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ExecutiveHumanResourceProgramThePromiseofPerformanceManagementHayGroupBoston0109-9271-HAYGLemaire2TheCurrentChallengeofPerformanceManagementTheHRprocess—IscompletelyunrelatedtootherkeybusinessprocessesIsdreadedbymanagersandemployeesalikeDoesnotresultinanymeaningfulfeedbackDoesnotdifferentiateperformanceorpayIsafocusforonlyoneortwodays—orhours—peryear0109-9271-HAYGLemaire3ThePromiseofPerformanceManagementImagineasystemthatcould—IncreasethelikelihoodthatyourstrategyiseffectivelyexecutedHarnessanddirectthe10–60minutesadayofdiscretionaryeffortthateveryoneofyouremployeeshasRationalizeandfocusthenumberofgoalsthatanyoneinyourorganizationhasImprovethedecisivedialoguethatoccursinyourorganizationRewardperformanceinawaythatitismotivatingandengagespeopleDifferentiateperformanceinwaysthatmakelinemanagersfeelgoodabouttheirdecisions0109-9271-HAYGLemaire4PerformanceNumberofEmployeesSource:Hay/McBerOptimizingtheperformanceofyourpeoplewillhaveapositiveimpactonbusinessperformanceImprovingPerformanceManagementImprovesBusinessResults0109-9271-HAYGLemaire5Percentageofvariationinchangeincompanyperformanceaccountedforbymanagerialpractices19%2%1%1%6%18%3%1%1%8%0%10%20%30%40%ProfitabilityProductivityHRMStrategyQualityTechnologyR&DSource:SheffieldEffectivenessProgrammeHumanResourceManagementPracticesDriveProfitabilityandProductivity0109-9271-HAYGLemaire6HighlySuccessfulCompaniesaredefinedashaving—5-yearsalesgrowth=17.5%peryear5-yearprofitgrowth=10.8%peryearAnnualequitygrowth=16.7%peryear5-yeardividendgrowth=13.4%peryearSource:D.Karvetz,TheHumanResourcesRevolutionClearEmployeeGoalsParticipativeStyleAttentiontoDevelopmentEncourageCreativityPerformance-BasedRewardsHighlySuccessfulCompaniesLessSuccessfulCompanies80%70%67%62%86%26%4%27%10%30%High-performingcompaniesarebetteratmanaging,motivating,andrewardingemployeesImprovingPerformanceManagementImprovesBusinessResults0109-9271-HAYGLemaire7Source:Mavrinac&Siesfield,MeasuringIntangibleInvestmentStrategyExecutionMatterstoShareholdersThirty-fivepercentofaninstitutionalinvestor’svaluationofacompanyisattributabletononfinancialinformationthatgaugestheabilityofthemanagementteamtodeliverresults:StrategyExecution:Canmanagementmaketoughdecisionsandseizeopportunitiesquickly?ManagementCredibility:Doesthecompanykeepitscommitments?StrategyQuality:Ismanagement’svisionofthefuturelikelytooptimizevaluecreationinavolatile,globalized,andconnectedeconomy?Innovativeness:Howreadilydoesthiscompanyadapt?AttractingandRetainingTalent:Isturnoverhigherorlowerthankeycompetitors?Donewhiressurpassleaversinskillsandexperience?ManagementExperience:Whatskillsandexperiencesdoesthemanagementteambringtothetable?Compensation:Docompensationpoliciessupportthefirm’sstrategicintent?0109-9271-HAYGLemaire835%improvementinhuman-capitalsystemsresultedin10%–20%gaininshareholdervalueAlignmentandIntegrationofHRSystem“HumanCapital”Enhancements290310330350370390020406080100QuintileImprovementsinStrategicMarketValueperEmployee(000)Source:HuselidandBaker,1995HumanCapitalSystemsIncreaseShareholderValue0109-9271-HAYGLemaire9ImprovingPerformanceManagementImprovesBusinessResultsHigh-performancecompaniesdefinePerformanceManagementinitsbroadestsense:itiscriticaltoexecutingandimplementingstrategyPerformanceManagementisnowwidelyrecognizedasdeliveringmorereturnsanddeliveringmorecompetitiveadvantagesthanotherHRinvestmentsPerformanceManagementisthekeyto“raisingthebar”inanorganization,foralllevelsofperformanceOrganizationswithahigh-performanceorientationandstrongmanagementcapabilityhavehigherrevenue,profits,andmarketvaluations0109-9271-HAYGLemaire10PerformanceManagementPerformanceManagementisaboutimprovingbusinessperformancebyimprovingteamandindividualperformance,andensuringthatthecompany’sstrategyisexecutedandimplemented.Itis—AprocessthatensuresthatpeopleexecutethestrategyoftheorganizationAprocessforestablishingasharedunderstandingofwhatistobeachievedandhowAprocessforensuringthatdecisiveandconstructivedialogueoccursAprocessofmanagingselfandotherssothatpeopledoachieveAprocessforensuringthatpeoplearedoingtherightthingsinthemosteffectiveways,tothebestoftheirability0109-9271-HAYGLemaire11PerformanceManagementStagesDesignParameterPerformanceAppraisalPerformanceManagementPerformanceOwnershipHumanResources“Checkthebox”compliance-orientedManagepoorperformersPassiveReportcard(retrospective)ManagersandHumanResourcesEvaluationrewardemphasisManagethetailsofbellcurveJointownershipforgoal-setting/reviewBarometerofprogress(periodic)Employees,managers,andleadershipStrategicclarity,coaching,dialogueRaiseperformanceoforganizationSharedaccountabilityforresultsDialogue(continual)FunctionRoleofEmployeeFocusEmphasesOwnership0109-9271-HAYGLemaire12PerformanceAppraisalPerformanceManagementManagingPerformanceHighLowLowHighImpactonResultsLevelofOrganizationalCommitmentImprovedbusinessresultsrequireorganizationalcommitmentCommitmenttoachievecompanygoalsGoodsettingandreviewMeritincreasesefficientlyallocatedPerformanceManagementStagesthis0109-9271-H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