CHAPTER 5

Four Key HR Processes and How to Improve Them

5.1   Business Process Re-engineering

The need for HR process re-engineering—a critical skill if you’re going to work with the business as a partner and focus on improvements.

The best educated workforce ever, dynamic Information Technology and systems, more employment law than ever before, the highest levels of training—yet why are we failing to get the performance increases we hoped for? Rather than chasing the latest fad or fashion we might to better to be a bit circumvented and look at what acutely takes performance from people. Most of our current performance problems are traceable back to the time of Adam Smith (1776) and his thoughts on how work was structured and managed. There are three major restrictors of performance in most of today’s businesses; the Public sector is certainly included here.

Processes are really organization orphans, everyone feels they ought to do something, but in reality very little is done to improve even key processes. The organization problem this causes is now easy to see. Human Resources are charged with getting the very best from employees—our most valuable resource, yet we have processes, which make the attainment of that goal impossible.

It’s not difficult to see that the management of processes should be included in the HR remit.

Process management and improvement offer the organization the possibility for greater efficiency and to gain quantum increases in productivity. It fits well in New HR, as the process is directly related to improved performance and efficiency of people. New businesses often capitalize on this factor when they start, being faster and more efficient than their competitors. A good example is that of Direct Line, the insurers. This UK Company who were unknown when they started became the industry leader in under a decade.

Process management improvement sits well in the workforce planning function of a business-focused HR. Why, as it is mainly statistically and process based? Let’s examine how this can be achieved and attempt to give you sufficient information for you to be able to practice on one of your own processes.

Getting started. The first objective is to pick a process that is 100 percent in your control. This will enable you to practice until you become sufficiently confident to move onto more complex processes.

Our process consists of five stages.

Stage 1. Identify the process to be examined—make sure you and whoever knows the process well knows exactly where it starts and where the process ends.

Stage 2. Measure and map the process—walk through the process at least twice, time and record exactly what happens: how many people involved at each stage, how long it takes, transmission time, delay time. The picture you are building is of elapsed time—this must be real and accurately measured. Elapsed time is exactly what it says. If I put something in my out-tray for you at 5 pm in the afternoon and you look at it at 10 am the next day the elapsed time is 17 hours. When measuring what happens—remember that employees have breaks, lunch, and have a start and finish time.

You are not attempting to find best performance in the process, merely record what happens on a day-to-day basis.

Mapping the process. In order that others and we fully understand the process we need to map out exactly what we have recorded. The maps we use are call swim lane maps.

These have the departments involved on the left with horizontal lines across the page segmenting the different departments. As you draw the map, each step moves to the right, so that you can see the time line involved. Under no circumstances move to the left to conserve paper (you can’t go back in time). These need to be drawn up on large sheets of paper, as you will want to review and amend the map until you are sure it represents what typically happens.

Unsophisticated as it sounds—this is best done on the floor. We use symbols to make the mapping easier, once finished it looks rather like a wiring diagram, but is very easy to follow and see the total steps in the process, together with delays, hand-off’s, and excessive checking.

Adding up all the time then gives us the Elapsed Time (ET) for the process. At this stage, there is little point in getting people to comment on the map, as it’s just a representation of what exists now. If you are not familiar with the process you could get a signature on the map to confirm that’s what the current position is. At this stage be careful you don’t get given lots of ideas on how to make the process a bit better—that comes later.

There is an example for you to try—a simple example using the post-delivery for a small company—just to let you have the opportunity to practice.

Stage 3. Creativity and Innovation—Now we have our process map we need to look at what we are going to do to improve the process. This is the first trap we come to—doing this exercise is not about making an incremental improvement—it’s about a complete redesign, starting from scratch—to make a dramatic improvement, in process time and people efficiency. Dr. Michael Hammer, the American process re-engineering specialist, has a very good definition:

“The radical redesign of business processes for dramatic improvement”

The first word is radical; RE-ENGINEERING gives us the opportunity to start with a clean sheet of paper. It gives you the chance to start afresh, to create a process that has low overheads, is fast, accurate, cheap, and easy to use (FACE).

The second word is dramatic, RE-ENGINEERING is not about a 5 percent change; it is about dramatic change where the new process is unlikely to have any resemblance to the existing process. This is where you can create real added value for your company.

The difficulty that HR personnel will experience is that of either being creative or innovative in their thinking. Most people in today’s HR are still very conservative in their approach to change. RE-ENGINEERING requires a very bold and aggressive approach—which is often why consultants are used.

Use the FACE technique often, you will find this a big help, think how we can make this process: Faster, more Accurate, Cheaper, and Easier?

In the classic IBM finance study they were able to take a 6-day process run by four people and reduce it to 1 person taking 4 hours—that’s both radical and dramatic. Also consider that the volume of business they were able to transact went up by a factor of 100.

Using your skills as discussed in step 3, redraw the new RE-ENGINEERING map. A tip here when doing this—do not look at your original ET map or you will just end up modifying it, getting a small improvement in performance.

