A practicing performance culture is a crucial advantage in highly competitive markets. An exemplary sector for such a market are insurances. In such tough competition, insurances as a service provider are particularly dependent on the performance of their employees. In light of the release of a new book titled “Change Management in Versicherungsunternehmen” (Change Management in insurance companies), hkp.com talked to hkp/// experts Dr. Harriet Sebald and Leon Jacob about the establishment of an active performance culture in firms by consistently using a Performance Management Process.
Mrs Dr. Sebald, Mr Jacob, what is your understanding of Performance Management?
Dr. Harriet Sebald: In any business, leaders exchange views about responsibilities and expectations with their employees – irrespective whether and to what extent these expectations are operationalized through formal systems. Performance Management is exactly this form of dealing with performance within the firm. A consistent Performance Management ensures comparability in the assessment of performance, guarantees standards of quality and conduct and enables links with other corporate and HR processes.
With regard to Performance Management, HR managers and executives like to speak of a performance culture in their companies – what exactly is behind this idea?
Dr. Harriet Sebald: A performance culture can be described as the pursuit of ambitious goals by the organization and its employees. Along classic economic goals, performance increasingly contains behavioral aspects in accordance with the organization’s code of conduct and leadership competencies.
Leon Jacob: Companies with a strong performance culture are typically characterized by the fact that they actively design their performance management and support and control it through a company-wide established process. These companies make the performance mindset a part of their corporate culture.
In what way do companies with a high performance culture differ from their competitors?
Dr. Harriet Sebald: Specifically, a number of significant differences can be noted: Firstly, performance is an explicit topic in the organization, particularly for executives. One consequence of this is regular and specific feedback. Secondly, performance appraisals are more transparent and fair. In addition, companies with a deeply rooted performance culture are more confident to differentiate between strong and rather low performers.
Leon Jacob: And finally: performance pays off – both in terms of financial consequences as well as in form of attractive career opportunities for top-performers.
Dr. Sebald, in your workshop at the German “Vergütungstag” 2014 you focused on the topic of consequence management. Where is the link to performance management and why is this element so important?
Dr. Harriet Sebald: The introduction and implementation of a performance management process is only the first step. To foster a performance culture, it is crucial that there is a distinction in the outcomes for high and low performers and possibly high potentials. Specifically, this means that after calibrating individual performance appraisals in calibration panels, individual consequences are triggered.
... which brings us back to the third point you mentioned, what companies with an extraordinary performance culture do different than others ...
Leon Jacob: Exactly. Consequences can be broadly divided into the areas of compensation and development. Traditionally, monetary consequences are oriented towards the individual results of an employee, that is, the classical target achievement. In comparison to that, consequences in the area of development are typically based on the competence and potential assessment of an employee. However, the overall trend goes towards a more holistic view of consequence management.
Dr. Harriet Sebald: In this context, we speak of consequence caskets that are provided to executives for the derivation of individual consequences for their employees. In any way, employees think holistically about their careers and experience appreciation not only in the form of salary and bonus, but especially via non-monetary consequences. That is why there is a trend towards flexible models that allow each employee’s supervisor to derive the relevant consequence for a given employee.
In the book “Change Management in Versicherungsunternehmen” that was published in November you discuss the role of Performance Management in change processes as well. Where is the starting point for Performance Management in this case?
Dr. Harriet Sebald: In the context of change initiatives, Performance Management provides a valuable tool that can help create a common understanding of the goals of a change process and to increase the commitment within the workforce. Both dimensions of performance – goals and competencies – offer the possibility to address the content of the change process and to promote the desired change in the company.
Leon Jacob: Change initiatives such as restructuring, extensive cost-cuttings or strategic realignment can be anchored in form of targets at the level of the individual. The measurement of competencies, that is, the behavior of an employee, is particularly suitable for the support of cultural changes such as the introduction of a new management culture or new corporate values and helps with enterprise-wide compliance – especially in large corporations.
That means, with a larger change process taking place, one cannot pass the issue of Performance Management?
Dr. Harriet Sebald: Absolutely! Almost every Chairman of the Executive Board or CEO joining a company from the outside uses the definition or revision of corporate values in order to initiate a cultural change on the basis of their own understanding of leadership. By embedding this in the performance management and linking it with consequences in terms of remuneration and development they turn out to have a big impact.
Leon Jacob: What you measure, is what you get! This statement is particularly true for performance management.
To what extent are insurances different from companies in other industries?
Dr. Harriet Sebald: Although running on a long-term business model the insurance industry faces a variety of challenges: Increased competition, especially in direct sales, increased cost pressure, transparency and digitalization – just to name a few. In such a business environment a solid performance management is particularly important to ensure inclusion of employees and to meet the challenges of the future with a strong workforce. Besides the major international insurance firms, also those focused on the German market increasingly take the initiative and revamp their performance management processes.
Mrs Sebald, Mr Jacob, thank you very much for the interview!
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