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LAST CLASS:OPEN DISCUSSIONEMBA 60616 September 28, 2012

Performance Evaluation (8:00AM – 8:30AM)Variable Pay (8:30AM – 9:00AM)Generational Values Differences (9:00AM – 9:30AM)Managing Derailing Employees (9:45AM – 10:15AM)Essential Management Skills (if time allows)Team-Based Leadership (if time allows)

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Performance Evaluation What are the advantages and

disadvantages of forced ranking performance evaluation systems? What does the research literature say? Who in the class has experience with forced

ranking systems? What are the benefits of forced ranking

systems? Why are they used in your company or others’

companies? What are the costs of forced ranking

systems? Why aren’t they used in your company or

others’ companies?

See Stewart, Gruys, and Storm (2010) review, posted on website

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Performance EvaluationNot removing that bottom 10% early in their careers is not only a management failure, but false kindness as well—a form of cruelty—because inevitably a new leader will come into a business and take out that bottom 10% right away, leaving them—sometimes midway through a career—stranded and having to start over somewhere else. Removing marginal performers early in their careers is doing the right thing for them; leaving them in place to settle into a career that will inevitably be terminated is not. GE leaders must not only understand the necessity to encourage, inspire and reward that top 20% and be sure that the high-performance 70% is always energized to improve and move upward; they must develop the determination to change out, always humanely, that bottom 10% and do it every year. That is how real meritocracies are created and thrive.

– Jack Welch

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Performance Evaluation A quarter of Fortune 500 companies use some

type of forced ranking system Little study of forced ranking (“rank and

yank”) systems Advantages

Eliminates rater errors/biases (severity/leniency) Before Ford implemented its system, 98% of managers

were rated ‘fully meeting expectations’ Process for eliminating “sick cats” – thus

productivity Helps identify (and thus reward) peak performers

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Performance Evaluation Advantages (continued)

Fosters more candidate communication How an employee’s performance compares to others

doing similar work; thus provides impetus for change Short-term motivational benefits

Disadvantages Ignores objective performance differences (GPA-SAT) Difficult to sustain (10% Y1; 10% Y2; 10% Y3…) Undermines teamwork (Survivor mentality) Disliked by employees Lawsuits (Microsoft, Ford, Goodyear, Conoco sued)

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Performance Evaluation What are the advantages and

disadvantages of forced ranking performance evaluation systems? What does the research literature say? Who in the class has experience with forced

ranking systems? What are the benefits of forced ranking

systems? Why are they used in your company or others’

companies? What are the costs of forced ranking

systems? Why aren’t they used in your company or

others’ companies?

See Stewart, Gruys, and Storm (2010) review, posted on website

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Variable Pay How well do variable pay (bonus)

systems work? What does the research literature say? Who in the class has experience with bonus

plans? What are the benefits of variable pay?

Why are they used in your company or others’ companies?

What are the costs of variable pay? Why aren’t they used in your company or

others’ companies? How does variable pay

encourage/discourage risk-taking?

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Variable Pay Unions generally oppose variable (performance-

based) pay Literature: Variable pay plans are effective Merit pay is most common variable pay plan BUT, is merit pay the most effective method VP

plan? Bonus Gainsharing Profit-sharing Stock (executive compensation is a different issue) Do these work equally well?

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Increases in Productivity Following Incentive Implementation

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Variable Pay What is the problem with merit pay?

Given accrual over time, dollar increases may reflect seniority as much as recent performance

Bonus plans are underutilized and effective Literature on gainsharing is mixed Literature on profit-sharing and stock

options is not particularly positive Any of these plans are better than no

variable pay plan and each has merits

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Variable Pay How well do variable pay (bonus)

systems work? What does the research literature say? Who in the class has experience with bonus

plans? What are the benefits of variable pay?

Why are they used in your company or others’ companies?

What are the costs of variable pay? Why aren’t they used in your company or

others’ companies? How does variable pay

encourage/discourage risk-taking?

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Generational Values Differences

Do values really differ across generations? What does your experience suggest? What does the research literature say? What are the implications for managing? Are there other age-based differences that

are important to managing and leading?