As before, when you draw up this map put the same departments in the swim lanes, and in the same order. When you have finished your new map—put them both on the wall and you will see a real difference.

Stage 5—calculating the added value—RE-ENGINEERING is a massive contributor to creating added value. What needs to be taken into the equation?

Cost of old process × times used per year = (old process cost p.a.)

Cost of new process × times used per year = (new process cost p.a.)

(Old process cost p.a.) – (new process cost p.a.) = total value

Total value – Cost of the HR’s work = Added value to the company p.a.

Practice exercise—Producing a business process map

Postal delivery process—M. Co. America—Stages 1–2

Post received 7.30 am in post room.

Post opened approximately 250 items per day.

Two people are involved in this operation, which takes 30 minutes.

All incoming items are recorded in a book—the book records the person who sent the correspondence, the company, the topic, and who it’s been assigned to—one person does this task and it takes 1.5 hours.

Difficult items are sent to a Senior Manager who will do the allocation—this can take some time and if this happens due to the delay, the item is normally put back into the system the next day for recording and then delivery.

When the post-delivery clerk arrives he sorts the mail and loads the post trolley and commences the delivery of the mail. Sorting and loading takes about an hour.

Delivery of the mail by the Post Delivery Clerk to the three offices. Calculate pushing the trolley from department to department; also calculate how long it takes to sign in the book for each item received.

When the post clerk arrives back to the post room, someone later in the day, he checks the book to ensure all items of post have been signed for. If there are items where the recipient did not sign then the item is written in the book for delivery the next day, the postal clerk also writes a handwritten note explaining when the item was received, when it was attempted to be delivered.

Don’t forget—the post room staff work 8 hours a day. They will have a 1-hour lunch break, tea/coffee breaks (15 minutes).

This process has been in operation for 10 years and everyone liked it.

Try to complete stages 1 and 2 and draw up a process map—calculate ET.

The mapping process in action

When you have finished calculate the value added and cost of this over a reasonable period—3 years.

In Conclusion

RE-ENGINEERING gives the HR department two significant advantages. First it removes things that take away performance from people—namely, out of date processes. Secondly and most important, if you are creating an added value HR function RE-ENGINEERING gives you the capability of creating large amounts of added value and at the same time getting a better business integration and acceptance at strategic level. Using your own process to start with, there is absolutely nothing to lose by trying this method—but everything to gain.

Getting results and creating value using this method is really effective—in early 2016 a company used this process and improved output by 50 percent —no extra staff were employed and the complete process end to end took less than 6 months. This is added value in action!

Case Study Re-engineering and Work Flow Management—Richards Engineering 2016

Richards is an engineering company founded in 1860 by Everard Richards, an engineer from Sheffield. The business went from father to son, and went public in 1991. The stock value had grown, very slowly and the city analysts viewed the shares as a safe but a low-income choice.

Richards’s product was spherical joints used in the gear linkages of certain sports cars. Its market had always been in the UK, and its product sold through one distributor whom the company had worked with since 1860.

Richards had only one competitor in its market, Squires Engineering, who had come into the market in late 2009. Then in 2015, and it came as a complete surprise, Squires started selling the same product 8 percent cheaper than the Richards product. Quality appeared to be the same, and in the course of 9 months Richards had seen its market share evaporate, share value plummet, and things became serious.

Facts about the Company

Engineering (Operations) have taken delivery of high-speed robotic lathes valued at £2.5 million, which as yet have not been used. Some facts about the company and its structured and reward scheme.

Restrictions

Please Note

The name and location of the company have been changed, as this is a real consultancy project.

The assignment briefing:

What happened? Part 1

The Process Explained

What happened? Part 2

Value created:

Profit per item £50 × 5,000 × 226 (number of working days per year = £56,500,000)

Cost involved:

Calculation (This is the standard formula in HR for calculating added value)

Value – cost = added value in 1 year

£56,000,000 – £2,600,000 = £53,400,000

This example was featured in a television documentary with Dr Miller in 2016 on How to create value and improve productivity.

5.2   Refocus Recruitment

Why We Need to Improve

Google quote:

“let in one bozo and others will surely follow”—CEO Google

Without doubt attracting, interviewing, and retaining a talent is a critical issue. Despite millions of unemployed workers, there is still an acute shortage of talent. Although the amount of people that are applying for jobs is amazing, companies still feverishly search for the people who will make the difference between 10 and 20 percent annual growth in profit. Critical talent is scarce, and about to become scarcer because of two looming trends: the retirement of the babyboom generation and the growing international skills gap.

The weakest link as always is recruitment—no-one who has not been trained since 2014 should be allowed anywhere near an interviewing room regardless of their position in the company. Recruitment is the gateway into the company; any shortcuts or poor practice here will be very costly to sort out later on.

Cost reducing the cost of Recruitment is what many HR functions have focused on - IT’S FALSE ECONOMY. The more time and money you spend on recruitment, the better your recruitment will be, provided you follow a process approach which we will discuss later.

