How Novartis is Reinventing Performance Management

reinventing performance managementNovartis, a global healthcare company based in Switzerland, has recently reimagined its decades-old approach to performance management. The initiative arose after employees collectively identified performance management as one of the biggest issues in the company.

Novartis has taken a scientific approach to diagnosing, developing, piloting, and productizing its performance management approach and has already seen early success:

96% of employees in the performance management pilot program said they never want to go back to the company’s old systems.

The company is successfully fueling a scientific and entrepreneurial spirit across the company through an inspired, curious, and “unbossed” culture. 

 

Download your copy of A Winning Approach to Employee Success: Research from Harvard Business Review Analytic Services >>>

 

In this blog, we’ll share highlights from a recent episode of the Digital HR Leaders podcast—featuring David Green, Director of Insight222 and Steven Baert, Chief People and Organisation Officer at Novartis. We’ll discuss:

  • 3 steps Novartis has taken in reinventing its performance management approach
  • 4 main elements of the company’s new performance management system

 

Step 1: Align with executive leaders. 

 

Before beginning to think about changing  your performance management system, it’s essential to partner with your executive leadership.

"If you are wanting to embark on the journey of reinventing performance management in your company, you need to spend a lot of time first aligning with your executive team," says Baert. "If they aren’t 100% believing and behind your work, it becomes very difficult to make progress."

 

3 tips for aligning with executive leaders

 

1. Explain the benefits.

Performance management programs are a huge investment, so leaders want to be sure there is real impact behind the efforts. Explain the benefits of your initiative not only for employees, but for your business—and help leaders understand the significant costs of a disjointed performance management system.

 

2. Identify the organizational problems your new approach can solve.

A simple way to secure leadership buy-in is to identify business problems and explain how your new approach could help solve them. For example, if employees are feeling lost or disconnected from their work, implementing a new way of setting and tracking goals can help drive connection and clarity (and hopefully an increase in goal achievement).

 

3. Connect your performance management program to business objectives.

Your performance management program shouldn’t exist in a vacuum. As you develop your approach, work with executives and managers to identify key business objectives that you’d like to see improvement on. Analyze the data to understand where your performance management initiatives are helping and where they might be falling short. 

 

Step 2: Define and build on your talent philosophies.

 

One of the most important elements of building a new performance management approach is ensuring it aligns with the culture you are trying to create.

"You really need to focus on your destination, rather than what you are walking away from," says Baert. "Be clear about your new direction, and make sure it’s completely aligned with the environment and culture you are trying to create for your company."

If you don’t have a clear vision for your culture, take time to discuss that vision with your leadership teams. What do you want to see and experience when you walk around this organization 2-3 years from now?

 

Novartis’ Vision for an "Unbossed" Culture

For Novartis, the future of the company’s culture included what Baert calls an "unbossed" culture—focused on curiosity, empowerment, ownership, and experimentation.

"The concept of the leader knowing it all, the leader being the smartest in the room, is actually an outdated concept that hinders innovation," says Baert. "Novartis wanted to completely rethink how we need and leverage our teams."

A key to Novartis’ unbossed culture is the fundamental belief that the answer to any problem is within the room, within the broader team. It’s the leader’s job to create clarity in terms of direction, but the leader needs to show up self-aware, vulnerable, and able to create psychological safety for the team to come up with all types of ideas, says Baert.



Step 3: Take a scientific approach to change and decision-making.

 

Ask a question.

Performance management has been a hot topic over the past decade. Baert says it’s a phrase we use very loosely. In order to be successful, organizations must get to the bottom of what they are trying to impact with their performance management processes.

"You need to be very clear about why you want to make a change and what it is you are trying to achieve,” says Baert. “What is the problem you are trying to solve?"

 

Research & hypothesize.

When Novartis embarked upon its performance management culture change, they held a crowdsourcing event with company associates. Through idea generation and voting, performance management quickly arose as the number one request for change. 

"It was very, very tempting to take quick action," says Baert. "If people don't like performance ratings, let’s get rid of them. But we knew that was only dealing with a superficial symptom."

Before taking any action, Novartis worked to clearly understand what the problems were—and what the alternatives looked like. Leadership wanted to define exactly what they were trying to achieve and how they would know if they were successful. This process took several months and involved studying experts and experiences at other companies.

 

Read: 12 Performance Management System Questions to Ask When Evaluating  Solutions

 

Experiment, observe, and analyze.

Once leaders felt like they had a handle on what was happening, Novartis launched a pilot program where they tested their hypotheses with 16,000 associates. They started measuring active and passive data and surveyed employees regularly, comparing pilot group survey responses with non-pilot group survey responses.

Baert believes this scientific approach has been much more effective than traditional approaches to HR decision-making.

