Reality HR: Laurel Ditson, VP Baxa Corporation on Improving Performance Management Processes to Increase Top Line Revenue

Laurel Ditson is the Vice President of Organizational & Associate Development for Baxa Corporation.  She has been with Baxa since 1999 and currently has responsibilities for HR, training and development, and information systems, and she facilitates the company´s strategic planning.  Laurel has been in HR management for 25 years and her career has spanned three distinct industries beginning with retail, moving to the non-profit sector, and now in manufacturing.  Laurel has a Bachelor Degree in Psychology from the University of Colorado in Boulder, a Masters degree in Management from Regis University and she has been certified as a SPHR since 1997. 

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AM: Could begin by telling us about Baxa and your role there?

LD: Baxa Corporation is a 31-year-old company that provides solutions to pharmacies primarily for safe preparation, handling, packaging and delivery of liquid medication.  We streamline pharmacy practice, so you would be familiar with us mostly if you are a hospital pharmacist. We help them out by increasing patient safety, by delivering accurate and efficient systems.

It's a fascinating industry; truly a niche, and is a very enjoyable industry to work in.  I came here in January of 1999 as the Director of Human Resources. There´s been pretty incredible growth and we now consider ourselves a high-performance organization, never satisfied with where we are but certainly moving in that direction. As you mentioned I also have functional responsibility, in addition to the HR and training, for Information Systems and the Strategic Planning process.

AM:  Could we speak about the business conditions that brought you to take a closer look at your Performance Management (PM) processes?

LD:  When I came here, we were pretty much a mom and pop organization at that point and we knew that we were set for some pretty good growth in the future. We knew we would have to make some operational changes first, so we were putting in a lean initiative. Fortunately the President of the company, Greg Baldwin (who is now our CEO) is a dream for an HR professional to work for. He really does understand the human capital side of it and obviously the performance management side.  So while operations was busy getting their house in order, that gave me the chance to set the foundations for PM.  We knew just having the right mechanics in place is only a part of the equation. We geared up to fine-tune the PM process at the same time.  It took us a couple of years, actually, but that is where we started the work in conjunction with our operational procedures; with the goal of blowing the top off some of our sales growth.

AM:  So you had a manual process and made the move towards a technology-based process.

LD:  We had a totally manual process for everything we did, which meant the compliance was pretty haphazard. When you have low compliance, you know that you don´t have alignment because you may have some centers of excellence, if you will, within the organization.  But we had what I would also consider some centers of mediocrity.
We knew we had to align everybody with that rapid growth and get all 200 associates marching in the same direction.

AM:  Many organizations today are striving to tighten the link and build alignment.  Can you talk to us also about how you aligned all of your human capital management processes? 

LD:  Part of it was just getting out of that manual process and getting into automated systems.  Whether it was upgrading our HRIS system, which we did in 2000, (we actually did that before we did the PM) and then also, ultimately in 2002, when we brought on the automated PM system that we use today which is WisdomNet.  We were starting to do all of that at the same time but one of the biggest alignment issues is just to become more visible. I kept showing up at different places and meetings and talking to people and making sure that we had at least an open communication, because you cannot find out where your misalignment is just by putting in a computer system, there has to be that person to person touch as well.  So we started talking to people and then we made sure that our paper process, even though it was still manual, was very definitely a strategy-driven process. That was what became the foundation for the PM system we use today. It was definitely going to take our company strategy and deliver that throughout the organization so that everybody knew what the big goals were.

AM:  And that is the work upfront that needs to be done.  Now could you tell us a bit about the goals that were in place for this transition?

LD:  Well, I had a very selfish goal, certainly to get rid of some of the administrative headaches.  There was just another associate and I in HR and a couple of hundred people and all of those pieces of paper flying around, which means some of them don´t fly into the right places all the time so they get lost, they get misplaced, they get misfiled, they get left on the table in the lunchroom. 