That the side of the equation that most organizations focus on. It’s the wrong approach; the cost of recruitment is miniscule when compared to the cost of making a mistake. In many organizations it has been found that poor performers account for 22 percent of the workforce. Looking at the real cost of making a mistake is worth working out and showing others. Looking at an organization that employees 3,000 people:

So it begs the questions why are recruiters made responsible for poor recruitment decisions? The figure is not complete, as you would have to add on all of the costs of training given to poor performers plus the extra management and supervision time they need. So in our overview on recruitment it’s clear that the cost of doing the recruitment is not the area where we need to save money but the area where we should invest more.

The latest research is included in my book on recruitment (2017) but it shows that less recruitment mistakes are made if a process approach is adopted and adhered to by the entire organization and that all personnel involved in the process are trained.

Now if the person were a poor performer you would lose 35 hours a week nonproductive time—at your leisure you can work out the cost in 1 year.

New process, new results

In the recruitment process there are three key areas where instant improvement can be made.

The first is testing.

This should not be optional but essential for every interview at every level. In 2011 the Obarni case brought the horror of shoddy interviewing to the public notice. Obarni, a Nigerian, resident in Germany who professed to be a qualified doctor, was employed in the Health service in the UK. On his first day in the job he administered an overdose of a drug—killing the patient. He fled to Germany to avoid prosecution. Simple testing would have determined that Obarni was not a competent, qualified Medical Doctor.

An occupational test is simply a psychological test used in the world of work. There have been numerous attempts to define what a psychological test is. One definition for a test is:

“a standardized sample of behavior which can be described by a numerical scale or category system.” (Cronbach 1984)

Psychological or “psychometric” tests aim to maximize objectivity by standardizing test conditions, instructions, time, content, scoring, and interpretation.

The History of Testing

Psychological tests have been shown to be among our most powerful aids in the crucial problem of selecting, developing, and counseling people at work. Estimates by some researchers have shown for example that large increases in the GNP could result from more widespread use of tests in selection.

In Ancient China, the selection of civil servants was undertaken by written tests and required candidates to show verbal creativity by completing rhyming couplets. In the seventeenth century, Samuel Pepys, on becoming Clerk of the Acts of the King’s Ships, introduced a test for the rank of lieutenant in the British Navy which he knew many rich but unmotivated young men would fail.

Although Binet in France in 1905 is usually credited with the world’s first standardized individual test of mental ability for children, it was not until the outbreak of World War I that occupational tests were employed on any scale. The important part which tests played in the classification of vast numbers of people in both world wars led to much activity in the development of tests more suitably adapted to the needs of commerce and industry—an activity which continues to the present day.

Occupational tests are now used for all types and levels of job selection: from unskilled factory worker to senior management positions. Most of this usage tends to be in larger organizations, clearly because they employ more staff, but also because they have more readily appreciated the difficulties of obtaining comparable assessments from different interviewers.

Testing

There are all sorts of tests you can use. The skill of the professional interviewer is to use only reliable tests that are valid for the job in hand.

Testing materials are best purchased from reputable suppliers, some of which are as follows:

Testing has been around for many years. Psychometric tests enable you to ascertain WHAT THE CANDIDATE CAN DO NOW. You can then do a mathematical comparison with them against an industry or group average, known as a norm group. Thus, when you test you compare the results against a standard and appropriate norm group, rather than compare against the group you are testing. It provides you with an accurate measure at the point of testing. It therefore helps to reduce the risk of employment error.

The “tests” are normally paper and pencil, run in strict, exam conditions, and are always timed. Be careful of web-based tests—they may be very convenient—but unless you can see the candidate—you will have no idea of who has really completed the test.

Ability testing is normally for skills selection, for example, selection of correct components, assembly of parts from a selection. Typing tests/speed and accuracy tests also fall into this category. These are easy to design and can be very cost-effective.

Other tests may include physical testing for fitness or to detect an issue that may affect performance of the job such as eyesight, color blindness, hearing, and active listening skills.

The Second—Personality Profiling

These are not tests but questionnaires which help us understand someone’s personality. There are thousands on the market—select with care as you get what you pay for. The reason why personality profiling is so important is that it enables you to select the right person for the job. People who are in occupations that fit well with their personality enjoy the work more and are normally more reliable and productive. So if you can match ability via testing and personality via profiling you have a much better chance of getting the right person in the right job and get a person who will perform well.

It’s not by chance that companies who have been voted America’s best places to work, spend a great deal of time and money on getting this right.

For recruitment, promotion, or development for supervisory level and below we would suggest the NEO or the EPI. This measures the Big Five personality factors:

The NEO is probably easier to use and is certainly quicker to score. Both are 60 questions and give a quick profile of the candidate.

For managers up to CEOs there is a wider but more confusing range, the top two are the SHL OPQ32 and the McRay&Coster NEO—PIR.

