Vol. 51, No. 11
When Kimberly-Clark underwent a massive reorganization, HR led key initiatives to align employee performance and compensation.
In early 2003, Kimberly-Clark was at a crossroads. Coming off disappointing profits in 2002, the company recognized that to capitalize on global market opportunities and to position itself in an increasingly competitive consumer products industry, it needed a major reorganization of its global business structure and strategy. CEO Thomas J. Falk embarked on an analysis of the company’s direction. The result was a new global business plan to shift Kimberly-Clark (K-C) from a consumer products manufacturer to a highly nimble and innovative global health and hygiene company.
The 134-year-old firm with such brand names as Kleenex, Scott, Huggies and Cottonelle underwent a total organization redesign that redefined the way it manufactures, distributes, promotes and sells its products worldwide.
From the beginning, the HR leadership team at the 60,000-employee manufacturer has been a key player providing input into the global business plan. It has put into place HR initiatives to support the plan’s objectives by creating buy-in and soliciting feedback from management and employees, and redesigning the performance management process and compensation plans to fit the new global business strategy.
“The HR team brought forward the need to create a strategy that would drive business planning, and a process for aligning the long-term strategic plan with objectives, measures goals and tactics,” says Lizanne “Liz” C. Gottung, the firm’s chief human resource officer, based in Rosewell, Ga. “We launched an all-out effort to rapidly change the culture of K-C,” she explains.
In recognition of the Kimberly-Clark HR department’s work in this transformation, it has been awarded the Society for Human Resource Management’s inaugural Strategic HR Leadership Award. The award recognizes an HR department that played a key role in driving the performance and reputation of an organization by leveraging organizational human capital.
Performance Management Before and After
Gottung represents HR as a key member of the firm’s global strategic leadership team, which includes the CEO and his core deputies. In 2005, Gottung spearheaded HR efforts related to the global business plan on two key initiatives
- Performance management. The HR department built and implemented a new performance management process to focus the organization and drive performance and accountability.
- Compensation. HR developed a new salary-setting process to better differentiate rewards based on measured performance.
Prior to the change, K-C had relied on a paper-based performance management process from the 1980s. Over time, the process was managed inconsistently. It also was seen as administrative, burdensome and generally not living up to the expectations of a robust, value-added process.
“Over time, performance management had become fragmented,” says K-C CFO Mark A. Buthman, who, along with Gottung, began his career at the firm’s Memphis, Tenn., mill 24 years ago. “Under HR’s leadership, we recognized we needed a much more rigorous, more process-oriented way of managing our global workforce. And we needed to do it more consistently across the organization.”
“Our own observations were validated in an HR services survey we conducted with the company’s senior leaders,” Gottung adds. “They identified performance management as a critical process to the success of K-C, yet expressed widespread dissatisfaction with our current process and practices. Clearly a change was needed.”
Given the magnitude of changes that were planned for the enterprise, HR knew it needed an effective way to align employees with business goals, motivate them to higher performance levels and hold them accountable. The new process had the basic elements of any good performance management system (performance objectives, feedback, performance assessment, etc.) as well as two key innovations:
Multidimensional feedback. The heart of the process is a multidimensional rating that allows HR to set expectations and evaluate performance for business objectives (what was accomplished) and on-the-job behaviors (how work was done).
As part of their “multi-rater evaluation,” employees provide a list of people they want to be considered as their “raters” with input from their team leader
- Calibration. HR also designed and implemented a “calibration” process that brings various team leaders together to jointly review the raters’ assessments of their team members and to ensure that ratings across the organization are consistent, appropriate and properly distributed. Sessions typically include a session leader (for example, a mill manager, director or vice president), between five and eight direct reports of the session leader, and an HR facilitator
In the beginning of 2005, all white-collar employees established individual objectives that were driven by their business sector or function objectives. (Extending the process to manufacturing employees is on the horizon.) Employees then sat down with their supervisors and agreed on these objectives. In April, HR launched quarterly employee-team leader coaching sessions to review the employee’s objectives and leadership behaviors. In October, HR launched the multi-rater feedback process. Team leaders then prepared draft performance reviews and shared them with the employees. In January 2006, HR began the calibration process.
HR also looked at the kinds of competencies needed to drive the global business plan forward. As a result, performance management now evaluates whether or not leaders possess six global leadership qualities: visionary, inspirational, innovative, decisive, collaborative and able to build talent.
Employees’ demonstrations of each leadership quality are rated as exceptional, effective or needing improvement. But, HR recognized that each characteristic would have to be defined at each level of the organization.
“We started at the executive level and then, using those same six qualities, created different role bands, because the quality of visionary looks different if you’re an executive leading the consumer business as compared with someone who is an electrical engineer,” says Gottung. “We now have role bands for leaders who lead other leaders, leaders who lead teams and individuals who lead themselves.”
