This is the conclusion of a two-part article on the Kimberly-Clark manufacturing company and its adaptation to a new management system focused on worker performance. The original, much more extensive article appeared in the August 22 Wall Street Journal and was written by Lauren Weber.
Performance management shifts companies away from backward-looking, once-a-year reviews framed largely as compliance requirements—a paper trail for potential job cuts and salary decisions—to a process that is real-time, continuous and focused on helping people meet ambitious goals, or move out of the company faster.
The last recession led many employers to rethink the nearly automatic merit raises they had been doling out, forcing them to do a better job identifying high and low performers when giving raises and bonuses. Millennial workers, meanwhile, demand more feedback, more coaching and a stronger sense of their career path.
Companies spend $14 billion a year on products to help manage employees, including human-resources software from Workday Inc., SAP SE ’s SuccessFactors and Cornerstone onDemand Inc., with about $2 billion of that dedicated to performance management, according to human-resources advisers Bersin by Deloitte.
Those systems let managers track workers’ progress via dashboards that display their goals, accomplishments, attendance, peer feedback and other data. Executives’ use of phrases like “performance culture” in conference calls with analysts and investors has doubled in the past five years, according to a review of transcripts in the Factiva news database.
Firms that set goals and hold workers accountable “clearly outperform,” said Nicholas Bloom, an economist at Stanford University and co-author of a recent paper that used Census data to examine more than 32,000 U.S. manufacturing plants. He said they have faster growth, higher profitability and are less likely to go bankrupt.
In 2008, with the company’s shares stagnant, few innovations in the pipeline and a belief that costs were bloated, the CEO added human-resources executives to the team putting together the firm’s long-term business plan for the first time.
Holding workers close through good times and bad is “not sustainable” any more, said Liz Gottung, the company’s human-resources chief. “If you look at when we started implementing the big pieces of the company’s people strategy, when you map that to our stock price and our business results, you can see the clear correlation.” Since 2009 Kimberly-Clark has laid off around 2,900 mostly salaried workers world-wide, some of the first big cuts in the company’s 144-year history. It currently employs about 43,000.
Remaining employees are expected to work “smarter” and meet regularly raised targets. “We have to routinely shuffle the resources and say, what’s the most important thing we need to do today, this week, this month, to drive this objective?” said Stephanie Martin, an engineer who analyzes new product ideas.
In 2015, Kimberly-Clark retained 95% of its top performers. Among the employees whose work was rated “unacceptable” or “inconsistent,” 44% left the company voluntarily or were let go. Ms. Gottung said she is “pretty pleased” that low-performer turnover has been rising.
These days, leadership has communicated to employees that turnover is a good thing, said Chris Luettgen, a senior research manager who left in 2014 to join the engineering faculty of Georgia Tech. “I saw it as a good move in that we could get some new thinking and innovation into our pipeline,” he said.
Regular “culture of accountability” sessions train employees in giving and receiving difficult feedback. When a colleague suggests improvements, “the proper response was ‘thank you for the feedback,’ not defensiveness,” Mr. Luettgen said. Employees also practice reinforcing positive behaviors, such as praising a colleague who had given up a weekend to solve a customer complaint.
The former manufacturing director, who retired in 2013, said a decade ago, “whether you knew anyone or not,” employees said hello in the parking lot and engaged in camaraderie typical of a smaller company. Even so, he said he approves of the recent management changes.
One former employee said he was initially glad that the company was identifying those who weren’t pulling their weight. Then, after earning top reviews over his decades long career, he said he was given a low rating and placed on a performance-improvement plan after missing a project deadline. After that, “no one would talk to me” about other positions, he said. He said the situation eventually improved with a new supervisor, but he still decided to leave the company last year.