These are very accurate and provide the interviewer with sufficient information to base a recruitment decision on. They are also excellent tools for developing or selecting staff for promotion. Both have built-in lie detectors and consist of over 200 questions. There is a great temptation to use free profilers off of the web. Many of these as one of my clients found to his cost and embarrassment are written for a laugh and have no reliability or validity tests to back them up. My advice, if you want to be the best—use the best.

The Third —Prewritten and Scoreable Questions

Prewritten questions are essential for two main reasons:

They focus on the key criteria of the job and they are a major step in preventing interview bias. With increasing cases of litigation it is essential to firm up and bring up to date how we conduct the interview.

All the main questions (knowledge based and directly linked to the criteria) are scored out of 10. The scoring is done as the interview progresses. The knowledge-based questions are grouped together for each of the key criteria, with 4–6 questions for each criterion. The criteria selected are normally but not exclusively the key competencies for the job. When we speak to the candidate we signpost the criteria we are going to ask questions about and do this by setting the topic as a scene setter. Here is an example of how it works.

For the job of Senior Accounts Manager, this job has identified the following key criteria:

Working with teams

For each series of questions the prequestion sheet is completed with the appropriate knowledge-based questions written on it. This would be done at the time the advert is discussed.

Interviewer

Good Morning—this is Mr. Smythe—he is head of Finance and will be interviewing with me. We will be asking you a number of questions about your past experience. Please give short and concise answers to the questions; when we have finished the questions at the end of the interview, you will have the opportunity to ask us any questions that you have—is that OK?

Scene setter Working with Teams	Score
1. What experience have you had at managing teams in the past 5 years?
2. Give me an example where you have dealt with conflict in a team
3. From your experience, what is the optimum size for an effective team?
4. Do you encourage competition between teams?
Total Score

Q. 1. Interviewer

What experience have you had at managing teams in the past 5 years?

A. Interviewee—I have run a department of 50 people for the last 5 years.

Interviewer Probing question

Were they split into teams?

A. Interviewee

Yes by function, when I first took on the job it was just one department, but dividing the department into teams worked really well.

Interviewer—probing question

Whose idea was it?

Interviewee—mine

Interviewer—probing question What were the benefits?

A. Interviewee

We were better equipped to meet our deadlines, never missed any so far, and unauthorized absence stopped. Also, there is a much better working environment.

The second question on team working:

Q. 2 Interviewer

A. Interviewee—We had one employee who was very disruptive—always talking on his mobile phone and texting.

Probing question—How were you involved?

A. Some of the team complained about him to me, I then spoke to him on a one to one and pointed out this was not acceptable in our department.

Probing question—Did that resolve the issue?

A. Interviewee—No, he took no notice so I had to give him a verbal warning in accordance with our procedures—that brought an immediate stop to the problem. He was not happy but understood why I had to pursue the matter.

Q. 3. Interviewer

A. Interviewee: I don’t understand the question

Interviewer: From your experience, what is the optimum size for an effective team?

Interviewee: Sorry, I don’t understand.

Interviewer: Don’t worry—let’s move onto the next question

Q. 4. Interviewer

A. Interviewee—Yes it’s a good thing provided it’s well controlled. This is particularly the case when we do end of year accounts and we have a special payment system for the best teams. We get good results and the teams all like a bit of competition. Last year the winning team brought cakes for all the rest, which was really appreciated, also the end of year accounts was completed two days ahead of schedule, so the CFO was very happy.

Interviewer

New approach—new results. A process approach to effective recruitment

If you were to ask ten of your managers “what’s the best way to interview,” I suspect you would get ten different answers, each convinced that their way was the best. A look through LinkedIn shows what a vast range of different ideas there are on what should be done, ranging from the quest to make recruitment as cheap as possible to outlandish ideas that defy belief.

Every time you recruit you have the opportunity to make a decision—either good or bad. You can recruit talented people, average people, or people who are and are likely always to be poor performers. The financial crunch between 2012 and 2014 has shown all of us that most organizations were overstaffed; reductions in organizational numbers in many cases resulted in higher productivity and greater organizational efficiency. The reason that numbers could and have been reduced is that those companies had a disproportionate amount of poor and average performers—and yes someone had recruited them.

A survey completed in 2014 in the Middle East of over 1,000 employees in 110 large companies showed that talented people do almost 6 times more work than poor performers; the financial implications of inadequate recruitment are massive.

The traditional face-to-face interview

The reasons that just face-to-face recruitment fails are a combination of the following. This is not an opinion but based on reliable current studies and fact.

The Panel Interview

One of the most potentially ineffective ways of interviewing, yet many organizations still use it. The reason they do is to avoid accountability, to be seen to be involved and in some instances people are on the panel so they can show their peers how clever they are.

Candidates often find the panel interview overwhelming and intimidating and for that reason introverts do not perform well in such conditions. The most effective would be two people interviewing, the line manager together with the interviewing professional. Secondary interviews should also be avoided, as this is normally a sign that no one wants accountability for the final decision-making.