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Generational Values Differences Boomers: 1943-1961 Gen X: 1961-1981 Gen Y: 1982-1999 (Millennials) The data analyzed here suggest that the

popular view of Millennials as more caring, community oriented, and politically engaged than previous generations is largely incorrect

There are increases in individualistic traits and declines in civic engagement over time

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Generational Values Differences

ExtrinsicIntrinsic Status Altruism Social Freedom2.50

3.00

3.50

4.00

4.50

5.00

BoomersGen XGen Y

Extrinsic job security, salary Altruism making a contribution to societyIntrinsic intellectual simulation, challenge Social good relationships with othersStatus influence, recognition, advancement Freedom work-life balance, working hours

Source: Cennamo & Gardner (2008)

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Generational Values Differences

Finding purpose and meaning in my life

Being a leader in my community

Being able to find steady work

Having strong friendships

Having a good marriage and family life

Having lots of money

Working to correct social/economic inequalities

Discovering new ways to experience things

Being successful in my line of work

0.00 0.20 0.40 0.60 0.80 1.00Gen Y Gen X Boomers

Source: Twenge et al. (2012)

Note: Individuals weresurveyed whenin high school

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Generational Values Differences

Source: Jin & Rounds (2011)

Change for Work Values across AgesChange for Work Values across Generations

Although work values evidenced small changes in rank-order stability, showing that individuals generally maintained their positions within a group across the life span, the results of mean-level change showed that for the whole population, the levels of importance attached to different work values underwent fairly dramatic increases or decreases at different age periods.

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Generational Values Differences Do values really differ across

generations? What does your experience suggest? What does the research literature say? What are the implications for managing? Are there other age-based differences that

are important to managing and leading?

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Managing Derailing Employees What does the term derailed/derailing

mean? What percentage of your employees are

derailed/derailing? How do you manage these employees?

In your experience, can it be fixed? How? What else is there to be done? What does the research literature say about

performance management for derailing employees?

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Managing Derailing Employees One of biggest problems with derailing

employees is distorted self-perceptions

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Managing Derailing Employees

Clarification of Goals and ObjectivesUpward Communication

Orderly Work PlanningOrganizational Expertise

Facilitating the Work of OthersPerformance Feedback

Time EmphasisControl of Details

Goal PressureDelegation/Permissiveness

Recognition for Good Performance

-0.5 -0.25 0 0.25 0.5 0.75 1

High potential managers Derailing managersSource: Shipper & Dillard (2000)

Notes: Sample=1,035 middle managersRating scale: 1=extremely low extent; 7=extremely high extent

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Managing Derailing Employees What does the term derailed/derailing

mean? What percent of your employees are

derailed/derailing? How do you manage these employees?

In your experience, can it be fixed? How? What else is there to be done? What does the research literature say about

performance management for derailing employees?

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Essential Management Skills What management skills matter most?

AKA: Management competencies, social skills, interpersonal skills

What does the research literature say about performance management for derailing employees? Surprisingly little data on this issue! However, several themes: FHIP

Feedback High standards/goals Ideas/insights Planning

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PerformancePotential

Predictors of current job performance anddesignation of high potential of 1,100managers in 21 countries

Source: Spreitzer, McCall, & Mahoney

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Essential Management Skills

Clarification of Goals and ObjectivesUpward Communication

Orderly Work PlanningOrganizational Expertise

Facilitating the Work of OthersPerformance Feedback

Time EmphasisControl of Details

Goal PressureDelegation/Permissiveness

Recognition for Good Performance

2.5 3 3.5 4 4.5 5

High potential managers Derailing managersSource: Shipper & Dillard (2000)

Notes: Sample=1,035 middle managersRating scale: 1=extremely low extent; 7=extremely high extent

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Essential Management Skills

Clarification of Goals and Objectives

Orderly Work Planning

Facilitating the Work of Others

Time Emphasis

Goal Pressure

Recognition for Good Performance

0 0.25 0.5 0.75 1

Difference Between High Potential and Derailing Managers

Source: Shipper & Dillard (2000)

Performance feedback Ability to provide immediate guidance on the accomplishment of goalsOrderly Work Planning Ability to organize work flowClarification of Goals/Objectives Ability to communicate what needs to be accomplished and why

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Essential Management Skills What management skills matter most?

AKA: Management competencies, social skills, interpersonal skills

What does the research literature say about performance management for derailing employees? Surprisingly little data on this issue! However, several themes: FHIP

Feedback High standards/goals Ideas/insights Planning

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Team-Based Leadership How team-based is the work in your

organization? _____ Total (nearly everything is done in teams) _____ Extensive (most work products are produced by teams) _____ Occasional (some work in teams, some independent) _____ Little (most independent ‘free agents’) Does effective leadership vary based on your answer

to above question? Why or why not? What does the research literature say?

Just how pervasive is teamwork in organizations? Do models of effective leadership differ for team contexts?

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IT’S BEEN A PLEASUREAND AN HONOR:

KEEP IN TOUCH!

EMBA 60616 September 28, 2012