PERFORMANCE MANAGEMENT

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PERFORMANCE MANAGEMENT
Amy Cooper, Kimberly Sanders, Sarah Odamah, Greg
Fuhrmann, Conroy Kydd, Vanisha Patel, Bhavesh
Patel, Bablu Chowdhury
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Merck Mission
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Performance Management

• What is performance Management ?
• (Also called Performance Evaluation, Performance
  Appraisal, Performance Measurement)
• What is an effective Performance Management
  System?
• Employee and supervisor to work together to set
  performance expectations, review results, assess
  organization and individual needs and plan for
  the future
• Measures of performance used by organizations
• Performance deficiencies- addressed through
  employee development programs
• Employee behavior- channeled to match the
  organizations strategic objectives
• Appropriate feedback to employee to assist with
  their career development

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Performance Management System

• How will it be used?
• Employee development
• Rewards and Compensation determination
• To enhance motivation
• Facilitate legal compliance
• Facilitate Human Resource Planning
• Who does the evaluations?
• Supervisors
• Customers
• Peers
• Self
• Subordinates

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Performance Management

• What will be Evaluated?
• Traits- Traits based methods
• Behavior- Behavior based methods
• Results- Results based methods
• Errors in evaluation process by Supervisors
• The Halo effect
• Stereotyping or personal bias
• Recency error
• Central tendency error
• Leniency or strictness error

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How to Evaluate Employees

• Absolute basis
• Standards of job
• Relative basis
• Employee comparisons
• IDs top performers
• IDs bottom performers
• Forced Ranking
• Data driven base for compensation
• Good for performance-driven organizations

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Means of Evaluation
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Other Critical Design Factors

• Link the performance management system with the
  training, development, and compensation systems
• Goals/objectives reflected in feedback
• Criteria incorporated into reward system
• Change models to reflect long-range growth
  instead of immediate past
• Self-managed work teams
• Flexible job assignments and responsibilities

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Degree of Standardization/Flexibility
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Why Managers Resist Performance Management

• Complex process
• Goals must be previously set to impact job
  performance
• Possible legal challenges
• Lack of control over process
• No connection with rewards
• Lengthy forms

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Managers Can Make Improvements in System
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COMMUNICATION As a vital ingredient in
Performance Management
Good communication, clarification of roles, clear
statement of expectations - all help avoid
performance problems.
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A Brief History
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1600s to 1800s
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1900s
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1900s continued
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Recent History
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Recent History
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The Old Appraisal System
The ratings were absolute based on individual
performance.
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6582 out of 6734
6603 out of 6736
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Im the one who carries this department, and yet
I get the same increase as everyone else. ITS
JUST NOT FAIR!
-A VERY DISSATISFIED EMPLOYEE
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Group Activity
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Benefits of Forced Ranking
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Goals of Forced Ranking

• Recognize and retain top performers
• Improve or remove least productive members of the
  organization
• Ensures that people who contribute the most to
  the organizations success and who appear to have
  the greatest potential for doing so in the future
  are identified, rewarded for what they have done,
  and provided with the chance to do even more
• Confronts those who are contributing the least
• Helps ensure the fulfillment of a basic human
  demand people get what they deserve

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Risks of Forced Ranking
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Negative Side Effects

• Lawsuits
• Complaints of unfairness from those who failed to
  be ranked in the top categories
• Various Design and Executive Flaws

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Culture Shock/ Competition Trumps Teamwork

• Excessive Competitiveness
• Survivor Game
• In-force element like teamwork or cooperation
  as ranking criteria
• A, B, C Players
• Benefits of process may outweigh culture shock
• You must rate high on partnership and teamwork.
  If youre a great performer but a terrible team
  player, you wont do well,
• Lisa Weber, V.P. MetLife.

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Resistance

• Managers are forced to perform honest
  tough-minded assessments
• Demoralizes Employees
• Insecure about Employment
• Top performers relish the challenge of meeting
  higher goals. What demoralizes them is a climate
  that tolerates mediocrity.
• May decrease to the work tempo of the
  organization or leave

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Subjective/Speculative

• Processs apparent Subjectivity
• Stems from misunderstanding of the term
• Objective- uninfluenced by emotions or personal
  prejudices based on observable phenomena
  presented factually objective appraisal
• Does not involve countability
• Uninfluenced by emotions or prejudices
• Helps accomplish the difficult task of making
  decisions that will affect the future of our
  fellow colleagues
• Persuasive Skills/ Horsetrading vs. Actual
  Performance Potential

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System Integrity Safe Guards

• Raise the issue directly as part of the assessor
  training program
• Demand that assessors present evidence specific
  observations to defend their judgments
• Set an expectation that other participants will
  challenge any recommendation on assignment to a
  category that is not sufficiently backed by facts
  evidence
• Sensitize session facilitators to the possibility
  of deal making dubious salesmanship
  substituting for tough-minded judgment

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Developing Stars

• Managers may concentrate on only developing their
  STAR
• Deviate money personal effort in those who are
  likely to survive the annual assessment firings
• Those ranked in the Bottom Bucket get less
  development attention
• The result is the best get better, while the
  poor performers have little chance to grow
  improve, Edward E. Lawler III.
• Unproductive Star System

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Not a Sustainable Process
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Not a Sustainable Process
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ALL-STARS