The Process Approach

A process approach helps to avoid most of our problem areas and also the underlying issue that managers, in the main, only recruit people they like. That “like” is often made up of the most amazing preconceived ideas that would not survive any sort of rational audit. The process approach is a way of having a standardized format across the organization and ensuring a conformance to standards.

The process approach may need to be modified to fit individual organizational needs and that is your choice.

The process consists of nine sequential steps—each very important to the total objective of recruiting great people.

The end-to-end process is backed by a massive amount of research and is currently thought to be the best way of getting high-caliber employees (talent); the process is fully explained in detail in the book on recruitment published in 2017 by Dr Tony Miller.

As a business partner you do need to be a master of your own processes and be able to work with and show the business how your processes really add value.

5.3   Performance Appraisal

What Are the Benefits of Appraisal?

Ask any professional HR manager about the benefits of performance appraisal and you will hear all the normal attributes—good development tool, essential to determine training requirements, key tool for motivation, ideal for gathering data, for setting performance objectives, for measuring employee competence, tool to justify bonus and rewards, etc.

The final comment is normally that it is best practice.

Yet ask the same question of a senior line manager and the response is normally very different.

The majority of managers seem to have the view that appraisal time does not justify the end result. This is a conflict of opinions so who is responsible for the output and added value of the appraisal system?

Who Has Responsibility for the Performance Appraisal?

If you decouple measurable output from performance appraisal, then most HR professionals put their hands up to owning the process.

However, once the term measurement output is mentioned, then the responsibility for the process and the output seems to transfer quickly to line management.

With performance appraisal being the single biggest tool for objective setting and performance measurement, how can it degenerate so quickly into an organizational orphan?

In the vast number of performance appraisal systems that are in place it’s inconceivable that so much can be spent on a process that delivers so little yet is still viewed as best HR practice.

This is due to a common myth that best practice must always produce best practice results. If it is best HR practice then perhaps any HR bonus should be calculated on added value measurable output from the system.

As the process is clearly a shared responsibility with the line management, the output must form the basis of a shared key performance indicator.

Before you sign up to this being a good idea, you need to read on and see what is involved to get benefit from this system.

Serious Defect in Most Appraisal Systems

The operating fault of most current systems lies not just with the process and lack of accountability for bottom line results but with a far simpler issue, an issue that is cheap, quick, and easy to remedy.

After speaking with over 1,000 HR professionals worldwide from a wide spectrum of industries, it is evident that in the majority of cases the focus of appraisal makes positive measurable outcomes impossible.

The consensus of opinion seems to be that once the appraisal system is installed, after the first year a pattern of how the appraisal actually runs becomes evident. The actual time spent doing the appraisal seems to vary to within plus or minus 15 minutes, the mean tending to be one hour in duration. What is of great interest is how that time is used.

It seems that the majority of the appraisal time is spent reviewing the previous year. In fact the figure quoted amounts to a massive 80 percent. That’s 80 percent looking back: on performance against objectives, identifying training needs, and other factors that should not be discussed at a performance appraisal. We term this the rearview mirror effect.

The fault with this approach is that nothing can be done about the past or past performance—what’s past is history, nothing will change what’s already happened.

The only thing managers can plan for and be successful with is the future. This obsession with the previous year’s past performance and activities is the single biggest reason for appraisals failing.

The rearview mirror approach is not compatible with today’s fast-moving dynamic business approach.

With such a strong “past” focus it leaves only 20 percent of the time of the appraisal left for future focus. It’s not surprising that objectives are poorly set and little, if any, real measurement of performance is planned or takes place. Because of this managers are unwittingly setting their staff up for ongoing failure.

This effect of setting employees up to fail is very real and costly. Training is then identified based on failure or weaknesses.

When the employee fails, the feeling of failure, or of a job not well done, pushes motivation down and hangs like a shadow of doom till the next appraisal, so training (normally the cure-all solution) is prescribed based on a failure which happened probably 9 months before the appraisal.

Training then identified at appraisal goes through the system and it can be 6 months before it takes place.

To recap, in this example a total of 15 months elapsed time has been taken to rectify a past mistake or shortfall and provide a solution, in this case, training. This retrospective approach to appraisal makes no business sense and could easily be avoided by taking a different approach. HR managers, line managers, and certainly managing directors seem to be unaware of the true cost of an appraisal system.

The Real Cost of Appraisal Formula 6

If appraisal is the most important goal-setting tool an organization has, then we must be confident that it will yield good returns on investment and add value. So let’s examine the cost of appraisal for a company employing 5,000 people with an average employee unit cost of £46.00 per hour.

For each appraisal

In addition it would be fair to add the cost of misdirected training identified from appraisal. This could be as high as 70 percent of the training budget—the cost of which would need to be added to the calculation.

In our example we have a cost to the business of £621,000—to get just a simple return on investment we need to get each year £621,000 of measurable bottom line benefits. Can your appraisal system deliver this type of performance?

