In these times when the businesses are greatly suffering with the financial crunch, business organizations are more critical in evaluating employee performance like the way they evaluate their company’s financial statements. We have heard massive lay offs in various industries from all across the globe since the latter half of 2008. As companies tighten their belts in cash and other asset’s outflow, they also begin implementing stricter and bolder actions to improve employee performance while costing them only modestly. Performance Management in IDEO
Businesses, may it be small or big, employs evaluation and control process. This ensures that the company is achieving what it is set out to accomplish. It compares performance with desired results and provides the feedback necessary for management to evaluate results and take corrective action, as needed. Performance is the end result of activity (Wheelen 2004, p. 243). To measure the acceptability of the results of the company’s activities, managers initially set their projected results and compare it to the actual performance of the company.
It is acceptable when the actual performance falls within the desired tolerance range. Otherwise, it is not acceptable and calls for a contingency plan or a corrective action to correct its deviations from the derived projections (Wheelen 2004). Performance management has been practiced by businesses to ensure that employees do not just perform their jobs but excel in their line of work and take pride in the work that they do. This objective of performance management derived its five key areas namely: planning, monitoring, developing, rating and rewarding employees (Haworth 2007).
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Performance management must be purposeful and beneficial to an organization and it must be unbiased to the management and its human capital. Robert Bacal (2004) suggests that an effective performance management results to the following: • Enhances sense of management control over process and outcomes. • Increases management ability to ascertain problems at the outset. • Reconciles employee goals and functions to general organization objectives, thereby creating a sense of contribution for the employee. • Drives employees positively by permitting them input into and ownership of their objectives and standards of performance.
• Facilitate communication by ensuring there is clear comphrension and acceptance of management expectations about deliverables. • Supports remedial action or disciplinary action because a breach of standards can be defined objectively and in a measurable way. • Provides a system where feedback can be accorded to employees on a more objective basis, and not on management's subjective criterion. • Provides objective criteria that management can utilize to make decisions regarding pay scale, and promotion (Bacal 2004). Performance management techniques differ from one organization to another depending on the business’ corporate culture.
So, to get a better grasp of this concept of performance management and its five key areas, we shall look at it in the representation of the activities, practices, and corporate culture of IDEO. IDEO is a design company based in Palo Alto California, with other offices in San Francisco, Chicago, New York, Boston, London, Munich and Shanghai. It was created in 1991 when David Kelley Design merged with two companies: ID Two which is led by Moggridge, and Matrix which is started by Mike Nuttall (Kelley ; Littman 2001). The merger bought under one umbrella all services client companies needed to design, develop and manufactures new product.
Kelly took over as the Chief Executive of the new firm since he has the largest ownership in the company (Thomke 2000). IDEO pioneered the design version of concurrent engineering--the fusion of art and engineering to produce aesthetically pleasing products that were also technically competent. From its inception, IDEO has been a force in the world of design. It has made a name for itself by designing hundreds of products such as the first mouse for Apple, Vertech Alpine/ Ski for Avocet, Crest-no squeeze and the stand-up tube for Procter and Gamble (Thomke 2000).
Its major clients are Apple Computer, AT;T, Samsung, Philips, Amtrak, Steelcase, Baxter International and NEC Corp. In the 1990s, IDEO won more industry awards than any other design firm worldwide. It came to national prominence when it allowed ABC to televise a segment showing its designers meeting the challenge of re-engineering the commonplace shopping cart in just five days (Thomke 2000). IDEO’s corporate culture is very unique. Its policies were more lenient as compared with other companies in the manufacturing and service industries.
The organization is flat in structure. There is no management hierarchy. This culture was inspired by David Kelley’s frustration from the structural demands of the companies from which he has previously worked. IDEO fosters an environment that encourages workers to think freely and creatively. Top management regard their employees very highly and they trust their employees to do more spectacular things when not closely managed than when they are under close monitoring (Thomke 2000).
While early critics say that this approach of IDEO was not effective in the long term, the innovative consultancy firm proves its successful running for nearly two decades now. Many are wondering how this is possibly a successful approach. Mainly, it is due to the keen recruitment, selection, and hiring processes of IDEO. The company does not just hire people with brilliant ideas. Albeit this is a good quality, they believe the people who make great employees have a set of skills than just having bright ideas (IDEO 2009).
Experience and comfort in working in teams are another factor that IDEO considers in prospective employee since the nature of their job involves collaborative effort. The most important factor that IDEO considers is “cultural fit” because they want their workplace to always have a peaceful and a happy atmosphere. They are adamant that they’re employees be recognized and respected by their co-workers. IDEO observed that the most effective way they can preserve their company culture is by hiring people who the present employees already know and trust (IDEO 2009).