The business planning process is feeding the objectives in performance management, Gottung points out. “We cascade the objectives starting at the enterprise level all the way down to an individual white-collar employee level. We look at both the behaviors and the results to come up with an overall rating of performance for the year."
From Paper-Based To Online Administration
HR implemented the process globally—covering almost 20,000 white-collar employees in 63 countries in 14 languages. This was no small task, as K-C lacked a truly global HR information system (HRIS).
The HR team embraced this challenge and implemented a common HRIS platform globally. While this was done primarily to support performance management, the long-term payoffs for K-C are expected to be significant as the company leverages this common database for compensation and tracking of key metrics.
Employees’ objectives now reside in a protected area of the company’s intranet, and employees can update their progress online. “When they sit down with their boss for their quarterly coaching session, we have up-to-the-minute information about results vs. objectives,” Gottung says. And “instead of sticky notes in personnel files,” employees and other managers can go online and note the employee’s performance achievements.
When it comes time for the quarterly coaching session, the team leader can pull up all the information, including, for example, “observations from that meeting last month where the employee made a great presentation and demonstrated strategic planning capability,” Gottung says.
HR has conducted employee surveys and focus groups on the new process. Among the findings: “Many employees felt that for the first time they had formal objectives, and the great majority felt that their objectives were aligned with the business strategy and meaningful to them,” says Gottung. “They also felt they were getting more meaningful coaching and feedback on a more regular basis from their managers.” Other feedback from employees showed they now felt their managers were being held accountable for building talent.
Tying Compensation to Performance
Kimberly-Clark’s base salary compensation process also was overhauled to create a clear and meaningful link between performance and reward. Again, this new process was delivered globally.
After the calibration session is complete, team leaders begin the salary review process, making pay increase decisions based on the calibrated performance ratings.
One of the chief goals of the new system was to treat the determination of compensation as “a fully integrated business process, as opposed to an HR process,” notes Gottung. Employees know that base pay as well as consideration for stock options and variable pay are tied to performance, which is tied to the objectives, which are tied to the business plan.
Team salary budgets are also based on the distribution of calibrated ratings, Gottung says, resulting in higher team budgets for teams with higher performers, “so that we can differentiate and give our top performers more in base pay.”
HR also drove the entire company to a common merit increase date for the first time and fully integrated compensation with the new performance management process. This further drove the principles of accountability, alignment, clarity and differentiation of rewards to mirror performance.
“The goal is to better tie performance with rewards in terms of behavior/values,” Gottung says. “We’re trying to drive a much greater degree of performance orientation and differentiation.”
HR formed a small team to manage the initiatives and secure support from key HR leaders around the globe. The broader HR organization was then leveraged to execute the plan. This included delivering classroom training to all employees, which increased HR’s visibility and credibility.
To date, the results of the performance management and base salary compensation initiatives have been impressive. The company has
- Converted virtually all salaried employees worldwide to a common business planning, performance management and compensation calendar.
- Delivered a fully online performance management system in 14 languages to ensure that all employees can efficiently use the new process.
- Rolled out a new leadership competency model to ensure that the behavior/cultural change was clear and integrated into the process.
- Conducted more than 200 “calibration sessions” globally among managers to ensure accurate and objective feedback for every salaried employee.
- Implemented a compensation system for all employees that aligned with the performance management process and achieved much greater differentiation in rewards.
- Trained all users through a mixture of classroom and online sessions.
During the first use of K-C’s new performance management system’s online objective-setting process, 97 percent of employees had objectives by the stated deadline. When surveyed, more than 90 percent of employees indicated that their objectives were aligned with the business strategy and were meaningful to them.
In the first use of the multi-rater feedback process:
- More than 90 percent of employees received a full feedback report focused on their performance against the newly defined leadership qualities.
- 92 percent of performance assesments were shared with employees by the deadline.
Top-level support has been crucial, says Joe Mauthe, K-C’s HR director, given that the performance management and base pay initiatives are so closely tied into the global business plan.
And the biggest fan of the new performance management system? CEO Tom Falk. This is how he summarized the value he sees in performance management during an address to the company’s top 1,000 leaders earlier this year:
“Fundamentally I believe that if we do a better job managing our people, we will improve our business results. So if we set clear objectives for our people and coach their performance, we will deliver better business results.”
To bring life to these words, Falk mentioned its value in almost every broad-scale corporate communication and ensured that it was a primary topic in several meetings with the top 100 leaders of the company.
Since the new process was launched, K-C has aligned its human capital with its new corporate direction, enhanced its performance-oriented culture and improved its ability to execute its global business plan. As a result, HR has established itself as a valued, strategic business partner throughout Kimberly-Clark.
“This is about delivering better business results,” Gottung stresses. “It’s not about delivering a world-class performance management process. We’re all about establishing metrics to access where we are with respect to driving business results and progress against our global business plan.”
Gottung sums up, “This has been a year of great change for Kimberly-Clark, and I am proud that HR was the architect behind this transformation."
Stephen Miller, CEBS, is an online editor/manager for SHRM.