If you go beyond return on investment to seek added value then it would be reasonable to expect to see a 20 percent added value each year. In other words each year the system is in place we should expect to see minimum measurable benefits of £745,200. Can your system deliver this type of business performance?

What Needs to Change to Produce Real Advantage from Performance Appraisal?

Producing real results from appraisal, whether it is development, competency improvement, or business performance, is achievable simply by changing the focus and emphasis of any traditional appraisal.

The only thought any manager should have at appraisal is “How can I set this person up to be successful?” With that thought clearly in mind, the rest should be straightforward.

Time reviewing the past (which we cannot change) should be reduced to 20 percent of the appraisal time—looking forward, setting SMART or WWW objectives, and discussing success should be our prime and only focus. At least 80 percent of focused attention must be for success in the future.

If, for any objective, there is any genuine reason that the employee (appraise) cannot meet the objective through lack of skill, knowledge, or experience, then some form of action, perhaps training, needs to be arranged prior to the objective start date.

This is a critical action if our employee is to be successful—training first before objective.

New focus = new results.

Once objectives have been set and agreed, the measurement of results must be an ongoing, a regular, and scheduled activity—after all, is this not the basis of why we employ managers? This must take the form of an ongoing and performance-focused interaction between appraise and appraiser.

The focus on everyone being successful should be the manager’s overriding aim. This is not easy with difficult and challenging employees, the lazy, and the unliked. A good manager should apply the same approach to everyone—change will happen only when trust and credibility have been established.

Is Appraisal a Motivational Tool?

Is appraisal a motivational tool? Just ask yourself, will employees be more motivated by failure—the old rear mirror approach; or will employees be more motivated by success in an environment that breeds success; the forward success-driven approach.

Motivational success through appraisal can be measured. Do some statistical analysis such as measuring sickness levels before the new approach and then examining the sickness levels after. Also, look at staff turnover both before the new system and then after. Staff satisfaction surveys are also a useful indicator.

Where does 360-degree appraisal fit with the new model?

The 360-degree appraisal is yet another shining example of what is believed to be best practice.

Does it work?

How much does it cost to run the process?

What’s the level of return on investment, and, when calculated, what will be an acceptable added value return on the process?

This type of appraisal is very expensive, not only in time and administration but also in lost productivity.

Most advocates of this process will say it’s a great motivational tool and that because it’s so open it is beneficial to all.

If this is the case, then providing the added value will be easy and should be carried out each year—but I suspect it is not.

Just do the calculation for yourself based on our example and see how much extra is needed just to cover the cost.

You can then make your own judgment on whether or not you think it is right for your organization. The term motivation is often wrapped in with the benefits of appraisal. If appraisal is a key motivational tool then managers need help.

If you must use 360-degree appraisal—then at least use one that works such as: one operated by Bill Best, a chartered Psychologist

Managers Need Help

Performance against agreed targets needs to be measured and discussed throughout the year, with success celebrated as appropriate. Then, when the next round of appraisals starts, the majority of employees will be confident in the knowledge that you’re focusing on making them successful. Success breeds success.

Most managers have difficulty with setting measurable performance targets. Although this is a key part of the job it is seldom tackled with much enthusiasm. Short workshops on setting specific objectives are a good way to start, using the SMART process to help them to focus.

Another good investment would be a briefing on the value of coaching and using Management By Walking About and it is a good tool to keep ongoing involvement in place.

A key input factor for managers and supervisors’ bonuses should be based on the percentage performance achieved during the year.

By linking directly to pay the incentive is created to make things happen.

Organizational Benefits

Changing the focus for appraisal really is a case of everything to gain and little to lose. Before changing anything gather base data on what exists now, if any.

Try to compile figures, which will show exactly the cost of appraisal and what if any quantifiable performance improvements there are.

This base information is needed for when you start to produce added value charts later.

Some of the organizational benefits that should be seen include: projects delivered on time and within budget, reduced absenteeism levels, improved staff morale, reduced training budget, a more agile organization, and lower staff turnover in the long term.

The process will clearly identify poor performing managers, supervisors, and employees and will enable a definite and measurable impact on the bottom line to be seen.

Although this might only seem appropriate to the private sector, many of the benefits mentioned do map very nicely into the public sector.

There should also be a change in the way HR is viewed, as this gives a clear indicator that HR is adding value by using business skills to enhance business performance.

Individual Benefits

Connectivity has become an issue in the UK, with a number of surveys showing that staff increasingly has low connectivity with their employers.

As the new appraisal focus is based on a shared responsibility for success, there will be a greater feeling of inclusion and the possibility for building long-term connectivity.

Rewards based on measurable performance are also fair and equitable and will be seen as such.

Those showing potential through improved performance will be the first candidates for development, while training takes on a new and specific role, which is directly linked to achieving business objectives, a prerequisite for IIP. Training, in whatever form, will also be seen as a key tool for individual success.

Finally, there will be an overall view that we are doing the right thing and something that is worth doing—because it’s measurable and taken seriously.

