Episode 70: How is Novartis Reinventing Performance Management? (Interview with Steven Baert)
The transformation that Steven Baert is leading as Chief People and Organisation Officer at Novartis, in shaping culture and leadership to a re-imagined medicine is hugely impressive. As Steven explains in this week's episode of the podcast, Novartis is successfully fuelling a scientific and entrepreneurial spirit of the company through its inspired, curious and un-bossed culture. This equips the people closest to the customer or product with the freedom to own the important decisions about their work for themselves. Novartis is also empowering their people by re-imagining its approach to performance management. As one of the worlds foremost science companies, that is entirely fitting that Novartis has taken a scientific approach to diagnosing, developing, trialling and productising its approach to performance management.
You can listen to this week’s episode below, or by using your podcast app of choice, just click the corresponding image to get access via the podcast website here.
In our conversation Steven and I discuss:
How he partners with CEO Vasant Narasimhan and the rest of the executive team at Novartis
The concept of un-bossing and what that entails for leaders
How Novartis has diagnosed that their previous performance management culture was a point of friction for employees
How Novartis has taken a scientific approach to re-imagining performance management involving 16,000 people
The four elements of the new approach to performance management, encompassing objectives, feedback, recognition and reward
This episode is a must listen for anyone interested or involved in the role of organisational culture and performance. So that is Business Leaders, Chief HR Officers and anyone in a Strategy, People, Analytics, Culture, Employee Experience or HR Business Partner role.
Support for this podcast is brought to you by Quantum Workplace. To learn more, visit www.quantumworkplace.com/digitalhr.
Interview Transcript
David Green: Today, I am delighted to welcome Steven Baert, Chief People and Organisation Officer at Novartis, to The Digital HR Leaders Podcast. Welcome to the show, Steven, it is great to have you on. Can you provide listeners with a brief introduction to you and your role at Novartis?
Steven Baert: Sure. Thank you, David. Glad to be here. I am responsible for people and organisation at Novartis, a pharmaceutical company. Originally I am from Belgium. I studied at law school, but then found my true passion, which is human resources. And I have been 15 years with Novartis now.
David Green: I know we are going to get into the shift that you are making around performance management, but Novartis is currently undergoing a large and exciting leadership transformation program. We got a preview of this when we had Simon Brown on the podcast last year. Can we start with you telling us a bit more about the concept of un-bossing and what that means for the leaders at Novartis?
Steven Baert: So we are in the business of what we call, re-imagining medicine and I think that is more relevant than ever, in terms of the world we live in today. Now, what that means is it is very complex work. You need a collective team, but all their experience, all their ideas, all their openness to failure to come together and really contribute to the fullest. And so what we have learned as a company, when we analyse our work, is that the concept of the leader knowing it all, the leader being the smartest in the room, is actually a concept that is outdated to really successfully innovate and find break through ways of curing the most evil diseases. So we had to therefore completely rethink how we need teams. I think many companies talk about the concept of empowering, we call it un-bossing there is something provocative in that term, but what it does is it starts a conversation. What is really fundamental in this is the belief that the answer to any problem is within the room, it is within the broader team and so a leader needs to create some clarity in terms of the direction, but really needs to show up as self-aware, vulnerable and creating the psychological safety for the team to come up with all kinds of ideas. Give them permission to say things that actually at first don't make sense and then really work together in a creative process to come up with concepts, try it out, allow the team to fail and the leader is there to support the team. That is the core idea.
David Green: This is something that I have seen, both from yourself and from Vasant Narasimhan your CEO, really being advocating about this externally. I think, particularly over the last 12 to 15 months, HR, people and organisation have become even more important within organisations and I know CEOs have relied very much on your peers Steven and I am sure that is the case at Novartis. How important is that relationship with the CEO and the executive team in your role?
