Who is your Chief Performance Officer?

This week Barack Obama appointed a Chief Performance Officer for the Federal Government, focused on assessing the performance of government programs and finding opportunities to reduce waste and eliminate low-performing investments. So who is the Chief Performance Officer in a business?

We have been studying this issue and I wrote about this topic several years ago in CLO Magazine, so lets revisit this issue in today’s economy. My thesis is that that strong Human Resources and L&D leaders have the opportunity to play this role in a highly strategic way.

Let us look at the three “owners” of performance in a business:

  1. Business Leaders own operational business performance.

    Unlike the Federal Government, where program managers are really “spenders,” in our companies the people who spend money are held directly accountable for results. The VP of Sales has a sales quota, the VP of Manufacturing has a production and quality quota, and the VP of Customer Service has a customer satisfaction and rate of response quota.

  2. Finance Leaders own financial monitoring and budgeting.

    In most companies the CFO or Finance organization monitors spending, headcount, and expenses. Their job is not to drive performance, per-se, but rather to monitor financial performance and give the business and HR leaders the information they need to quickly realign resources when things are not going well.

    For example, when Starbucks realized its business was slowing last Fall, the CFO quickly announced a slowdown in sales, store traffic, and other information – this information was then used by retail operations and staffing to cut or reduce hiring and close strategic locations. Ultimately the work of improving performance goes back to the business leaders.

  3. Strategic HR and L&D Leaders create Processes and Systems to drive performance.

    When done well, strategic HR or L&D leaders (often the CLO, or VP of OD) actually know more about why performance suffers than many other leaders. They have the tools and visibility to understand where weak leadership, low engagement, mis-alignment, or skills-gaps are holding the organization back.

    In addition, the tools of talent management (performance management, goal alignment, leadership and supervisory development, succession management, total rewards) are powerful levers over performance. Our research clearly shows that these “people processes” really matter.

How People Processes Drive Performance

Consider some of our research findings over the years. Organizations with a strong “learning culture” are 12-15% more profitable over a 10 year period than those without such a learning culture (The High Impact Learning Organization®, 2008). Organizations with strong competency-based performance management processes drive higher revenue growth and profitability by industry (The Role of Competencies in Driving Financial Performance, 2007).

Consider the impact of people on expense and resource allocation. The typical business spends 60-70% of its total expenses on payroll, and of course employees make decisions every day about where to spend money. When people are unproductive or misaligned, vast amounts of money are wasted.

Finally consider the importance of decision-making in an organization. Every day virtually every employee makes decisions about what to do, how to behave, how to deal with customer or internal problems, and how to share or interact with others. These individual decisions (like tiny little economies in the macro-economy) make up the lifeblood of organizational performance. When the people side of the business is not managed, dysfunctional and unproductive decisions are being made all the time.

Building the “People Performance Model”

I would suggest that one of the most strategic things you can do as an HR or L&D leaders is to build your organization’s “People Performance Model.” Essentially this means uncovering the “secret sauce” which makes your organization perform. Let me give you an example.

This week I had the opportunity to talk with the Chief Talent Officer of Lowes. He told me that after a year of research among thousands of stores they found that the #1 driver of retail store financial performance is employee engagement. This is not a glib or simple conclusion. Similar research by Gallup (The Human Sigma), found that retail stores with high employee commitment levels generate 3.4X the return of stores with low employee commitment levels. In fact, this research found that retail employee engagement has a bigger factor on customer retention than satisfaction with the products themselves.

So in the case of Lowes, where the Chief Talent Officer analyzed store performance in detail, the company has now decomposed the level of engagement into three driving factors: employee-manager relationship, job fit and career opportunity, and total rewards. These findings are not rocket-science, but in the case of Lowes the correlation analysis is so strong that the company can go into each store, measure these three engagement elements, and predict how well a store will perform.

Lowes also found something else. There are two pivotal job roles which drive these three engagement indexes: the store manager and store sales manager. The store manager is a real manager; the store sales manager is actually an individual contributor who one would consider a strong “influencer” of in-store employee engagement.

This work is what one could call the “People Model” or “People Performance Model.”

What Lowes can now do is filter all their HR and L&D investments against this model. In their case the Chief Talent Officer is looking at the company’s leadership development programs with a strong focus on what it takes to help store managers better coach, align, and communicate with employees. In this case the solution involves a very specialized, highly customized supervisory development program.

Why HR or L&D Leaders are so Important

I would argue that you, as a strong HR or L&D leader, must lead this type of effort. You, as an HR or L&D professional, best understand the way that performance management, leadership, rewards, learning, and systems fit together to drive high performing teams and organizations. By working with your leadership, you also have the closest understanding of your company’s “secret sauce.”

As I will be presenting at IMPACT 2009® this year, our latest research clearly shows that organizations which implement high-performing learning cultures, strong talent management strategies, and build a true “people plan” drive much higher long term (5-10 year) financial performance than those which have weaker or less mature people strategies. If you are an HR or L&D leader, you should rethink your role as the “Chief Performance Officer.” Rather than just “implement HR programs,” focus on understanding the core people model in your organization:

What are the critical roles that drive success? What is the profile of a high-performer in your organization? What cultural and leadership elements drive success? Why do people fail in your organization? How can you use this information to build HR and L&D processes which build, reinforce, and improve these factors?

If you think about your role in this way, I can guarantee that you will become a “Chief Performance Officer” – and such a focus will improve your career, your impact, and your organization’s success.

About This Analyst

Josh Bersin writes on the ever-changing landscape of business-driven learning and talent management. His favorite topics include strategic talent management, creating high-impact learning organizations, and how organizations drive business change and competitive advantage through talent strategy and technology.

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