5.4   Motivation and Its Relationship with Pay and Rewards

Before you reel at the thought of pay being the only motivator—it’s not. The way we treat and manage employees is by far the greatest individual motivator. Time after time on published surveys, the top companies who people prefer to work for are not the best payers. In fact, on reading the last survey on principally American companies, most of the top ten were not that well known and were certainly not high payers.

Changing any existing bonus scheme will prove to be one of the most difficult but potentially rewarding activities you can perform. Why? Because it’s fair and it produces massive added value.

First we need to believe in the old saying “One shoe does not fit all.” This certainly applies to any type of real bonus scheme.

First who should be entitled to bonus? Going back to our concept of differentiation described earlier we have three groups within any organization.

The poor performers—they don’t qualify for any bonus payments, increments, or any sort of enhancements.

The average performers—well, this group do the minimum to stay employed, so why would you want to pay any of this group bonus, perhaps cost of living awards, but that’s it.

Finally our last group our talented group, our high performers, not to be confused with high potential. This group according to Jack Welsh (former CEO General Electric) and the late Steve Jobs (Apple) do almost 50 percent more than average workers. This is the only group that should be on the bonus radar. We can afford to pay this group huge bonuses. Why? Because they are worth it and it’s the group we don’t want to leave. It is this group that are the future and the lifeblood of any successful organization.

By paying the talented group big bonuses this will inspire those who are average performers to try harder and join the talented group, thus pulling up the standard of the organization. From a manpower planning point of view:

More talented people = less total employees

This is due entirely to the amount of work done, so there is a double benefit. Showing the added value of this policy is easy to do and it just involves calculating.

The value of the extra productivity plus less turnover of talented people plus productivity improvement of any average or poor performers who are replaced minus the cost of extra bonus paid.

However, the talented group must, individually, earn their bonus and as such this will give rise to healthy competition. This approach works in public and private sectors and is not linked to success, which is entirely due to international market changes.

If you are considering moving in this direction—do so with care. The people who will complain the most, the people who will talk about strike action are—the poor performers.

When designing a good bonus system, do so from the end point; what is it you are trying to achieve? There are three parts to think about:

Setting the tasks or objectives—these need to be done to insure that the potential bonus is specifically aligned with strategic objectives, they need to be allocated points so that the total objectives are measured out of a 100 percent. This makes scoring at a later date much easier. There is a tool that helps with this—known as strategic action plans.

Is the task/objectives team or individual based? If team based then a hopper bonus-type approach would be appropriate.

The task/objective with this scheme you need to set very clear competency standards that must be achieved by the entire team (this takes care of quality) and also the minimum performance standard to be achieved by the entire team, before anyone can get bonus. Once the competence and performance have been achieved it is all systems go for earning some serious bonus and creating real productivity. What about the outstanding individual?

Individuals—Outstanding individuals need to be recognized. Once this system is set up it’s easy to work out whom the high performers are and to give them an extra payment. This needs to be over and above any team bonus. If individuals are not part of a team then clear objective setting still needs to be in place and so too the scoring method. Bonus can then be allocated based on actual scores as a percentage of salary.

By taking this approach we have satisfied all the needs of the Adair model for creating high performance. But what about the managers?

Managers’ bonuses should be based on the performance of their teams compared to the performance of other managers’ teams. If the manager creates, motivates, and produces teams that can outperform other teams then they can go on to a ladder bonus system which is purely productivity based. Good managers will earn a lot and poor managers about the same as the people they manage.

Other Considerations

There are many other ways to motivate employees—this is the job of the line management. One suggestion you might want to consider is the use of power briefings. This has been used to great effect in the finance industry and with production companies in China. At the start of the working week at exactly the start of the working day the manager/leader has a power briefing for 4–5 minutes. During this briefing, which is completely focused on the current week, what’s critical to make the week a success is discussed. This is a great aid in getting employees focused for the week and to start fully informed about what’s critical. This is not a forum for discussing the previous week’s activities nor is it a general gossip forum.

The giving of “Goodies” for rewarding outstanding effort. Some companies have used this to good effect. In one company the “Gift” of a Land cruiser was offered and given to the manager who could reduce sickness levels by the largest percentage. As before, the value was the cost of the lost day minus the cost of the Land cruiser. Another added value costable activity by New HR.

Please remember it’s not New HR’s job to take over the role of motivation, but it is our responsibility to provide managers with the tools and processes that will maximize our human capital.

5.5   Training

Training accounts not only for a significant part of the HR budget, but also attached to each training day is the ESUC of the employee who is attending the course.

Training costs (see training budget Excel download) comprises of four unit costs:

In addition is the ESUC cost per person attending the course—so the total cost is a combination of these two factors.

So How Do We Prove Training Adds Value?

