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  1. 100 CASE STUDY PERFORMANCE MANAGEMENT AT RAINBOW TRUST Published: 27 November 2014 eresearch 2. e-research report e-reward.co.uk research report is published monthly…
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  • 1. 100 CASE STUDY PERFORMANCE MANAGEMENT AT RAINBOW TRUST Published: 27 November 2014 eresearch
  • 2. e-research report e-reward.co.uk research report is published monthly (10 issues a year). Single subscriptions are £255 a year + VAT. All advice provided by e-reward.co.uk is for general guidance only. Any readers relying on information contained herein do so at their own risk. e-reward.co.uk Ltd 33 Denby Lane Heaton Chapel Stockport Cheshire SK4 2RA UK Tel: 0161 432 2584 Email: post@e-reward.co.uk Web: www.e-reward.co.uk www.e-reward.co.uk is a web-based research and information service designed for UK compensation specialists and all those concerned with reward. Registered name: E-reward.co.uk Limited Company number: 4281768 Registered in England and Wales Registered office as above Editorial and subscription enquiries Editors: Michael Armstrong Paul Thompson Researcher: Sarah Silcox Production: Patrick Armstrong: www.pabps.co.uk Contact Paul Thompson on tel: 0161 432 2584 or email: paul@e-reward.co.uk. For details of previous issues visit the e-research report section of our web site. COPYRIGHT Copyright 2014 E-reward.co.uk Limited. All rights reserved. No part of this publication may be reproduced, stored in an information storage and retrieval system or transmitted in any form, or by any means, electronic, mechanical or otherwise, without the written permission of E-reward.co.uk Limited. Permissions to reproduce this report An enormous amount of hard work goes into the preparation of this report. You are permitted to copy some material for your own personal use, but we will take legal action against anyone who reproduces, condenses or adapts any substantial part of the report without the prior written permission of E-reward.co.uk Limited. Clients wishing to distribute copies within their own organisation should request extra copies from us at discounted rates. To avoid misunderstandings please write to us or email: post@e-reward.co.uk.
  • 3. CONTENTS eresearch 100 Organisation profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Who e-reward interviewed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Sustaining employee engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Objectives of the scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Business plan underpins performance management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Personal development review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Year-end review and ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Performance pay link . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Line manager training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 www.e-reward.co.uk 3
  • 4. PERFORMANCE MANAGEMENT AT RAINBOW TRUST eresearch 100 Performance management at Rainbow Trust www.e-reward.co.uk 4 Rainbow Trust, a charity that supports the families of children with life threatening or terminal illness, introduced performance management in 2010/11 as part of a strategic plan to produce a step-change in the number of families it is able to support. Sustaining employee engagement Four years down the line, the number of supported families has increased from around 1,000 to 1,700 and all parts of the organisation now work “more collaboratively,” according to Anna Powis, HR Manager at the Trust. Fundraising has also benefited, with income rising from £3.98 to £4.65 million over the same period. The new performance management scheme, and the more recent introduction of performance pay, is also “helping to sustain employee engagement” at the charity. Data from an annual employee survey, which regularly achieves 100% participation, demonstrate that a high proportion of employees fully understand the business priorities. Powis says: “This is a real sign we are producing alignment between individuals and the organisation, helped by the performance management system.” ORGANISATION PROFILE Name: Rainbow Trust. Employees: 100. Business: Charity providing support to families with children who have life threatening or terminal illnesses. Its 50 family support workers join families in their own homes and provide whatever emotional or practical support is needed. They may attend hospital appointments with parents, sit by the bedside of the sick child to give parents a break and take worried siblings out for the day. It supported 1,692 families in 2013/14. Location: Rainbow Trust has nine regional offices and a head office in Surrey. Financials: In 2012/13, the charity had income of £4.65 million. Web site: www.rainbowtrust.org.uk WHO E-REWARD INTERVIEWED Anna Powis is the charity’s HR Manager. She joined the charity in 2010 and is part of the Rainbow Leadership Team. She heads the HR function and is passionate about strong and fair people management. Her background is in the corporate sector, initially in sales training, moving into the IT industry, where she remained for 14 years. In 2001, a change in career direction from project management to human resources led to her becoming HR & Operations Director and part of the senior management team at an IT software and services company. Powis is a chartered member of the CIPD. Objectives of the scheme Four years ago, Rainbow Trust had settled into a position where it was able to support around 1,000 families, which it calculated to be only one in ten of those needing its help. A decision was taken to introduce performance management for both the care giving and fundraising parts of the