training your organization’s customers as well. This takes the form of equipping them to be better customers by fostering an understanding of your product and how it can help them. That means introducing communications and marketing that, in addition to selling, helps customers by providing them with useful, objective information.
In a ground-breaking study for World at Work, a leading trade association in the compensation field, Sibson & Co. highlighted the benefits of a “total rewards” strategy encompassing compensation, workplace environment, benefits and other related factors in order to best utilize the work force. Formal strategies, such as incentive and recognition programs, play a critical role in drawing attention to organizational values, driving the behaviors that count, fostering loyalty and commitment, and encouraging participation in training and communication efforts. “Most organizations have lavish programs to recognize their top performers,” Unruh notes. “World-class organizations also recognize the consistently good performers.”
Stowell outlines the full range of recognition: “Besides giving employees feedback on how well they are doing their jobs, leaders also recognize and reward people for their accomplishments. This recognition can be as informal as a pat on the back, a thank-you note, or a commendation at a sales or team meeting. It can also include rewards, such as a night on the town, a cash bonus, a merchandise prize, or a trip to a company recognition event.” Performance-driven companies, Stowell says, recognize “that positive recognition is the most effective way to reinforce desired behaviors. People tend to repeat the behaviors that they believe will be rewarded.”
An executive white paper published by the Aberdeen Group points out that reward programs not only provide “the appreciation craved by most employees,” but can “lead to coaching, feedback and mentoring by managers.” The paper notes that companies with superior employee relations programs (AOL, American Express, Compaq, Dell, Delta and Federal Express, among others) grew more rapidly by a factor of four to one between 1986 and 1995, compared with firms whose employee relations programs were less well defined and executed.
What makes people performance management unique is its equal emphasis on recognizing and motivating employees, customers and even vendors. In Winning through Enlightenment, Ron Smothermon writes, “There is something that must be in order for loyalty to endure: it must be noticed. If you simply remember that no one owes you anything, loyalty will be easy for you to notice and acknowledge. If you begin to think they owe you loyalty, you are in trouble.”
In Customer Loyalty, Griffin quotes a Steinway & Sons advertising director: “We are trying to engage our customers in not just a one-purchase deal, but in building a relationship. We think of things that will add value, or perceived value, to the purchase.” In this context, properly structured consumer promotions go beyond spurring one-time behaviors. They thank customers in a way that builds loyalty over time through sustained recognition.
The concept of people performance management is grounded in return-on-investment measures. According to the Aberdeen Group, an organization can measure its people performance management efforts using Kaplan and Norton’s Balanced Scorecard, which looks at how the organization affects:
- Stakeholders, who are concerned with such factors as stock price, return on investment, value added, revenue growth, cost reduction and productivity improvement
- Customers, who may be categorized by such measures as the rate and cost of customer acquisition, customer profitability and satisfaction, dealer satisfaction, customer retention and market share.
The scorecard evaluates the processes at which an organization excels. That could include measuring the number of new inventions, post-sale service quality, response time, cost levels, new product introductions, yields versus waste, scrap, rework, returns and cost of safety problems. It also looks at how well the organization improves over time, measuring such things as employee satisfaction, information system availability, employee retention, productivity and revenue per employee.
While these indicators apply to management of people performance programs, performance-based companies also make a point of measuring the activities of individuals and teams. “Measurement systems are an integral part of the business strategy, giving management feedback on how well its plans are working,” notes Stowell. “Measurements tell the organization how well it is doing relative to its performance and improvement goals, its competition and customers’ requirements.”
To be effective, of course, measures must be aligned with customer needs and linked to corporate objectives. Judith Bardwick sums up this point in her book, In Praise of Good Business: “A results-driven culture finds fun in winning by hitting achievable, measurable, specific, stretch targets.”
Database technology and the Internet significantly lower the cost of implementing people performance management practices, because they foster one-on-one communication, training, measurement and motivation. Today, even the smallest organization can identify prospects, customers and employees on a one-to-one basis and target them with customized promotions or other information. The Internet also makes it cost-effective for organizations to make their customers better buyers by providing them with useful information that builds trust, confidence and loyalty.
Company intranets make it possible to use one-on-one relationships to provide employees or resellers with how-to, reference and training information just when they need it. Similarly, employees and resellers can share information with one another and keep up to date on the company’s vision and goals. Intranets also facilitate programs for recognizing employees’ achievements or testing their knowledge of company products and policies.
People performance management is practiced all the time at organizations large and small, and many well-known organizations make it a fundamental way of doing business: Southwest Airlines, Marriott Hotels, Chick Fil-A and Fifth Third Bancorp are just a few examples. At such companies, people performance starts at the top, because it takes high-level authority to mobilize the entire organization toward achieving new goals.
Common sense dictates that organizations focused on fostering customer loyalty via a motivated work force will outperform those that aren’t. A report by the Aberdeen Group, “Reward and Recognition Programs: Driving Employee Performance, Loyalty and Enterprise Profitability,” gives compelling reasons to adopt this emerging business strategy. The benefits include:
- Higher profit margins
- Increased sales
- Increased market share
- Greater net income per employee
- Lower costs
- Better asset utilization
- Increased innovation
- Fewer accidents.