Most training carried out by organizations is competency-based training. We devote on average 95 percent of our training budget on making sure this happens. If you take a hard look at this we are making sure that our employees are competent to do the job we are paying them for. This should guarantee the organization:

From an added value point of view these essential stills carry with them very little in terms of real measured added value. Nobody in the organization, for example, will get excited if your training improves Mr. Chan’s competency score from 65 to 70 percent. If you were to calculate this value, the response would be it’s not real value as they are being paid to be competent anyway. So the good news is don’t bother evaluating competency training improvements. It’s a line manager’s responsibility and they will come up with the new scores normally at performance appraisal time. A word of caution—your training budget is based mainly on competence requirements so you have to make sure it’s done.

The next area is of greater importance if you are looking to produce value added. These courses will and must produce measurable added value and as such need to be properly evaluated. We use the 10-step model to do this.

The number of courses and the types of training that produce measurable bottom line results are very few. Groups of professional training managers struggle to get a list of over five such programs. Remember the courses are not competency based, so see if you can add to their short list.

As you can see, the list is quite small but the value added is massive. Other courses you may expect to see are team working and new leadership skill. Although they will produce added value they must be done in conjunction with organizational change. The first time it is done it would be added value—thereafter it would be absorbed as a competence.

Training has a positive effect on employees. Regular training keeps employees mentally engaged and evidence shows that good training has a direct positive impact on reducing sickness and cementing loyalty.

This case study on using added value training and measuring shows the 10-step model in operation. Although only a small piece to training, just look at the added value created in 1 year.

Step 1 Business Need

In a meeting with the Senior Administrator it was clear that savings needed to be made.

Examination of what needed to happen seemed to focus on the need to improve the value for money spends that the authority made. In other words, on all external contracts were they getting the best deal? The Senior Administrator thought that for other areas of the business and their operation every possible economy had been made.

Step 2 Analyses

An examination of purchasing procedures showed that within the Administration area a number of senior people were involved with significant contracts. Further examination showed that none had received training on the methodologies of purchasing and the only benchmark for success was accepting the lowest tender.

It was also evident that little effort was made to negotiate price other than regular statements that “we expect the best deal.”

In total six members of staff were involved. Typical contract prices varied from £3,000 to £400,000.

Step 3 Design

Discussions within the training unit focused on providing a solution that could improve on contract success from strictly a price point of view. In other words, reduce the cost of individual contracts or item cost. There were a number of existing contracts that were either about to be negotiated or that could be renegotiated.

Current contract value was £706,000 and it was thought that training on specific negotiating skills would have at least a 10 percent improvement on current contracts in 1 year. The training on negotiating skills was to be incorporated in a management development program that was currently running and provided by an external supplier.

Step 4 Agreement

The agreement with the business was to provide Negotiation Skills training and to seek a “Pay back” on 10 percent on existing contracts to the value of £70,000.

Clearly there would be additional costs with the Management Training course, as it had to incorporate Negotiation Skills into its program

The business sponsor wanted the cost of the Management training in total, to be paid only if the benefits of the negotiation skills were realized.

The agreement therefore was between the three parties:

The business sponsor

The training department

The external supplier

The external supplier was to be paid once the results of the negotiation skills course were known

External supplier costs	£40,000 including negotiation skills
Benefits sought	£70,000 through renegotiation ofcontracts skills
Method of evaluation	each course member to produce hard evidence of each saving negotiated. The agreed figures to be approved by the Senior Administrator. The external provider to be paid when the evidence is available which should be within two months of the training

The training was performance based, as it would add value in 1 year.

Step 5 Delivery

Training carried out as designed with specific output requirements. Each course member was briefed on the need to evaluate the results of their negotiating skills and get the required sign off. During the course the trainer went through each trainee’s individual negotiating or contract arrangements to provide as much help as necessary. Individual action plans were drawn up and agreed.

Steps 6,7,8 Validation Not Appropriate

Step 9 Evaluate

Evaluation of the results was as follows:

Course participant	Savings
a	£3,000
b	£172,500
c	?
d	£3,750
e	£500,000
f	£40,000
TOTAL IMPROVEMENT VALUE	£719,250
Less the cost of external training provider	£40,000
Less the cost of training departments involvement
For consultancy, administration, and evaluation	£1,000
Actual benefit	£678,250

The evaluation results exceeded expectations by all concerned; all of the results were verified by the Sponsoring Manager and signed off.

Step 10 Feedback

Feedback of the results were given to:

Training can be a massive contributor for added value. All that needs to change is getting a tighter focus on training that adds value. In instances where this has been used, training functions move swiftly into becoming profit centers. Consider running more added value courses and fewer competency-based courses, you can then use the value created to offset other training costs and aid in making the organizations training much cheaper by running with smaller budgets. Without any doubt all organizations react favorably where training can be shown to financially contribute to the organization.

Software sample downloads are provided by Duncan Williamson.

He is a specialist software designer and is available to work with you to customize your spreadsheet models. He has extensive experience in providing software solutions and customization ranges from small retail outlets to complex chemical processing organizations. Contact by e-mail [email protected] Best is a Charted Psychologist specializing in executive coaching and assessment centers. He has many years experience with 360-degree appraisal systems. Email: [email protected]