Steven Baert: I think it is essential. When Vas became CEO he worked, over a period of six months with his executive team after listening externally to various stakeholders, listening to our own people, doing a crowdsourcing event to really define the agenda of what would define success for Novartis in the next decade.
The first priority he came up with together with the team was unleashing the power of our people. So he had noticed the strength of our human capital but that for various historic reasons, we were actually holding them back. So he with the team said, we have so much potential in this organisation what if we kind of unleashed that potential. And so there of course the role of human resources, we call it people in organisation, we even rebranded the name of the function as an important symbol, we are kind of the masters of ceremony of enabling that to happen. But I would not be able to make this change if it wasn't for the tremendous ownership, role modelling, support of Vas the CEO and the executive team.
So any HR professional listening to this, wanting to embark on this journey, allow yourself to spend a lot of time first aligning with your executive team before you go to your broader organisation because if your executive team is not 100% believing in this and behind this, it becomes very difficult to make any kind of progress.
David Green: Yes and I guess one would question the point of investing all that time and energy and resources into doing it, if the executive teams are not behind it because it is such a fundamental change that you have talked about. Moving to that un-bossed culture is a big step, isn't it.
Steven Baert: Sorry to interrupt there, but it was an interesting concept because too often people, including me, fell into that trap where we think that others need to change for this to happen and we experienced leaders are here to help them. I was looking for the frozen middle and after a few months I had to come to the conclusion that I was part of the frozen middle. That we can’t expect the rest of the organisation to make a change, unless we change ourselves. We took months, as a leadership team, to first work on ourselves. To first really become self-aware, to first confront some of our own fears of failure, our own vulnerabilities. For a long time I thought that vulnerability was a sign of weakness and that if your team would see vulnerability, that they would see you or consider you as weak. It is only once you really experiment and lean in yourself as a leader that, first of all amazing things start to happen, but that you also create permission for your team to do the same. And so unless you do the work yourself, you cannot expect your organisation, your leaders, your teams to go on that journey with you.
David Green: That is so important,isn't it? I think we have seen again, in the last 12 to 15 months, that leaders both in business, in politics and other areas of life, who show vulnerability get that that link with a lecturer or with with their workforce and it is so important. The last 12 to 15 months in particular with the pandemic, whatever role that we have got within an organisation, we are experiencing things that we have not experienced before and it is okay to say we don't know.
Steven Baert: And it makes the discussion so much richer because I think many of us came to work or to a meeting or to any type of conversation spending a lot of time and energy, trying to hide some of our insecurity, some of our shortcomings, out of fear that somebody else in the room would find out that you are not as smart as you think you are. First of all, you spend 20 to 30% of your capacity just doing that and then it is an illusion because even good decisions are not purely something that you do from a rational point of view. You need to be in touch with your feelings and your concerns, you need to tap into your experience, but once you say, I don't know, you give to the team permission to also say we are not sure about this. I think there are many documented examples of catastrophic failures, where there was somebody in the room who knew about the problem, but didn't feel safe to talk about it. So suddenly when you bring that vulnerability in the room, you start to talk about a much broader spectrum to approach this challenge and it is so much stronger and so much richer, in terms of what you can come up with in terms of ideas or a way forward. As a leader, you still need to ultimately make decisions, we are not talking about constantly going for consensus but that you really tap into the full potential of a team.
David Green: Which as you said, it is so important in medicine when you are trying to tackle some horrific diseases. You talked about how the leadership team themselves had to actually work through how to show the vulnerability so that they not only set the example but, as you said, not become the frozen middle. How did you go about shifting the way that you measure leadership performance?