Through keen hiring measures, management is able to restrain hiring unproductive and floating employees that is usually the kind of risks companies with loose and hands-off management is facing. With a very low turnover rate over the two decades of the company’s existence, Kelley prides the IDEO’s human resource practices as truly effective (ABC Nightline 1999). A good motivational measure to elevate the performance of IDEO’s employees is by making them feel some kind of personal ownership in the company and having no troubles with their peers.
As the company grow global and there is a need for larger workforce to respond to the growing list of clients, IDEO has organized a new structure that raise camaraderie among employees while maintaining levels of productivity (IDEO 2009). IDEO has now divided into sub-divisions which they call studios. Each studio is comprised of approximately twenty five employees assigned to brainstorm, design, and develop a project of their own choice. In each studio stood a studio head, however, he is no different to the other studio members since he performs the role very autonomously.
He just systematizes organizational duties so there is a smooth flow in the project development of his group. The number of participants in each studio is said to be ideal since they is no need to put much rules to organize the team. Team members are also given the chance to pick other employees to join their team. Truly, this kind of system has very little chance of problem occurrence, thereby making employees more enthusiastic to do well in their jobs (IDEO 2009). In addition to the studios, IDEO’s former CEO, David Kelley, was forced to create the project leader position.
Not because performance of employees has dropped but because he feels the company needs to take this step as a growing company. He was initially reluctant to install a bit of structure to the company but he has to do this given the greater demand for the innovative design consultancy firm. IDEO usually gets contracts to engineer or to design a product. Now, they get the whole project - engineering and design – so it requires more people to coordinate with in a project. One way to make coordination simple is through a project leader (IDEO 2009).
The project leader position is the most sought after position in IDEO because the one designated to that position generally comes to a decision of what the product will turn out to be in the future. This position does not take on much managerial role. In actual fact, it is not even permanent since the position rotates based upon the availability and skills of employees in relation to the project. Employees who work as a project leader on one task will have to serve under another project leader for a different project (IDEO 2009).
This way, every employee is exposed to various projects that stimulate their minds to develop and design new projects that can have market potential in the future. Designating one as a project leader is one way of rewarding a deserving employee for a job well done for his previous works. The one put in that position indeed has the highest privilege for deciding the future of an innovative product (IDEO 2009). IDEO rarely holds meetings. Instead, they have “idea sessions” that requires invitations. Again, this motivates employees to work harder in order to get invitation to the idea session (VA 2000).
This session is intended for brainstorming and is mostly attended by people who can air out an opinion on a meticulous subject (VA 2000). IDEO hires bright people with wide array of skills. Every employee is encouraged to voice their opinions on each project and even encouraged to design products that may be used to market in the future (VA 2009). Each idea, design, or prototype is valued by IDEO. Small ideas can get vast market potential that is why IDEO has put up a “tech box” where employees store their product plan, designs and prototypes. This Tech Box plays a huge role in motivating employees.
It encourages them to think innovative ideas that can contribute to the company or to a project. IDEO believes that big breaks arise from little ideas so every little contribution of employees is greatly valued by the company. IDEO reviews the contents of the Tech Box every now and then to see notable works that can possibly be marketed to the buying public (VA 2000). Although IDEO’s management style is a little loose and hands-off, this doesn’t mean that they do not monitor the performance of their employees. Like every other business organization, they wanted high output and high productivity.
IDEO is interested to know whether their human capital is profitable, in the sense that they have significant contribution to the company. In order to know this, IDEO’s employees do an annual performance review. Unlike other companies’ performance reviews, IDEO’s has a twist. Usually supervisors or studio leaders submit a critical evaluation of the employees but IDEO also allows employees to pick a co-worker of his choice to do his performance review (VA 2000). The management is perfectly okay with this kind of setting because they believe that it is not difficult to fool their bosses and employers but employees can not fool their co-workers.
Kelley admits that, in the start of this performance evaluation, employees tend to pick their nicest colleague to do their review. Now, they go after the most critical person to evaluate them because they found out that doing the former does not help in their improvement (VA 2000). Failure is part of the culture of IDEO. To them, this is considered to be an “enlightened trial-and-error”. Although IDEO has a reputation of being playful and informal in its business philosophies and practices, the company works hard as they play hard.
Playfulness to them is encouraged because it stimulates one’s innovativeness. To put a lever and even things out between business and playfulness, IDEO strictly follows a product development process. Albeit it sounds too formal, the company manages to carry out this process with its very own IDEO touch – fun (VA 2000). IDEO’s employees follow this product development process in order to successfully deliver an innovative project and for employees’ better understanding in the product that they are engineering and/ or designing.
There are five phases of IDEO’s product development process namely: Understand / Observe, Visualize / Realize, Evaluate / Refine, Implement /Detailed Engineering, and Implement / Manufacture Liaison (Thomke 2000). This process is seriously followed by the employees because the success of the product depends on the stages or phases of the product development. Now that we are more familiar with the corporate culture and philosophies of IDEO when it comes to running the business and handling their employees, we may all agree that IDEO is a revolutionary firm that digresses from the operations of most companies in this day and age (Insala 2007).