"Too often we went on the basis of our connectivity, our proximity to people to say ‘here is how the organization feels about this,'" says Baert. "It was important that we find a more data-driven approach to understanding how people feel. You only know the answers to important questions when you have data."

 

Present findings.

Finally, Baert brought the data they collected back to leadership and other key stakeholders. "You need to establish trust with the organization that you are actually listening to feedback, and that you are using the data to learn and not to spy," says Baert. "Then you need to go to your business leaders with that data with a perspective that is relevant to them. It needs to be relevant to where your business is going."

 

4 key elements of Novartis’ new performance management approach

 

Novartis focused on four key elements in their reinvented performance management approach:

  • Empowering objectives
  • Effective feedback and coaching
  • Meaningful employee recognition
  • Transparent and fair rewards

“At the surface, people were telling us they don’t like performance ratings,” says Baert. “When we peeled that back, there were four things we needed to address.”

 

Read: 5 Steps to Move Toward Continuous Performance Management

 

1. Empowering objectives.

Novartis learned that employees were not inspired by the objectives they worked on. Objectives were often top-down and focused on the calendar year—when in reality, different types of work run through very different cycles.

Leaders at the company worked to apply the idea of "unbossing" to objectives.

"When people are inspired by a purpose, they’re in the best place to come up with suggestions of what they think they should be working on to achieve goals or make progress."

Novartis created a process that allowed for rolling objectives. Employees create big, bold goals for themselves—on a timeframe that is relevant to the work that they’re doing. To keep teams aligned and in sync,  they participate in team ceremonies where they set and exchange common, big, bold objectives for the team.

 

2. Effective feedback and coaching.

Research also showed that employees felt they were not getting quality feedback and coaching. Ratings felt like the only type of feedback employees were getting from their managers—and feedback only came tied to bonus decisions.

"We discovered that feedback and coaching are skills," says Baert. "You need to learn to give feedback, and you need to learn to become a better coach."

Novartis made a significant investment in developing tools and partnerships to train people managers on coaching and feedback. They also reimagined their 360 feedback process to dig deeper and increase transparency.

Read: 10 Tips for Building a Feedback Culture

"Feedback should come in a safe way, not just that you fall short of an expectation," says Baert. "You need to do this work in a very caring way."

Novartis employees get 360 feedback four times a year from their teams, peers, and managers. They share the data and discuss it with the entire team, creating a safe and supportive environment to receive, process, and act on feedback.

"When you get feedback and discuss it in a very loving, caring way—you are all going through this together," says Baert. “There shouldn’t be any embarrassment to it. It puts us in the position to say to a colleague—’hey, I’m working on this, can you help me?’ So then, three months later, you start to see the one big thing you have been working on is actually starting to pay off."

 

3. Meaningful employee recognition.

Novartis also learned that employees weren’t feeling recognized. People would say they understand there is a bonus, and  they were okay to take a lower bonus, but they still want the top rating because they felt they had done a great job this year.

To solve this, Novartis created a platform where people can give real-time recognition to each other. Not just up and down, but lateral and team recognition. Recognition can be in the form of a funny card, a nice comment that you send, or a monetary award through points that employees can assign to each other.

"We have seen a big uptick in recognition and you can even see a kind of social network of how people recognize each other throughout the broader universe of Novartis," says Baert. "It’s not just people working shoulder to shoulder that keep on recognizing each other."

 

4. Transparent and fair rewards.

Finally, Novartis learned that employees were not pleased with how rewards were  handled.

“We still believe in paying for extraordinary performance,” says Baert. “The concept of everyone getting the same pay when they have delivered different quality of work did not work for us.” 

As leaders wrestled with how to keep a pay-for-performance culture, they came to the realization that two things matter most: transparency and fairness.

Read: 6 Ways to Increase Clarity Around Employee Compensation

Novartis rewards employees and teams for impact—both what one has achieved and how they have achieved it. Leaders ask employees which teams and individuals have made a high  impact on their year. Those who have made a tremendous impact on the company are considered for increased bonuses on top of the default bonus. 

 

Conclusion

 

Baert says Novartis’ new approach to performance management has unlocked new  potential and brought teams together.

"Once people believe in something and they put their energy behind it, it’s amazing what an organization can achieve," says Baert. "People move much faster because they feel empowered and inspired."

His advice for organizations trying to reinvent their performance culture?

  • Focus on the destination
  • Be clear about where you are going
  • Make sure your direction is aligned with your culture
  • Take time to discuss with your leadership team
  • Build a hypothesis
  • Test your hypothesis
  • Listen, learn, create a feedback loop

"You are replacing 20-30 years of history—don’t expect to fix it in three months," says Baert. "Listen to your associates, improve, fine tune, learn, and spend time training and dedicating the resources to make it happen."

 


 

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