Steven Baert: We are a science driven company, so we like to have a hypothesis and then measure for either a confirmation or learn something new and do a course correction. In that way we took a very similar approach here on this leadership journey. We have a very clear hypothesis, what we believe leadership should bring to address very complex problems and we want to measure that. Not from a pass or fail, but we believe that self-awareness is the foundation to this and so in order to be self-aware as a leader, the best thing you can do is get a lot of feedback. But feedback again, in a safe way, not just that you fall short of an expectation, you need to do this work in a very caring way. What we do is when you go on this journey, you get four times a year upwards feedback from your team, from your peers and from your manager. So we have recreated the traditional 360 tool, but this tool asks for very specific things that are much sharper in terms of supporting our hypothesis and then you get your data. You share that data with the entire team, you discuss that data with the entire team. There is something again funny about this, because I was used to getting pretty good 360’s in the past and now suddenly I get this 360 and there are some strengths in there, but there are also some very clear gaps. I thought, oh man, and now I need to discuss this with my team. I naively thought they were not aware of some of my shortcomings and that I was able to hide it from them. They just burst out laughing and said, really Steven, you never knew that about yourself? Some of the things we don't know about ourselves are very obvious to our team, but you do it in a very caring, loving way, in a very supportive way and it becomes also the fact that you go through this all together. Vas goes through this, my colleagues on the team go through it, my direct reports go through it. There is no embarrassment to it, it is a very supportive community of us growing together. We are also in a position to say to a college, hey I am working on this, can you be a peer buddy to me? So then, three months later, you take the survey again and you start to see that one big thing you have been working on is actually starting to pay off and you are getting better at it and that is how it works.
David Green: Again, a nice link to vulnerability because as a leader, actually being open to feedback on areas where you could improve, because we can all improve in different areas, it doesn't matter how effective you are. That links in quite nicely then to what you have been doing around the performance management culture in Novartis as well, more broadly. You have been going through a pretty radical transformation there too, before we dive into the detail, I am sure our listeners will be really interested to know firstly, how you discovered that the previous performance management culture was a point of friction for employees and secondly, how you approached developing a new approach?
Steven Baert: It is a very relevant question because I think there is a lot of discussion about performance management these days, it is a word that we use loosely, but you need to be very clear why you want to make a change and what it is you are trying to achieve, what is the problem you are trying to solve for.
So when we embarked on our culture change, we did a crowdsourcing event with our associates and so through the idea generation and then the voting, performance management came up as the number one request for change. It is very tempting, and it was very tempting for us, to take quick action. People don't like performance ratings, let's get rid of performance ratings and score a big hit, but that is only dealing with the superficial symptom. We first had to really understand what is the problem and what would be an alternative? Because typically associates don't like the performance management system, managers don't like it, HR doesn't like it, but what is the alternative? And that is where many companies have struggled.
So we first had to define what are we trying to achieve, in support of the culture we are trying to create and how will we know that we are successful? And that was again, a lengthy process, it took us several months to figure that out. Several months to define it and then, because it is such a big step and we had also studied the experts and the experiences from other companies, we knew that this was a difficult project to take on. We embarked on an experiment where we tested various hypothesis with 16,000 associates and we started again to measure through active and passive data. We would survey them on how they feel. We would ask them specific questions. We would also be able to compare the two groups in our quarterly engagement survey, on a broader range of questions to see how one group was feeling and behaving versus the other group.
David Green: So classic AB testing, using science. A scientific company, using science to help get to the answer.
Steven Baert: Yes, very important at Novartis.
David Green: Exactly. So obviously that helped you draw insights from that trial. Let's look at the new approach to performance management in a bit more detail. I saw you published a great article on LinkedIn at the start of March and we will provide a link to that article with the podcast.
Can you talk us through the four elements of the model and the intention behind it?
Steven Baert: So at the surface, people were telling us they don't like the ratings. Once we peeled that back, there were four things we had to address. People were not inspired by the objectives. The objectives were often top down and had the illusion that great work starts on January 1st of a calendar year and finishes towards the end of the year, where in reality innovation cycles or any type of work runs through very different cycles.
