Academic journal article Organization Development Journal

Driving Business Value from Performance Management at Caterpillar

Academic journal article Organization Development Journal

Driving Business Value from Performance Management at Caterpillar

Article excerpt

Abstract

Performance management is often touted as a strategic lever for developing organizational capabilities and achieving organizational growth. Nonetheless, many organizations still lack a well defined performance management process, or fail to apply it consistently across the organization. The purpose of this paper is to describe an approach used by Caterpillar to deploy a performance management learning curriculum to over 20,000 employees, and to assess its effectiveness. The curriculum was intended to outline how managers were expected to improve the performance of their people and how employees were expected to take responsibility for their own development. Methods for determining the return on investment are discussed.

Introduction

Caterpillar University (Cat U) was established in early 2001 to deliver global learning initiatives with strategic value to the business. At that time, Caterpillar was organized into 26 business units operating around the world that, while mostly autonomous, did share one abiding goal: enhance learning opportunities that will create business value. Caterpillar's executive office, including the CEO, challenged the organization to accomplish aggressive business growth targets that would, in effect, increase revenue by 50% in five years or less. Achieving these growth targets required, amongst other capabilities, effectively managing people's performance. Performance management was widely recognized as a strategic need for the business.

Cat U formed a global learning team composed of business unit representatives and learning professionals to perform a needs analysis and propose a solution. The needs analysis uncovered several best practices in the business units. These best practices included well defined performance management processes, high compliance to complete performance management requirements and offering skill-building in coaching and goal setting. However, many other business units lacked a well defined performance management process, and overall throughout the enterprise, performance management was not consistently practiced or commonly used. The global learning team recommended that a common, global learning curriculum for performance management be developed and implemented. Cat U played a key role in deploying the performance management learning initiative that would ultimately include over 20,000 employees.

Given the strategic importance of improving performance management, Caterpillar took a strategic view of how managers were expected to improve the performance of their people. Goal setting was emphasized. People were expected to draw a line-of-sight between their individual development goals, their business unit goals and the overall Caterpillar critical success factors. A coaching approach was emphasized. Managers were expected to assist their employees in gaining deeper insights into developmental needs and how to meet these needs. Personal responsibility was emphasized. Employees were expected to take responsibility for their own development and build the skills required to improve performance.

A two-day performance management workshop was developed and deployed for over 20,000 Caterpillar salaried and management employees, including supervisors and managers. The workshop presented the new performance management process, clarified the responsibilities and expectations for executing the new process, and contained skill-building in the areas of coaching, goalsetting feedback and communication skills.

For Cat U the performance management learning initiative represented its first major test and its first opportunity to demonstrate a tangible return on the investment made to establish the university in the first place. Cat U, and the global learning team, decided early on not to take ROI for granted. They partnered with MetrixGlobal, LLC, a recognized leader in learning evaluation, to develop and execute a comprehensive approach to evaluate the business impact of the performance management learning initiative. …

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