Nice confidentiality issues there, and certainly that was one of my major goals, to ease the pain there, but we also knew that we had to align the individual and the department goals.  We had what I would consider sub-optimization. I can´t have the number one HR department, operations can´t have the number one operations department, sales can´t be the number one sales force.  We have to look at the next step up and align towards a high performance company and therefore put some of our functional biases aside and maybe not be as worried about our personal interest. By making sure that everything that we were doing was aligned to the company strategy, then each person was able to find out their individual role on that. 

So that was our next goal - to make sure that people got beyond their individual needs into the bigger picture needs - and then we would be able to show them how their individual needs would be met through that. Then we had to increase productivity, the per person productivity and the company´s productivity and get a real focus on results. We see it here and in other companies as well, that we tend to focus on activity rather than on results.

AM:  You spoke about how there was a lot of ongoing communication initially with all the employees. Can you tell us a bit more about that process, perhaps how long it took place and just some of the mechanics?

LD:  Communication is just one of those things that is never done and it is never finished.  You can never just assume that you did it right. Our company initiative at that time was actually to transform into a lean manufacturing environment, so as I mentioned, I would tend to pop into meetings or sit in and listen and ask questions. It also meant being a part of the lean events and all of us on the leadership team put aside our functional hats and participated in operational events during that time period, which was a huge way to break down silos but also a way to communicate that yes, we are all in this together.  It is one of those, "don´t tell me about it, show me," and we were all participating. I was tearing apart our warehouse and putting it back together again, so just the thought of having any HR person in a warehouse, rebuilding, racking and things like that is a bit amusing to most of us, but that was part of the communication, part of that was very, very informal and showed me how the job is done.

The human capital piece of it was a little bit stealth at first then it was, "first of all I care about what you do, I care about the job that you are doing and I care about where the company is going and getting to know people."  Now I can almost hear people saying, "Well that is fine in a small organization," and I do admit that there are only a couple of hundred associates and that is a lot different than a 2,000 person or 4,000 person workforce, but we can still do it with our teams and with our colleagues to make sure that we are not just stuck in our offices.  The communication started at really grassroots to making sure that we understood what the job was that the people were doing and making sure they saw us as a part of the team and not a part of the problem, so that is where it started.  The minute it began to get more formal and working with managers, whenever you are talking about PM, they are feeling a lot of the pain as well.  They have this cumbersome process to deal with.  Most managers hate doing reviews at one level or another whether it is the form or whether it is the conversation or another aspect. After doing the grassroots thing we were able to build a rapport with those managers and say okay, let me look for some ways to ease your pain a little bit in this regard as well.

AM:  And now then on the other side, in terms of their participation in providing input into the initiative, how much involvement took place there? 

LD:  We ended up with a taskforce or sub-team. They were my go-to people, they were the ones who looked at the initial product that I was suggesting and offered up suggestions. How will this work? How long will it work? By having those folks in at the ground level they had incredible buy in. Nobody wants to see an HR-driven process that nobody else has seen before it is rolled out, that is how critical a piece it is. I gathered some people who I knew would be allies and I got some who I knew would be a little bit reluctant.  I would recommend this strategy because your naysayers can be your biggest champions for you and we went that way.

AM:  Definitely.  Your organization has always had a focus on quality and performance.  Do you think that contributed to the acceptance of the steps taken during the initiative? 

LD:  I am sure it did. As a medical device company we are highly regulated.  And you can face regulations in one of two ways, you can either look at it as something you tolerate and you make sure it is there where the auditor comes to check on it or you can make it a way of your life and make sure that your business practices are firmly in place and actually go beyond what the law prescribes. We try to do the latter so the things become more of a way of life and in this early time period of 1999-2000, especially, we were going through a lot of regulatory change, so that regulatory pain and suffering was actually helping us on the whole PM piece because people were seeing how much easier it is to comply when you do make it a way of life. 