The second thing was that people were actually not getting good quality feedback and coaching and so often a rating became the only type of feedback that somebody would get from their manager and they would get that feedback at a time when there was actually a discussion about bonus going on. So there was even the wrong incentive at that moment, to give genuine constructive feedback and coaching. Then there was an entire topic around recognition and rewards, those are even two distinct things. People would sometimes say, I understand that there is a budget, so I am okay to take a lower bonus, but I still want the top rating because I feel I have done a great job this year. So they were basically saying I don't feel recognised. Then of course, there is the reward system and we still believe in pay for extraordinary performance, so the concept of everybody getting the same pay when they have delivered a different quality of work did not work for us.
Those are the four elements, objectives, feedback and coaching, recognition and rewards we had to tackle.
David Green: So what are some of the things that you have done in each of those areas?
Steven Baert: First we apply the idea of un-bossing to objectives. When people are inspired by a purpose, people are the best place to come up with suggestions of what they think they should be working on to achieve goals or to make progress towards science. We have created a process where we have rolling objectives, where people will create big, bold objectives for themselves. Some of them will be on a timeframe of six weeks because some things are just urgent and they sometimes say, if I could just spend a few weeks working on this then we could crack this issue and then others will go over three years. Of course, we still believe that the strength of the team is bigger than the sum of the individuals. So there is then also a team ceremony where you exchange and set common, big, bold objectives for the team.
In the beginning, that feels actually a little heavier and that is also the initial feedback we got, people were saying, man, this is a lot of work because you really need to think through what you will be working on and you need to discuss with your colleagues. So, if I am working on this and you were working on that, how will that work together? They are the big bold objectives and then have them broken down in to your own set of priorities. The second thing is the entire concept of feedback and coaching, where we discovered that this is two things. First of all, it is a skill. You need to learn to give feedback, you need to learn to become a better coach and so we developed tools, we created partnerships through some agile teams and then we really are training all of our people managers on how to be a good coach and how to provide feedback. That is a significant investment.
At the same time, there is also that self-awareness. The belief that people hold, including myself for a long time, that when you give direct feedback to somebody that he or she will be disappointed, that it will damage the relationship. So we both know that we should be doing this, but why aren't we doing it? They are all bright people. So we also, through our un-boss leadership experience, go deeper into some of those barriers, those beliefs that you will hurt people's feelings when you give them feedback and working on that concept that you can be caring whilst holding people accountable, that these are not contradictory.
When you look at the recognition, we have created a spark platform where people can give real time recognition to each other, not just up and down, but also lateral and team recognition. That can be in the form of a funny card, that can be in the form of a nice comment that you send, that can also be in a monetary spot award through points that you assign to each other. We funded that system so that there are points available for people to recognise each other. We have seen that the uptake has been tremendous and you can even see a kind of social network of how people recognise each other throughout the broader universe of Novartis.
It is not just people working shoulder to shoulder that keep on recognising each other.
Probably the hardest was how do you still keep a pay for performance type of culture? How do you make sure that at the end of the year, people still think, hey, this makes sense. We have discovered that two things really matter, transparency and fairness. It is actually less about the quantum, it is about I have worked really, really hard and that other person basically took it easy this year and we both get the same bonus, that doesn't feel right. So that fairness and that transparency we had to solve for. We reward for impact and impact is both what one has achieved and how you have achieved it, so it is also how you operate in the organisation. That becomes a peer and a team discussion for example we will take the difficult year of 2020, who or which team has really made an impact on you? The team will discuss that and say, well, in this case, it was really the clinical trials team. They had to make sure that our clinical trials stayed on track but there were no more in patient visits, hospitals were closed and look, they have come up with a revolutionary concept of remote monitoring. This has really made a tremendous impact for patients and for the company, so this is a team that had a disproportionate impact. That is where you put a multiplier on these people's bonus and the rest gets the default, the default being a one bonus pool for the company. The company does well, everybody gets a good bonus. The company doesn't do well, everybody takes a hit. We have also done away with the sub pools, where you had internal competition, we have one pool for the entire company.
