Prudential Measures HR With A Total-quality Yardstick

In life, it’s generally a good idea to practice what you preach. In business, it’s not only a good idea, it can be crucial to your success.

Although Valhalla, New York-based Prudential Resources Management, a unit of The Prudential Insurance Co. of America, formally began a total-quality journey in 1991, that journey took a sharp and more focussed turn a couple of years ago when the company revised its mission and tied that mission to the company’s core values: Client Focus, Winning, Worthy of Trust and Respect for Each Other.

Because of the company’s move toward quality objectives, the firm’s culture had changed, but HR-and the systems it administered-had not. As a human resources consultant, it was time for the company to practice what it preached. It was a goal that although clear-as it is for many companies-isn’t always easy to reach. But it could offer large payoffs.

The company’s revised mission is to be a world-class leader in providing relocation, real estate, human resources and related consulting services to individuals and institutions globally while generating a satisfactory return. Above all, the company now strives to “delight its clients” and to do so with honesty, integrity and mutual respect, realizing that its greatest asset in achieving this mission is its employees. As a learning organization, the firm states that its employees’ ongoing education and development is critical to its success.

After Prudential set its sights on total-quality improvements, the organization’s Chairman and CEO Matthew M. Luca and President and COO T. Stephen Gross chartered an ongoing human relations assessment project (HRAP) team to be responsible for ensuring that all the company’s human relations systems directly support the company’s revised mission, vision and values.

“We recognized that in order to succeed, we needed to make sure that our human relations systems were aligned with our company’s mission, vision and total-quality principles,” explains Maria Stolfi, director of employee benefits and lead facilitator of the HRAP team. “When we say we [must] work toward continuous improvement, we [must also] give everybody the tools to do that.” Some of the questions they began asking themselves were: Are our human relations systems supporting continuous improvement and total quality? Are our people getting rewarded and recognized according to our mission and values? Is their performance being managed on that basis? In many cases, the answer was no. It clearly was time for action.

The HR team takes stock of HR systems.
According to their chairman’s mandate, the company formed a cross-functional team of 10 associates (which is how Prudential refers to all its employees) ranging in level from senior vice president to lower-level employees.

Why give the task to a team instead of simply giving it to the HR department? “One of the things in our learning about total quality is the strength and the effectiveness of cross-functional teams and that’s why we went that direction,” says Thomas R. Jago, an internal communications officer and an HRAP team member. The firm had had success over the past few years in having cross-functional teams tackling multidimensional projects, so the company’s senior management felt it should also give HR systems the same directive. Also, because there are only 10 individuals in the company’s internal HR organization, it would be difficult to give sole responsibility for a project of this magnitude to so few people.

The team first looked at the HR services the company provided for its employees and categorized them into well-defined service units. They identified six broad human relations systems or services which the human resources function provides to the organization. These services included: Performance management, reward and recognition, personnel policy, compensation and benefits, communication and career development.

After careful evaluation, the team ranked these systems, putting the performance-management system at the top of the list. They determined that these were the six areas where there were some concerns, where there was the greatest room for improvement and where they felt they could get some relatively quick results so that changes would have a positive impact on the organization.

The next step was to figure out how to systematically redesign each of these six systems so that they would be aligned with the company’s new vision, mission and values. The team went about setting concrete objectives for measuring the six HR systems’ impact on the organization. “We established a set of 10 objectives that we would base all of our human relations systems against,” says Jago.

The goal of these 10 HR objectives, which included such areas as fostering open communication and leading by example (see “Prudential Resource Management’s 10 HR Objectives”), was to recognize that the company’s ongoing success is dependent on HR’s ability to recognize and value each individual’s unique differences and talents. The HRAP team envisioned that a work environment, supported by these 10 objectives, would allow each person the opportunity to reach his or her fullest potential, and therefore directly contribute to, and of course help improve, the bottom line.