So as we put in even tighter quality standards during that time, we were really taking a giant leap forward at that point and the PM piece tagged along with it. Now we were looking for ways to measure that and time the two initiatives together so that you are rewarded for your quality efforts in a PM outcome.  One of the analogies that our CEO developed during that time was that we were moving from a cruise ship to a sailing vessel.  That is a pretty good analogy if you think about it.  If you are on that cruise ship on vacation, you can sit back and be in your lounge chair, but if you are in a sailing vessel, everybody has a role and everybody is taking a part in it.

That is where we moved to and frankly, some passengers don´t like that change and they may opt to get off when you go into port next, but those who have decided to stay were rewarded because the whole PM and quality go hand in hand.  We have been well rewarded for quality efforts and we reward people very well for their performance efforts as well.

AM: Can we speak about some of the specific steps that you took during the implementation process?

LD: First of all as I already mentioned, I focussed on the managers. They were the ones who had to see the benefit. Most of those managers had experience with the documents getting lost or they had me or someone else reminding them repeatedly that they were late with their documentation or another issue like that. We brought in this key group of managers and we played up the benefits of an online system.  We certainly sold it well to make sure that they understood that they were still going to have access when they needed it.  They were going to have a process that looked very similar to the process that we had honed over the last couple of years, so we weren´t changing the whole process on them, we were just streamlining it. That worked well for us because we had worked hard to get a good process that encouraged the use of our strategy throughout the organization, plus we very much like technology in this company. 

We had had an intranet since 1999, which in a company of this size at that time was pretty rare.  We had dashboards already so our managers were very comfortable with the technology. They were so ready to automate this process, because frankly we were e-mailing word documents around to each other and that is not obviously automated.  They were very much in favor of this and I got the small group to help me to move forward.  Then we elected to have a roll out with our salaried associates at first, simply to make sure that we had a pilot group that was going to make sure it was successful.  So we started with a smaller group.  We started with our salaried associates and then we very intentionally gave ourselves about six weeks to implement it and were pretty tight on that. We worked with our vendor to make sure that we had a reasonable time period, but then we got the system implemented, people trained, and the first reviews done in a very tight timeframe so that it would force compliance, force everyone into this system. We review this twice a year.

AM: I imagine when you are communicating back the benefits of using the system, the benefit of the work that you did in terms of speaking with people about their specific jobs, really showed through. 

LD:  Absolutely. If you have a canned presentation and the only goal that you used is a sales goal you are going to lose some of your operations people or your engineers or your other folks. You have to be able to speak the language and I don´t care if it is for PM or anything else, any HR person needs to be able to speak the language of business because you are right, it gives the credibility and helps them know that you know what they are up to.

AM:  Did you have a large number of different types of appraisal forms that you had to accommodate?

LD:  Thankfully no, and that is another reason why we started with the salary process because they are focussed in on one.  Today, I have not only different forms, but different timeframes so we have a format that we use for our salaried associates, we have a different one that we use for our hourly associates who are in lead positions, we have a different one that we use for our hourly production associates. We are actually on a skill-based pay method and we also use this in our UK office - they have a different system as well.  So we did not start there.  We needed to start in a way that we could get our arms around but we do today, absolutely.

AM:  Have you noticed any resulting changes in the way that managers and employees view and approach the whole performance management process?

LD:  Well, the short answeris yes, of course, and the great thing is that the managers who get it, the ones who are truly leaders, and who truly take their human capital seriously, see the whole PM process as something that is year round.  It is not something that you just do at review time and that was ultimately my goal when I came here in 1999.  It was just to have a fluid process, similar to how we now have our quality process.  You do not just manage performance at the end of the cycle.   We have a great tool that we can use and it can be used throughout the year.  Both the associate and the manager can be documenting issues, they can be putting in career developmental activities they can be working towards those goals throughout the year.  It is a great communication tool that yes, successful managers and associates do use throughout the year. 

The fun thing that is starting is those associates who are actually managing upward and convincing their managers to use the tool in a better way, by filling in some of the information on, for instance, their development path and saying, "Look at what I put in here and how can you help me get there? This is what I want to do, what you suggest?" I love that grassroots movement when you can have a tool that will allow you to do that.  For an HR person it is kind of fun.