David Green: That makes a lot of sense and again this is a big change, as you highlighted at the start, both in culture behaviours and then actually testing what you needed to build that new performance management system on. But I guess it is still, in some respects, early days. How far along are you in rolling out the new approach and what are some of the outcomes or impacts that you are seeing so far?
Steven Baert: It is a very good point that you raised because our biggest temptation was to go faster because you have this crowd sourcing, people want this and you say, we can score a big hit by doing this.
I would really caution people, don't rush into this, really understand the issues, really try out your solutions and make sure those are solutions are fit for purpose for what you are trying to achieve as a company and the culture you are trying to create.
With our pilot group, the 16,000 people, we stayed the course. So there we now have two and a half years of data. The total company, we went live at the beginning of this year. We of course had to take this also to our administration committee and convince the board, they were very supportive, also because of the data we could show. When we asked the 16,000 people there is definitely still things we can do better, but 96% of the population said we don't want to ever go back to the old system, we prefer this new system. That by itself is already, I think, very convincing. We have seen examples of these teams being more empowered during the pandemic in coming up with solutions for complex problems. Those are just anecdotal examples, but still this encourages us. And then across all the data and all the measurements we did, we saw a significant improvement in how people perceive receiving feedback, how people feel about the objectives that they are working on, how they are inspired by their work. All of that gave us the confidence and the data to go to our board and say, we are going to do this. But the broader organisation, so the 110,000 people, we do this in a very customer centric way. We don't want to talk about, here is the old process gone and here is the new process. We go piecemeal, we start at first with hey, let's talk about how you can come up with your own objectives for what you think you want to be working on. That was the first part of the year. There was a lot of, checking in, listening, somebody saying, hey, this feels heavy. There was too much emphasis on making sure to document this, so some teams felt that the administrative part was still too heavy. So we had to course correct there a bit.
Now we are going into feedback and coaching. We want this part of the year to really double down on feedback and coaching and towards the last part of the year, we will start to talk about these impacts. Again, it will take time, several years, to replace a system that was carefully crafted and implemented for 25 years.
My other insight is don't be too harsh on yourself, don't believe that in three months you can replace 25 years of history with an old system. This will take time to become part of the DNA of your organisation and it will take time before people really believe and trust that this is different and that they have permission to work differently.
David Green: And as you say, you have got to help people along the way through training, coaching and then using active and passive data to understand how people are feeling and course-correct as you need to do that. What has really resonated with me through the conversation Steven, is you have talked about data a lot, as you know it is kind of my passion along with people analytics. You kindly provided a case study for the book that Jonathan and I have got coming out in July. Again, I know that there is a culture that you have got both within the wider organisation about using data, but also within people and organisation as well. As a Chief People and Organisation Officer, how does data help you, certainly in understanding what is going on in the business, but also with your conversation with Vas and the executive team as well?
Steven Baert: I now jokingly refer to it that HR is evolving from being King whisperers to data Kings.
There was a time that the power of any HR professional was that special relationship they had with their client and where, often behind closed doors, they would say I have heard it in the cafeteria. You would pick up on a conversation in the elevator or in the cafeteria and you project that the people are unhappy.
Maybe the people in Switzerland at that moment might have been unhappy, but that doesn't mean that the entire organisation. Too often we went on the basis of our connectivity, proximity to people to say, here is how the organisation thinks or feels about this. So it was important to get a more data driven approach.
It was also to dispel some of the myths and beliefs. For a long time, people thought that working from home would lead to lower productivity, that people on Mondays and Fridays wouldn't really be working. Well, I think we have all learned that that discussion of productivity is out of the door. If anything, we are all concerned that people are working more these days, now that they work from home. But you only know that when you have data. We had to build active quality and quantitative data. So we had to first survey our people and ask them actively a question and then we had to look at metadata. At the same time, I would again say, don’t use this ever to gather individual data. The data privacy, the contract of trust with your associates is paramount and if one oversteps that line you basically, rightfully so, lose the trust of your associates. So we only use metadata. We don't use individual data.