Realigning employees’ performance goals with company goals.
After establishing the 10 HR objectives, the HRAP team had to figure out what criteria to use in aligning the company’s performance-management system with the 10 objectives. They had to determine: Where the systems fell on the objectives continuum, where they should be and where the gaps were.

To figure all this out, the team gathered best-practice information from award-winning companies and consulted with leading experts through secondary-research sources. “We also did informal benchmarking by referring to publications that have written about other organizations and what they’ve done in performance management,” Jago adds.

In addition, they evaluated a recent employee survey that had asked questions-many relating to performance management. From this, the HRAP group learned that the performance management system wasn’t used consistently, it didn’t stress ongoing and multilevel feedback and it didn’t factor in team performance.

The team also spoke to other organizations on an informal basis to get an outside perspective. “We didn’t actually go out and talk to other organizations because time was important to us,” says Stolfi. The HRAP team also solicited feedback from the organization’s senior management team about what changes they thought needed to be made. All those insights were incorporated into the evaluation process.

“Through our research of total quality, we imagineered what our HR systems would look like in terms of behaviors if they were aligned completely with all the [objectives],” Stolfi explains. “So we looked at all that data, came up with a common rating system and then conducted about 12 focus groups throughout our company of both management and nonmanagement groups,” adds Stolfi.

Over the course of a month (late last summer), they met with about 20% of the company’s employees in focus groups throughout the organization, facilitated by HRAP team members. The team’s research lead them to the realization that employees wanted a more formal way to see how the work they do every day helps the company achieve its mission and quality vision.

Performance management tops the list.
The HRAP team’s research suggested that the company’s performance-management system was the first HR system that needed to be realigned with the company’s new vision.

The system had flaws, both in design and in execution. The biggest flaws were that it didn’t clearly tie individual objectives to company objectives and that it lacked clear evaluation standards. Although people could be rated on a scale of 1-5 (from “needs substantial improvement” to “outstanding”), in several areas such as client focus and technical ability, those performance dimensions needed further clarification. “The process that we had was pretty good if people were using it as it was intended,” says Jago. “There were situations where people were doing quite well because employees’ managers were very focused on it.” But, in many cases, people weren’t using the system as it was intended, often because they didn’t receive training. Many weren’t using it at all.

“Where we were falling short was that [the performance-management system] was not well-communicated and it was very unevenly implemented,” says Jago. In fact, some employees weren’t setting objectives at all so they couldn’t be measured by any performance system. Often, managers were dictating objectives with little or no input from employees and employees weren’t getting a lot of ongoing feedback throughout the year about how they were achieving whatever objectives were set.

The performance-management system underwent reconstruction. What emerged was a four-part improvement plan. The new plan calls for:

• Systems improvements:
  The plan requires feedback from three to five team members for each associate’s performance evaluation. Everyone is reviewed-exempt and non-exempt-with a 360-degree feedback system. Also, managers are now responsible for coaching and counseling their direct reports on a scheduled basis.

• Skills building:
  A complaint of the old system was that managers, especially new managers, weren’t trained on how to help employees set objectives and how to conduct performance evaluations. Within the last several months, 700 of the company’s 1,000 employees have received training in how to set objectives for themselves or for their subordinates.

• Education of the process and company expectations:
  “People had been feeling lousy about the [old] process because they didn’t know what the expectations were,” says Stolfi. Employees are being educated about how to set their job objectives based on company objectives.

• Management of the process:
  There’s now a cross-functional team that’s responsible for managing the performance-management process-to make sure that there’s continuous improvement and measurement of how the process itself is proceeding on a monthly or quarterly basis.

The new performance management system now includes: setting performance objectives, ongoing communication and feedback between manager and associate, gathering associate input, client/ project team input, performance review and compensation review. The biggest difference between the company’s old system and the new one is that performance management is viewed as a shared, rather than a one-sided, top-down responsibility.

The new system was put into place for the company’s 1995 planning purposes at the end of 1994. Every associate has developed 1995 objectives that are meant to track and be consistent with their manager’s objectives and to support the company’s four strategic objectives. Everyone will be evaluated at the end of the year based on the new system.