AM: Fabulous.  Now you also linked PM to compensation and I wonder if there are any indicators or requirements that you established to be sure that your PM processes were sound before you went on to introduce that link.

LD:  Absolutely, and this is probably one of the more controversial aspects when we launched it.  We went on to the WisdomNet PM software in 2002.  We did not change how we did pay increases until 2004 and we wanted to be sure that everybody was comfortable with the tool, that we were getting good sound information and that people knew again, that we were making that cruise ship to sailing vessel transition, and that we were not going to reward them based on effort any more but actually on results. That required lots of communication and training with managers and also we had the benefit of having all company meetings about once a quarter.  We took time in those meetings to explain how we are going to do it, this is what is going to look like, and this is how you are going to be rewarded and over time. We do give 50 to 65 percent of our associates annual pay increases.  We hit at the top end of that this year.

You have to make sure that you are staying competitive with the marketplace and frankly I don´t buy into completely the GE Jack Welch model of trying to convince the bottom 10 percent to leave. We are not at all that rigid but I do want to make it clear that we pay at market, we don´t pay above market, but we pay at market so they are not being underpaid. We have a very attractive profit-sharing program that everyone participates in and it pays out monthly, so it is very lucrative as well. A performance increase for an associate is truly seen as something that´s for performance but if they don´t get it they don´t think they are about to be fired and they are also not going to end up collecting food stamps as well as a result of not getting the increase.

AM:  Do you also use competency identification?

LD:  We are moving more and more towards those competency-based issues on the performance review.  The goal-based one was very easy for us to do.  Competency based is a little harder.  It is a little squishier.  It is kind of soft and sometimes fuzzy and kind of prickly for some of my managers.  The goal base was easy and it is very clear but I think most of us have learned that you can have someone who accomplishes the goal and maybe accomplishes it and exceeds the goal, but if one of the competencies they should have is working within a team environment and you have someone with an individual contributor strength then you have a problem there. In the last year or two my managers have become better at identifying those competencies. 

I just chose the team base versus the individual as an example because certainly we realized that you cannot go strictly goal-based.  You have to look at some of those other competencies and see how the full process comes together. It has been a great transition watching managers make that step forward to say you know they will always get the job done, but if they irritate everybody else along the way then really maybe it is not as good as it could have been.

AM: Can we talk about benefits that your organization has experienced? 

LD: We were hoping to increase our sales and we have absolutely done that.  Everybody knows what we are here to accomplish, everybody is able to really see and we post it ourselves daily.  We are privately held, so we do not have a ticker running anywhere, but everybody knows exactly where we stand financially. The growth over the past three years has been in excess of 20% each year and it was in the teens prior to that.  1999 to 2000 was pretty flat and then it started to creep up in 2001. Now it has taken off nicely with a target of really doubling the size for the company between now and 2010.  Financially when you have everybody rowing in the same direction, you can absolutely do amazing things and we have been able to do that. That is an obvious benefit that everybody always wants to know about. 

Then there are others as well.  Certainly administratively, I will mention that because that was such a big pain for me and now it is all a click of the button. While everybody still has responsibilities about approving things and all of that, we do not have reviews left sitting out on the copier and in the lunchroom very often anymore.

We have been able to make the whole performance management issue turn into a process that is cyclical throughout the year.  It avoids a lot of that pain and suffering that comes twice a year when managers think if they don´t get their reviews done, somebody is going to be on their case.  Some people still and will always go through that, but it is a lot less. We have also been able to add in a lot of other functionality because of the mindset that we have encouraged. We have cross-functional reviews - that was one of the things we put in early on.