• Does not work appropriately for an organization
  that consists of entirely of ALL-Stars
• Managers see their employees as all being
  perfect, and there is no one better
• Purpose of FRS Identify relative differences
  among a group
• They are not poor performers
• They are simply less talented, have less
  potential than the rest of their world class
  colleagues

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Comparing is Unfair

• Develop assets that make them productive
• Mistaken belief that almost any worker is
  salvageable
• Company should be barred from cutting ties unless
  the individual has repeatedly proved to be
  incapable of meeting minimal standards of
  performance
• Let go of assets creating the least return
• Is it fair to compare the performance and
  potential of one member of the enterprise with
  that of others?
• Downsizing Is it fair to throw out strong
  performers and retain marginal ones?
• Is it fair to customers?
• Socialistic Environment vs. Capitalistic
  Environment
• Turkeys Eagles get the same treatment
• Forced Ranking eliminates this Socialistic view

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Illegal Discriminatory Results

• Employees feel they are being assigned to
  non-contestable labels vs. more descriptive
  constructive feedback
• Exercise caution on the labels to be used for
  different categories in the Forced Ranking System
• Full satisfactory give for many years
• Now telling them in spite all those years of
  acceptable appraisals, they are now a poor
  performer
• Provide people with the ability to contest the
  assignment they receive in the process
• Appeals process should be implemented into the
  Forced Ranking System

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Mistakes are Inevitable

• Strengthen weak areas where there are increased
  poor performers, by replacing them with high
  performers
• Some companies require an equal of cuts per
  area
• Talent Rich areas vs. Scarce Talent
• Scarce talent areas required to assign a larger
  of their populations to the bottom category
• Improve policies operating practices of Forced
  Ranking Programs
• Improve training assessment skills of rankers
• Dont just remove the worst of the best

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THE NEW PLAN
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Old Plan vs. New Plan Salary Distributions
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What Attributes to This SUCCESS

• Successful Marketing Strategy and Positioning
• Products marketed in most major markets and more
  than 100 countries
• Evidence-based, customer-focused marketing
  strategy is designed to implement and leverage
  the products unique benefits
• Scientific approach defines opportunity for the
  product based on unmet patient need and
  demonstrates the products distinct advantage.
• Rapidly respond to customer need by delivering
  innovative and lasting solutions
• Expertise in turning products into global brands
  
• Multimedia integrated marketing campaigns
• Constantly improving their products

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Opportunities for Employees Development and
Professional Growth

• To create a high-performance organization and
  stimulate individuals to achieve their full
  potential, Merck offers a wide range of training
  and educational programs and resources. (Merck
  Co.)
• Some of these skills development programs are
• -Transformational Leader Program
• -Managing _at_ Merck and Learning Teams programs
• -You Your Success program
• -Merck Sigma
• Tuition Reimbursement Program -the program
  includes financial assistance for undergraduate
  and graduate education

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Competitive Compensation and Benefits
Healthy Comfortable
Work-life balance
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Diversity Inclusion
Power of Differences, Utilizing those Differences
Total Workforce in 2007 21.5 -
Minorities 50.6 - Females --info from
Diversity Brochure

• Supplier diversity
• Employee diversity

Notable mentions of Diversity.

• Working Mother-Color
• Hispanic Magazine-Top 10
• G.I. Jobs-Top 50
• Diversity Inc. - Top 50
• Top 10 for disabilities
• Top 10 for Asian-Americans

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Merck Now
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Merck Now

• Merck is still one of the largest pharmaceutical
  companies in the world
• Revenue ?24.197 billion USD
• Total Assets ?48.350 billion USD
• Net income 3.275 billion USD
• Employees 59,800

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Merck Products

• Research-driven pharmaceutical company that
  discovers, develops, manufactures and markets a
  range of products
• Company's operations are principally managed on a
  products basis and comprises of two business
  segments
• Pharmaceutical segment
• Vaccines segment

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Merck Products
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Merck Now

• Merck stumbled badly in recent years
• Dwindling profits as some of its best-selling
  medicines lost patent protection
• Drought in its drug-development pipeline
• Lagged behind competitors in making deals with
  the biotechnology companies that have emerged as
  the main source of breakthrough drugs
• Vioxx settlement
• Overcharges settlement
• 7000 job cuts

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Merck Now- Vioxx

• Merck has agreed to pay 4.85 billion as part of
  a multistate settlement of accusations that its
  ads for the once-popular painkiller Vioxx
  deceptively played down the health risks.
• research showed it doubled the risk of heart
  attacks and strokes.
• More than 44,000 people

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Merck Now - Overcharges

• Merck will pay 671 million to settle claims it
  overcharged government health programs for four
  popular drugs and gave doctors fees and gifts to
  induce them to prescribe its drugs
• Drug companies are required to report to the
  government the lowest price for their medicines
  to ensure that Medicaid programs get the benefit
  of discounts or rebates on the drugs they buy.
• Prosecutors said Merck was hiding the steep
  discounts it gave to hospitals that used a set
  amount of Merck products and was reporting higher
  prices to the government.

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Merck Programs
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Leaving the Mark

• Merck has always enjoyed a good reputation, and
  our values and standards are not new. Recognizing
  that we operate in a dynamic and rapidly changing
  business environment, we could easily lose our
  good name if we do not continually reinforce our
  values and standards with our employees.
• Merck Co.
• Americas Most Admired Companies