Evaluating the new performance-management system’s progress.
Although the company is still in its first year of implementing the new performance-management system, already the HRAP team has identified changes they’ll make to next year’s plan.

They’ll be incorporating a section into the performance appraisal form to elicit feedback from clients-both internal clients, external clients and colleagues-similar to other feedback mechanisms the company has incorporated into areas of the business as a result of its quality objectives. Improvements such as these, in turn, help support the 10 HR objectives-communication being at the top of the list.

“One of the other things we’re going to be doing [more] is putting a couple of questions on our E-mail system and having people zap back their answers,” explains Stolfi. Before, they asked: “Were you setting objectives before, yes or no?” Now they’ll ask: “Were your objectives set by January 15th?” Or, “Have you assessed to improve the process?” Adds Stolfi: “We’re going to continually solicit more data. But there’s a lot more work to be done.”

Improving five other HR systems.
Prudential Resources Management’s HRAP team has started looking at revamping the next system on the list: reward and recognition. The realignment process for this system is taking the same course as the performance-management system did. “We’re looking at where we are today, we’re doing focus groups, we’re looking at survey data and we’re also doing a lot more internal work on the reward and recognition system,” says Stolfi.

In tandem with this project, the company is further focusing on evaluating HR’s approach to achieving total-quality objectives through: 1) Discussions by the senior management group about where they perceive HR to be today; 2) Having an outside consulting firm conduct an assessment of how well the company is meeting its total-quality objectives; 3) Designing a formal matrix of the organizationally sponsored HR programs.

The firm’s reward and recognition systems are a good place to start. “Right now, we’re looking at the organizationally sponsored programs and identifying what we spend on the programs, how many people it affects and how they’re utilized,” explains Stolfi. “A lot of our regions have different programs they they might do on their own.” For instance, there might be 15 different types of reward and recognition programs used throughout the company, which include such variations-on-a-theme as base pay, benefits, incentive compensation, public thank you’s and private thank you’s.

“People are being asked to rank what personally motivates them,” says Stolfi. “So we’re going to take that data to determine if we’re spending our money in the places that make sense for people.” Says Jack Navarro, senior VP: “We’ve brought our client focus to a higher level, we’ve got tools to improve our processes and we’re creating measurement systems for collecting data on client and associate satisfaction. Now we must focus on the human side of these initiatives.”

Although the company is eager to tackle each of the remaining four HR systems that it has committed to aligning with the firm’s mission, it doesn’t want to hurry the process by laying out an overly ambitious schedule. In keeping with the company’s commitment to continuous improvement, it plans to work on each remaining HR system until all have been revamped. But the process won’t stop there. Because each system will have a cross-functional team as its monitor, each will continue to undergo tinkering. Such is the way of total quality.

Measuring success with a total-quality filter.
For some organizations that decide to travel the total-quality road, results are immediate and measurable. Prudential Resources Management has found this to be true. Comparing its 1993 year-end results to 1991 (the year the company began its total-quality journey), it has found that:

• The number of clients it serves has nearly doubled
• Overall client satisfaction increased almost 10%
• Associate productivity jumped 5%
• It increased its profits by 20%.

Why is Prudential’s focus on tying quality objectives to HR systems so innovative? Sometimes, innovation is simply common sense put into action. However, common sense, as they say, often isn’t common at all. “The key is that we’re getting people involved and we’re understanding that their contributions impact the organization,” says Jago. Indeed, they have. “Last year we phased in more than $2.6 million in efficiency improvements, and it’s because of this planning and focus that we’ve been able to do that,” he adds.

Now, with numerous partnerships and more than 65 cross-functional quality planning and improvement teams throughout the company, total quality is well integrated into the fabric of the company. Practicing what you preach isn’t always easy and may feel like the road less travelled. In the end, however, it very well may be the road most profitable.