One of the contributors to our growth is a cross-functional perspective on product development especially, but also on almost everything else we do.  We have co-located cross-functional teams, so if I am in new product development I may be a mechanical engineer, I sit next to an electrical engineer or a buyer from purchasing would be sitting all in the same work space. Maybe there is a team of six to 10 people and we all have different functional managers perhaps, but we all sit together, we are all co-located and then we have a project manager as well.  So the project manager through the cross-functional review tool has the ability to provide written input in addition to the verbal and formal and informal input that they are giving to the people on their team. Again, we have that great ability to break down the silos by having the right people have input into performance reviews.  That is certainly one of them. 

Another one is the use of a 360 review.  We have our associates do that twice a year and of course the first couple of times we did that sent some blood pressures up and made some people nervous.  We still do not tie that to pay and I don´t intend to actually.  It is a great tool for giving feedback to your peers and for getting feedback from your peers.  And as we have used it over time and people have become more comfortable with the idea, the type of feedback that we have seen has really increased as far as the substance.  Every now and then you get somebody who just gets on there and gripes, but that really very rarely happens. What we saw more commonly at the very beginning was people were pretty much non-confrontational - yeah, she does a fine job - pretty worthless information.  Now we are getting some great meat on those 360s and since the associate chooses the people who overview him or her, they don´t know exactly who wrote the comments, but they know that these are the people they chose.  This is not somebody who may be stuffing the ballot box against them.  So that has been very good. 

Same sort of results have come out with the supervisor evaluation and every time we do associate evaluations the associate evaluates his or her supervisor. Again, that is a great tool for some feedback and once people found out that it is not a retaliatory thing, it is truly a developmental tool, then people were more forthcoming with very good and sometimes very insightful comments about their managers. I know personally with the team I have, I have been able to see them over time give me some absolutely priceless feedback through that tool. That is just a wonderful thing when people will use it effectively.

AM:  I was going to comment on the 360 review. I actually just did a webcast on this topic and one of the points that came out through my research was exactly that - that sometimes it takes people to go through a cycle of using the tool, to actually see how the results are dealt with before they feel really comfortable using it.  I would be interested in hearing from you how the feedback was delivered to each of the individuals because that is an area that really impacts the success of the whole program.

LD:  In the tool that we use the associate has the ability, once the survey is complete, to go in and read it for themselves from their own desktop. It does not have to be delivered to them by their manager, and that was valuable.  The other piece is that we have coached managers on how to use it, because the manager can also see it, it is for the manager to use the line that we recommend.  The line is simply - tell me what you have learned from your 360 this round - and then that gives the associate the opportunity to say - you know what, there was a comment in there that really bothered me or that really inspired me or that really made a lot of sense. Some of them will say that they haven´t even looked at it - in which case you encourage them to look at it. That combination of having them able to see it on their own time and also having their manager approach it as a coaching tool is invaluable.

AM:  You were also speaking about the climate survey. 

LD: We have done this at least once a year and it is just a way to get the communication throughout the organization. In early November we had about 85% participation, and I was just thrilled with that because that really gives you a great sense of what is going on in the organization. Certainly there is a lot of research out there about what questions are best and how to phrase them. We have designed this one in-house by using a lot of those resources and you can pretty much tell when you get a bad question in there. You get bizarre answers and in the comments field, people even comment about it. We have been doing this for four years now and you can really see trends, you can see blips that suggest something is going on here and maybe we need to dig into this issue a little bit further.  That has been wonderful.

AM:  How did your PM process integrate with your other human capital processes? 

LD:  Our HRIS is how we track our training right now and that was just simply because that was the software we got first.  Those two will be linked this year.  Our recruitment and position management is currently done separately and obviously the more holistic of a view you can get the better. We can link all of that.  Succession planning is coming totally out of our performance management tool at this point.  Those are wonderful linkages that we have been able to get through this because as you are developing your associate, you want to have the whole piece come together and be very visible. You go ahead and you look at the talent throughout the organization.  You want to make sure that you are not missing some big huge piece like training them or what are our plans for this person moving forward?  If they are all converging in 2006 and by early 2007, it is an exciting place to be. It has been fun to watch the technologies come together as well.

