M a n a g i n g P e r f o r m a n c e A c h i e v i n g O u t s t a n d i n g P e r f o r m a n c e T h r o u g h a “ C u l t u r e o f D i a l o g u e ” If managers think giving annual performance reviews is like delivering a newspaper to a house with a growling dog, you have a problem. Spreading rewards should not be like spreading peanut butter. Dialogue aligns performance with goals. P A P E R W O R K I N G M a n a g i n g P e r f o r m a n c e This working paper is the product of research conducted by Katie Lemaire and Larry Reissman. Copyright 2002 Hay Group,Inc. All rights reserved. Creating a “culture of dialogue”2 Three keys to managing performance2 Achieve Radical Clarity Around Goals4 Without clarity, employees lack confidence in management5 Why clarity matters5 Narrowing priorities6 Getting buy-in at the top6 Establish Systems and Processes To Create Clarity8 What GDDS did8 Its about behavior change10 Creative ways to build a culture of dialogue11 “Hands-off” management means not being “on-message”12 Making Rewards Count13 Aligning rewards with goals13 Differentiating rewards14 Find new ways to differentiate merit pay16 Conclusion1 7 A c h i e v i n g O u t s t a n d i n g P e r f o r m a n c e T h r o u g h a “ C u l t u r e o f D i a l o g u e ” P A P E R W O R K I N G Peter is Chief Executive Officer for a medical supply multinational. His compa- ny had just crafted a new plan to counter competitive threats. It stressed the need to cut cycle time,concentrate sales on higher-margin products and devel- op new markets. All in all,this was a pretty classic,very sound strategy. Four months after circulating the plan,Peter did a “walkaround”to see how things were going. He was appalled.Everywhere Peter turned,people,depart- ments whole business units simply didnt “get it.” First surprise:Engineering. The group had cut product design time 30%,meet- ing its goal to increase speed-to-market. Good. Then Peter asked how manu- facturing would be affected. It turned out the new design would take much more time to make. Total cycle time actually increased. Our message is not getting through,Peter thought. Second surprise: Sales. The new strategy called for a shift emphasize high- margin sales rather that pushing product down the pipeline as fast as possible. But just about every salesperson Peter spoke to was making transactional sales to high-volume customers;hardly anyone was building relationships with the most profitable prospects. Sales is doing just what its always done,Peter thought. Worst surprise: Even his top team,the people who had helped him craft the strategy,was not sticking to plan. Peter asked a team member: “Why are you spending all your time making sure the new machinery is working instead of developing new markets?” “Because my units chief goal was to improve on-time delivery,”he answered. “But what about company goals?”said Peter. “We came up with a good plan and communicated it very clearly. But nowhere is it being carried out. Why?” The reason is poor performance management. But what does that really mean? It means that the leaders of the company from the CEO to the executive team to middle managers to shop-floor supervi- sors did not recognize the importance of gaining clarity of goals,discussing ways to accomplish those goals,and following through to make sure behaviors were aligned with desired outcomes. 1 Poor performance management means that the leaders of the company did not recognize the importance of gaining clarity of goals, discussing ways to accomplish those goals, and following through to make sure behaviors were aligned with desired outcomes. P A P E R W O R K I N G Leaders at many organizations make this mistake. They assume that because they understand the objective,everyone else will,too. It doesnt work that way. People dont get it. Imagine someone hitting a tennis ball. When the brain says “hit the ball,”it doesnt automatically happen. The message travels through nerve pathways down the arm and crosses gaps between the nerve cells. These gaps,or “synapses,”are potential breaks in the connection. If neurotransmitters dont carry the message across the gap,the message never gets through,or it gets distorted. C r e a t i n g a “ c u l t u r e o f d i a l o g u e ” Just like a nervous system,organizations also have gaps that block and distort messages. The gaps can be hierarchical,between boss and subordinate. They can be functional,between departments,for example. Or they exist between two peers who sit right next to one another. Crossing these gaps sounds sim- ple,but its not. The reason is that the “neurotransmitters”in organizations are human beings primarily executive team members,senior managers,middle managers and supervisors whose job it is to make sure that people do the right things. Doing what it takes to achieve alignment is very difficult. It is what management guru Ram Charan calls the “heavy lifting”of management, and its the key t