organisation, underpinned by a purpose statement: “To introduce a performance management and performance-related pay process which is fair, endorses Rainbow Trust values, encourages exceptional performance and provides recognition to both individuals and teams for exceeding the agreed performance expectations of the families and children Rainbow Trust exists to support”. Powis explains: “The objectives behind the introduction of a performance culture were to foster a greater focus on the commercial side of the organisation, as well as to attract good quality staff.” Her team were conscious that performance systems can appear arbitrary, “so we were always looking to ensure that ours makes a difference”. The introduction of performance management in 2010/11 was followed by performance pay in 2011/12. Powis says: “Our system is quite complex and we knew it would take time to embed. Separating the two elements provided people with a chance to get used to the new performance management cycle before pay came into the equation.” She accepts that an increase in staffing over the past four years is also a factor in the charity’s
  • 5. PERFORMANCE MANAGEMENT AT RAINBOW TRUST eresearch 100 www.e-reward.co.uk 5 ability to support more families, but adds that “the focus provided by performance management is also key to our success; a new drive for efficiency has accompanied the introduction of performance management”. Business plan underpins performance management Performance management at Rainbow Trust is a continuous cycle of review and improvement. The setting and reviewing of performance and development objectives takes place annually, starting with the development of each year’s business plan. This plan, which involves all functions working together, is presented at an annual staff conference each May. Powis says: “This is a highly participative event. All employees get the chance to question the senior leadership team of five. The formal presentation usually only lasts around 20 minutes while the Q&A that follows can last a further hour.” The senior leadership team (SLT) develops organisational objectives – “Team Rainbow Trust Objectives” – based on the business plan once the latter is confirmed, and these are cascaded to line managers in May/June each year. For example, the five business objectives for 2013/14 include: “Support 1,500 families during the • period and increase referrals by at least 10% per care team.” • “Cross-organisational improved planning and reporting demonstrated by 95% of deadlines met over a 12- month period.” Other objectives cover raising the charity’s income and public profile and working effectively with volunteers. “It is then up to managers and individual employees to take these organisational objectives and translate them into individuals’ objectives by mid-July each year,” Powis explains. The “how” is as important as the “why” at the charity, so individuals’ objectives are split into three types: • Business objectives: Individuals will typically have three to five objectives in this area. Business objectives form a more important part of the performance plans of the senior leadership team and other managers than non-managerial staff. • People objectives: Objectives should be directly aligned to, and support, the development of people and relationships. Powis says: “This is all about how we work together, across the organisation.” Again, objectives are listed in order of priority, so that the first is more important than the fifth. • Personal development: “This is critical, as lifelong learning is central to Rainbow Trust,” says Powis. Employees and managers are asked to list in order of priority a maximum of two personal development priorities – for example, one skills-based and one behaviour-based. There is an explicit link between these objectives and an individual’s personal growth, competency development or career development plan. An employee’s performance and development review plan is designed to be a living document and the HR team recommends that line managers look at those of team members every quarter, particularly if there has been a change in the way of working. Powis says: “In my own department, our focus has recently been on making the HR system more user friendly. However, part way through the PM cycle we provided our 50 family support workers with computer tablets, but realised the existing system would not work on these so have altered our own objectives to incorporate investigating a new HR system, rather than making the old one more user friendly.” Personal development review Personal development has a separate cycle to performance management, starting in October each year. Powis explains: “Development is all about looking forward, whereas performance management is reviewing what has gone on in the past year.” Employees have a career discussion with their line manager during which they are assessed against the charity’s in-house competencies. Managers then agree personal development objectives for the next two to three years with employees. “These discussions are supposed to be very positive and not about people having to prove themselves,” Powis stresses. The SLT meets in November for a people planning meeting, during which each employee is placed in a nine-box grid, based on their performance, potential and career aspirations. “Not all of our employees want to become managers,” Powis points out. A mid-year formal check-in takes place in December, when managers and employees have discussions around progress against objectives, including whether any adjustments in the timescale for meeting them is required. Powis adds: “This is also the point at which a manager is expected to highlight any concerns about under-performance so that there are no surprises at year-end.”