David Green: It is so important. You talked about the changing how you approach performance management is a massive change, it is a multi-year and not something you can just turn on the tap in three months. I guess it is the same with creating that data culture within HR and within people and organisations as well.
I know that is something that you are doing in parallel, you are developing the people analytics capability, but you are also helping your P&O professionals acquire the skills that they need to actually take that into effect with their clients within the organisation.
Steven Baert: Yes, absolutely. I think first of all you need to build the systems, but you also need to hire a behavioural scientists and data scientists, so that it is a different capability. Then you need, on average, seven data sets to have any reliable type of trends. You can't go on just one moment in time and say, oops, look what is happening. You then need to retrain your HR business partners and generalists on how to use this data and how to access this data. You need to establish the trust within the organisation that you are actually listening, that you are using the data to learn and not to spy. Then you also need to go to your business leaders with that data from a perspective that this data is relevant for them, we were joking that it is not because everybody says, I want a pony that you now will start to buy ponies for you, it needs to be relevant to where your business is going.
So it is a journey, it is complex and it is worth pursuing it.
David Green: Some great insights there Steven, unfortunately we have come to the final question. This is one we are asking everyone in this series and it probably allows you to maybe summarise some of the things that we have spoken about over the last 40 minutes or so. Many companies have done a way, as we talked about, with their annual performance cycle over the last few years but we haven't seen a new consistent model replace it as quickly as everyone expected. How do you think companies should approach performance management in the future?
Steven Baert: I think you really need to focus on direction or your destination rather than what are you walking away from. It is very clear that people are dissatisfied with the old model but unless you are clear on your new direction, you will be lost or possibly going around in circles. That direction should be completely aligned with the environment and the culture you are trying to create for your company. I would take enough time to have those discussions with your leadership teams about what is it that we want to see and experience when we walk around in this organisation, two to three years from now? Then I would build those hypothesis and I would test. I would try to be very clear on what it is you are trying to address, not just do way with performance management, but what are you trying to build for and now start to test it. Also, listen, learn, make it a constant feedback loop because you are replacing 20 to 30 years of history. Don't expect that you will fix this in three months. Listen to your associates, improve, fine tune, learn and spend the training and the resources behind it to make it happen.
And then it is worth it because I think you will unlock so much energy and passion in your organisation that you will find solutions for the most complicated issues that you are faced with.
David Green: That is a great summary, Steven. Maybe from the work today, what surprised you the most from the journey that you have been on and what surprised you most from the pilot with the 16,000 associates that you did?
Steven Baert: Well, many things, but I would say in the first place the true power and potential of bringing the team together. Again, we have seen it in the pandemic, but once people believe in something and they put their energy behind it, it is amazing what an organisation can achieve. It is actually amazing how fast they can then move because once they really feel empowered and inspired and once you take away that fear and replace it with curiosity, it is amazing what starts to happen in an organisation. Personally, going on this journey was initially difficult because you need to reopen some doors that you had carefully closed over the years, but I felt that I was living in two rooms of a castle and it is so rewarding as a leader to go on that journey because suddenly you can reopen all those doors again. After you initially accept some of the stories you have told yourself, you will become a happier, more inspirational and a more impactful version of yourself and so I would recommend it to anybody.
David Green: Steven, that is fantastic. Thanks for being a guest on The Digital HR Leaders Podcast. How can listeners stay in touch with you, follow you on social media and maybe find out more about Novartis?
Steven Baert: I am a big fan of LinkedIn, I learn a lot from what colleagues are publishing and sharing. I like to share our journey in the most vulnerable way, I will share what works and what doesn't work, so follow me on LinkedIn I would say.
David Green: Steven, thank you very much. We will post some links to some of the articles that Steven has published over the last year or so as well.
Steven Baert: Thank you so much, David.