AM:  Do you have any specific recommendations for organizations that are embarking upon a similar initiative? 

LD: Well certainly, I love the product that we use and we have had an amazingly successful implementation with this and it is a way of life here. My recommendation though would be first of all make sure that you have a decent process in place now and you are not looking for a piece of software to fix everything for you.  We have all heard that before and it is pretty straightforward but we continue to make that mistake.  So you need to fix the process internally, make sure that internally people are ready for a change and ready to look at a process that is going to drive this sort of performance. 

In a previous company I worked in, I had a CEO who did not want to move our compensation method into a performance-based compensation philosophy.  She was much more comfortable with a cost of living philosophy. Why bother rolling out this whole sort of a thing if you are not going to really embrace the whole PM idea? Don´t get me wrong, you can have PM cultures with different pay structures but just make sure you know what you are getting into in that. 

The other piece is obviously getting those key people to buy in ahead of time and then making the investment and moving forward.  This was a pretty low cost product for us. I am not an expert in calculating ROI but just in the administrative savings and in the ability to grow sales and have everybody on task, it´s a phenomenal ROI that you can pretty much just almost see without quantifying.  But the things that you just need to do are obviously have that CEO buy in as well.  I take that one for granted, but I know that if you don´t have that leadership support, again you are going to be disappointed and the rest of the organization is going to be disappointed.

AM: We have a question from the audience:  Were there any issues with employees who did not speak English and that impacted their use of the tool?

LD: That was another reason we started with our salaried staff.  My hourly workforce is very multicultural and multilingual.  We have a clean room operation and on any given day we have 10 to 12 different languages represented in that clean room. One of the reasons we did not bring them on until the last couple of years was because of the language issue.  We do have the situation whereby our regulating bodies can come into our clean room and ask questions of our aligned workforce.  We do have a minimum standard English required and it is verbal and it is about at the 5th grade level.  So we do have a baseline level of English knowledge, both here and in our UK office. They are multilingual, but they all speak English, and they have all had to become computer literate over the last five years as we have moved all of our processes in manufacturing on the computer as well. We certainly need the support of our line supervisors to help associates with the process when they log on to the computer and get their reviews. 

The only thing that we significantly changed is that at the production level. Those associates are not required to do a self-assessment whereas we do require that from everyone else. They have the option if they so choose and they can do that in any language they choose frankly, and we can actually electronically attach that document so that it stays there right with their reviews. 

AM: Was there was any PM-related training that accompanied the implementation?

LD:  Absolutely, and there was a lot of it. We only focused on training the managers, then we went around to every single person and they got their login and password information and in small groups we trained all of them. The vendor helped us immensely with that and my key, the key team that I brought on from the very beginning, helped as well. I continue to do training once a year for managers just on PM in general but it is a part of our new hire orientation, we don´t do it right when they start.  We wait until they have been here a month or two, within the first 45 days to get them so their head is not still swimming but that is just an ongoing part of how we bring people onboard, and is a part of the on-boarding process. During the roll out those six weeks were jam-packed, everybody in the organization was getting training and some remedial assistance and a lot of one on one help along the way.

AM:  Do you have any suggestions around how an organization would go about gauging the appropriate rate of change for something like this?

LD:  That is so organization specific and we actually take to change pretty quickly and we were going through a period of pretty rapid change.  I think most HR people who have been in their job for more than three months have probably gotten a pretty good taste of how quickly they can change things.  This company is pretty much a rip-the-Band Aid-off company instead of just trying to ease it off a little bit at a time and so when we said okay, in six weeks we are going to get this put in place for our salaried associates, we ripped the Band Aid off for the salaried associates.  We did not allow anybody to do the old method but we knew we had to be patient with our hourly associates and that took longer.  How do you gauge it? I am afraid the way I have done that is by doing it wrong and then having to regroup.  I think I played it right in this particular circumstance but most of us learn that by trial and error.