Penn Mutual's Liz Heitner on Effective Performance Management

According to Gallup, only 2% of CHROs strongly agree that their performance management system inspires employees.

In this episode of Better from Great Place To Work, we delve into the intricacies of performance reviews and goal setting with Liz Heitner, chief human resources officer at Penn Mutual.

She shared how Penn Mutual has transformed its approach, resulting in a dynamic performance success program. They've shifting from annual reviews to continuous, real-time feedback that's connected to business goals. Leaders are aligned and employees are actively involved in the process.

She also encourages the use of AI tools like ChatGPT to boost productivity and innovation, while upholding ethical guidelines and transparency.

On why performance management often doesn’t work well:

One thing some programs get wrong is this focus on a bell curve that's predicated on the fact that you have low performance, that you’re hiring people that do not fit and will not be successful. That's actually a very small percentage of most populations of most organizations. The focus really needs to shift to empowerment, enablement, and people really bringing their best. It's not something that you can just say, "Oh, yay, we've arrived. Check the box. We're done."

This is how contemporary leaders, operating in these remote, high-performing organizations need to focus their time and energy. This is the J-O-B so to speak.

A lot of these performance management programs are a check-the-box compliance exercise, a tool for delivering merit and bonus — and not thought of as the fiber of how we work and accomplish results as a company.

On how Penn Mutual made changes:

We took a test and learn approach.

Step one was goal setting, and we did a lot of training and development to support this effort. People said, "I'm not really sure how my role relates to these areas of the business. I'm really only focused on this area." And so having those integrated conversations with leadership to ensure the goals made sense down to the individual level and cascaded down was huge. And you’ll learn what people shouldn't work on. “What are the things that we no longer are going to work on that don't align with the priorities?”

We also moved our performance calendar to align with our business cycle. And rather than it being an annual event — performance management, success, or feedback — it happens in real time and we’re normalizing that for employees.

And we looked at the alignment of rewards. If you get your performance review and your rating in June, you might ask, "How does that connect with my bonus that I get in the following February?" So again, making sure that we lined up performance elements and the reward cycle in the right place was something we got a lot of credibility around.

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On the importance of aligning leaders:

You need to get everybody focused, committed, and on the same page around what you’re trying to accomplish with your performance management system. That has been a continued focus of our leadership development and training.

At our leadership summit for the top 150-200 leaders, we made sure that we're aligned and committed to the results and priorities as a company. That was a very impactful cultural catalyst, if you will.

On professional development programs:

Organizations need to spend some time reflecting on, "What are the skills, what are the capabilities, what are the competencies that we really need to be successful?" Not today, because today's baked, but five years from now, and, "How do we really chart that course?" That’s all aligned to your business goals. I would get aligned around those goals before you develop and deliver any learning and development activities. That’s so critical.

The other piece of this is thinking about how those programs will be received by employees. If the content is not engaging or relevant, and people don't understand the “why,” it leads to low participation and retention.

Make sure you engage your employees in the design process and explain to them why you're focused on the things you're focused on.

On expanding tuition reimbursement programs:

I think everyone is aware that degreed programs are less and less relevant to equipping current talent in the workforce with the skills they need for the future. We've heard the sound bites around the shrinking half-life of a skill, and it's interesting. There's so much to be gained by degreed programs, but there's so much value we can get out of certifications and courses so we shifted tuition reimbursement program to open it up for employees so they can build skills in the areas where they see fit, where they think they're going to get value.

On setting internal AI guidelines:

If your company doesn’t have an acceptable use policy that addresses AI – whatever your stance is – that is the first place you want to start. Get on the same page from a policy standpoint around what is acceptable and what isn’t within your environment.

We're taking a thoughtful look around the benefits and risks these tools can bring to our employees, policyholders, financial professionals and other stakeholders. Where I think we landed is that this technology has incredibly impactful possibilities for productivity. The toothpaste is out of the tube. It is not going away.

Also recognize that this technology is not something that we, as an employer, are procuring and providing, it's readily available on everyone's cellphones.