  • 6. PERFORMANCE MANAGEMENT AT RAINBOW TRUST eresearch 100 www.e-reward.co.uk 6 Year-end review and ratings Two year-end review meetings are held between employees and managers as part of the performance management process. The first is primarily for the employee to put forward their summary of the year and to comment on how they have met each objective. “The manager’s role at this first meeting is to understand the employee view, not to provide ratings of their own,” Powis says. The manager proposes a performance rating to a calibration committee and a second meeting is held after the rating is agreed to cascade the overall rating via the line manager. The calibration committee is made up of leadership team members and an external facilitator. “With ten offices, we are quite dispersed, so it’s very important that ratings are consistent and fair,” Powis says. The calibration committee will confirm or question the rating put forward by an individual’s line manager. “We believe the system is fair because, typically, eight people are involved in agreeing ratings,” she adds. Calibration comments on an individual’s performance management review should include a summary of the year, the reason for the overall performance rating and a comment on priorities for the following year. This committee will also determine the Team Rainbow Trust rating used to determine the “team” element of performance pay (see below). Rainbow Trust uses a five-point rating scale, but one in which a “3” rating is not in the middle: “We are trying to differentiate in the system, so do not want two relatively poor ratings for ‘1’ and ‘2’, as managers would simply not use a ‘1’,” Powis explains. The ratings are: 1: Did not meet most key objectives. • An employee had an unsatisfactory year and did not meet expectations on the most important objectives set. • 2: Met most key objectives. • 3: Met key objectives. Met expectations on most key objectives and exceeded some objectives. • 4: Exceeded key objectives. Exceeded expectations on the most important objectives and met expectations on others. • 5: Significantly exceeded most key objectives. Significantly exceeded expectations on the most important objectives and met expectations on others. There is no forced distribution of these ratings across the organisation, although Powis and her team do have expectations for what proportion of employees will receive each rating – for example, the largest single group of employees is expected to gain a “2”. Objectives are prioritised and weighted according to employee function – for example, people managers will have a higher weighting attached to people objectives, compared with members of the SLT, whose objectives are more closely aligned and weighted to the business results. Performance pay link Performance pay, which was introduced in 2011/12, is intended to provide fair financial reward for individual and team performance, as measured by an individual’s performance rating and a rating for the organisation as a whole, measured against the business plan-related Team Rainbow Trust objectives. Total annual pay awards are made up of a consolidated increase in basic pay and an unconsolidated performance element, typically split 40/60. The value of each element of the pay award varies with the individual’s performance rating. For example in 2012/13: • An employee rated 2 – Met most key objectives – received 1% consolidated increase in basic salary plus a one-off performance payment of 1.25%. • An individual with exceptional performance, rated 5, received a 1.75% consolidated increase and 3% performance pay. There is also a facility to flex the total pay award individual employees receive. “It needs to be complex to be fair,” Powis argues. The flex element, which can increase the award to a level “5” performer by up to 40% in a good year, and conversely depress that of those rated anything under a level 4, is designed to take account of role responsibility and overall Team Rainbow Trust performance. Line manager training “The challenge for us is that Rainbow Trust is a dispersed organisation, meaning we rely on line managers to cascade all elements of the scheme effectively to their teams. This does require on-going training to ensure messages are embedded,” Powis says. The HR team recognised that the new performance management system would take time to embed, so started by training line managers separately, focusing particularly on conducting effective personal development meetings with employees. In the first two years of the system, the HR team did have to pass back some ratings that managers recommended – “all at the top end of the distribution” –
  • 7. PERFORMANCE MANAGEMENT AT RAINBOW TRUST eresearch 100 www.e-reward.co.uk 7 but in 2012/13 all were within the expected range, “which shows the system is embedding,” Powis adds. “Initially, the focus in our communications with managers was all around differentiation, for example, making it clear that there should be a range of ratings in each team. We also stressed that it is the manager’s job to both celebrate successes, but also to manage poor performance.” The HR role at Rainbow Trust is to support managers to use the system, to provide training (including as part of induction), fielding questions and administering the system (processing forms and highlighting impending deadlines). Powis and colleagues have recently reviewed the performance management process, for example, asking managers and employees for their views on its usability. This feedback will be used to develop the system. She adds: “Already we realise that we need to do more on the communications side as the feedback shows that employees and managers are not aware of some aspects of the scheme.” Lessons learned Powis shared with e-reward some of the key lessons learnt over the past couple of years: Senior buy-in:Work hard at obtaining • this at the earliest possible stage. • Keep communicating: Put out the message that performance management will “not go away” but is a way of helping the organisation reach its objective of supporting more families. • Make it live: Powis says: “We recognise that we may have sat back a bit in year three, so now need to up our game and keep communicating.” • Work with line managers: The charity focused initially in its manager training on explaining the process. Powis recognises that it now needs to give them the leadership skills to work the system effectively. • Performance management is not an HR add-on: PM is not a nice-to-have addition, but a vital part of reaching the organisation’s goals. “Our own personal development is as important as that of the organisation, we need to spend time on ourselves at some point in the year,” Powis concludes.
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