Having said that, we can not really say that the organizations getting the most impact from performance management are those that have strong leadership support and that accomplish well in distinguishing performance and giving performance messages. This was the a study accounted by the 2007 State of Performance Study administered by WorldatWork and Sibson Consulting which assessed more than 550 Human Resource professionals (Insala 2007).
What could be any greater proof to that than having IDEO in the top ten of the fastest-growing company in the United States of America (Fast Company 2009), in addition to working with multiple industries and developing over 4,000 new products? Suffice it to say, IDEO has a particularly strong history of learning about technology applications and usages (Haragon 2003). Conclusion Even with this strong statistics, IDEO, like any other companies have issues with regard to poorly performing employees.
Given the nature of the work process where employees may both self-select for participation into a project or be taken on into a project, it may occur that some are simply not selected. It is not unlikely that problems on “free riders” arise. The open space set-ups make it likely that the studio groups will monitor on a de facto basis the work done by all. This practice may be regarded as successful, in a way, because of the low frequency of termination in the company. Another strong indicator of success, as mentioned earlier, is the recruiting, selection and orientation process used employed by the Human Resource of IDEO (Haragon 2003) .
IDEO seems to be one of the highest performers on several measures such as brand equity and human capital. Over the years, the company seems to have a sustainable competitive advantage. The source of its advantage contributed largely on the intangible capabilities found in its people, its culture and its history. Suffice it to say, these sources of advantage are the company’s core competencies (Haragon 2003). IDEO’s corporate culture and employee’s exposure to multiple industries is seen to be the key human motivator.
In a culture like that, they exhibit effective work performance since the environment is less stressful and more enjoyable. David Kelley (VA 2000) says that the management intends to keep the structure of IDEO intact even as the company continues to grow on its path of innovation. They strongly believe and are satisfied with the company’s flow of business, however, they are still cautious of the future of the company since the number of really good people that fit the company’s culture were not only declining in number but are also being pirated by other large companies.
In IDEO’s line of industry, employees’ performance is not easily quantifiable. Monitoring and confronting low performers is even challenging for the studio heads and / or project leaders because of non-quantifiable nature of output and the very loose management style. Although performance management of IDEO is said to be effective because of low turnover rate and gleaming number of successful products and client demands, IDEO should remain cautious of the changes of behavior, needs, and priorities of their employees – their core competence.
Even as they face the global economic crises today, IDEO’s Chief Executive Officer Tim Brown remains positive about the company’s performance. The new tagline campaign of IDEO in response to the crisis is derived from an Eskimo proverb that says: “Storm is the best time to fish” (Brown 2009). This is not only used for commercial purposes but a motivating words for employees that despite the financial crunch, IDEO would still secure their seats in the company. References ABC Nightline 1999. Innovative design to improve the shopping cart. [Television broadcast]. New York: American Broadcasting Company, February 2.
Bacal R 2004. A critical look at performance management systems – why don’t they work?. Ontario: Bacal and Associates. p. 8. Brown, T 2009. Fishing in a Storm. Designing Thinking Thoughts by Tim Brown, [online blog]. January 12, 2009. Available at ;http://designthinking. ideo. com/; [Accessed March 14, 2009] Fast Company 2009. The Fast 50: The World’s Most Innovative Companies [online]. Available at http://www. fastcompany. com/fast50_09/list-all [Accessed March 13, 2009] Hargadon, A 2003. How breakthroughs happen: the surprising truth about howcompanies innovate. Boston: Harvard Business School Press.
IDEO 2009. 20 Questions. [online] Available from:. ;http://www. ideo. com/culture/questions/;[Accessed March 13, 2009] Insala 2007. Performance Management Research Review of Best Practices [online]. Available at http://www. insala. com/Articles/performance-management-software/performance-management-research-review-of-best-practices. asp [Accessed March 13, 2009] Kelley, T. and Littman, J 2001. The art of innovation, Lessons in creativity from IDEO America’s leading design firm. New York: Currency Doubleday. Haworth R 2007. Performance Management – Five Easy Steps to Success [online].
Available at ; http://www. articlesbase. com/management-articles/performance-management-five-easy-steps-to-success-204895. html; [Accessed March 14, 2009] Thomke, S 2000. IDEO Product Development. Harvard Business Publishing. Vitual Advisor, Inc [VA] 2000. Designed Chaos – An Interview With David Kelley, founder and CEO of IDEO. Available at ;http://www. vainteractive. com/inbusiness/editorial/bizdev/articles/ideo. html; [Accessed March 14, 2009] Wheelen, T. , Hunger J. D 2004. Strategic Management and Business Policy. New Jersey: Pearson Education, Inc. p. 243.
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