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Performance Management is fast emerging as the differentiator between a successful organization and any other organization. With the high amount of automation, HRs role is now focused on people performance management.
This is more pronounced in organizations with a large frontline workforce – FMCG, Consumer Durables, BFSI, etc.
While many theories abound on performance management, there are many blind spots in People Performance Management. The team at TMI Group, based on extensive research with real-time data of our clients, has listed the 13 blind spots which when focused upon result in lower attrition, higher employee productivity, and vast savings in the cost of recruiting, training, etc.
1. Business performance is always on a calendar month basis but people performance cannot be on a calendar month basis. Why? Because in any calendar month, there are people with different vintages in the role and hence older people get an unfair advantage over younger people. Hence calendar month-based people performance and the real people performance reveal two different performance pictures.
2. People’s performance must be on a residency month basis. Only then you can compare people performances. Monthly People performances vary significantly from month to month. Hence people performances must be compared to Cumulative Average Performance (CAP) over an optimal period. The optimal period to compute CAP and compare people performance varies from cohort to cohort but ideally, it is between 4 to 12 months.
3. Target setting must be much more scientific than what we do today. It must meet four rules – the target must increase with residency, the target must increase with the increase in fixed salary, and the target must be determined based on recent past actual data on people performance (in addition to the other criteria like the value of sale) and must be determined for every individual (instead of teams). It is possible to do all the above scientifically.
4. Incentive plans must be determined much more scientifically. It must meet two objectives – to reward top performers in proportion to their CAP (to retain), must incentivize low performers to improve performance, and must differentiate people based on performance. This is now possible.
5. Time to achieve milestones like – the first sale, 50% of the target, and 109% of the target must be calculated regularly to arrive at scientific norms for exiting employees or putting people On a Performance Improvement plan (PIP).
6. The cost of refill must include the cost of underperformance till the new hire reaches the performance norm. This is much bigger than the cost of re-hire and re-train.
7. Correlation between CAP and various demographics like education, residency in the role, age, previous employer, and previous experience must be scientifically determined to frame the right recruitment policies.
8. Correlation between CAP and various work parameters like the location of posting, the supervisor must be scientifically determined to tweak R&R (reward and recognition) policies for supervisors and also determine scientific policies on right Manning and geographical recruiting.
9. TMI PLOT must be regularly done to determine the “low performance and high residency – or Horror Segment “and” high-performance high residency – dream segment” to find out the commonality of each – to determine insights for recruitment.
10. The average of the people cohort as an indicator of people performance alone hides more than what it reveals. This is because the distribution of performance in any residency month or cumulative UPTO a residency Month is “Nowhere near a normal BELL curve”. Distribution of CAP reveals a huge variation in performance between the top 10% of performers and the bottom 10% of performers. We need another indicator called “CAP multiple” – CAP of the top 10% divided by CAP of the bottom 10%.
11. The biggest blind spot of HR is the extent of the HR budget spent on underperformers. This could be as high as 33 % of the HR budget. This can and must be reduced and this will increase the bottom line of the company and also reduce attrition.
12. Enterprises are minimizing the components like recruiting costs, induction, and training cost, incentive cost, and salary cost. This is one of the reasons for high attrition and underperformance. The correct metric for optimizing people costs is TOTAL COST OF EMPLOYMENT which takes into account all the above and the idea is to minimize TCOE.
13. Relative performances between people in the same role, in the same company, at around the same time, with the same product-market issues, with the same interval company issued, reveal unbelievable insights. This means the answer to the underperformance problem is already there – with the high performers in the team. This also means that the retention of high performers is a bigger problem than attrition. Considering the high cost of refill, and the high correlation between CAP and attrition, enterprises have no choice but to accelerate the performance of new hires and enhance the performance of everyone.
Want to know more? Visit https://tmigroup.in/ppac.
Join the master class on People Performance Management where we discuss these 13 blind spots in more detail.
Join the master class on People Performance Management where we discuss these 13 blind spots in more detail.
What are the blind spots you agree with and those not found here?
Please share to build a performance management system that will help the future of 7 million plus frontline sales executives and managers in India.
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