Automating Performance Management

7/29/2019 Automating Performance Management

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The automation of performance and talent managementprocesses brings a multitude of benefits, which make it,arguably, a prerequisite for effective people managementA bespoke approach to online performance managementallows HR professionals to meet the specific needs of an

organisation, thus creating competitive advantage.

Automatic for the people: why automation of performance

management is an organisational imperative

Original insight


2/14www.etsplc.com| 2

Executive summary

Employee performance management is a fundamental business process that too manyorganisations fail to get right. It is critical to realising the full potential of individuals andmaximising business performance. Leading organisations recognise the value of theiworkforce and aspire to create a high performance culture. Most achieve this through the

implementation of performance management processes that are underpinned by an onlinesystem.1 The secret to success is to adopt a bespoke approach, implementing a system andprocess that is the best fit for the company rather than best practice. Our experience showsthat what works for one company may fail for another.

Despite the advantages of online performance management systems being well-knownsome HR professionals have been slow to respond, preferring to follow rather than leadTheres also been a reliance on off-the-shelf automated systems that incorporate softwarevendors definitions of best practice. This is not the most effective option for the majority olarger companies. We argue instead that, when automating performance management, HRprofessionals should shape and deploy a process that is tailored to fit the specific needs otheir organisation, thus creating competitive advantage.

An historical challenge for HR professionals has been getting buy-in from senior executives with the need to deliver a strong business case demonstrating the return on investment. Weset out exactly how implementing the right online solution for performance management canbenefit your business and demonstrate what returns you can expect. Well also present casestudy examples of HR practice that employ bespoke automated systems and conclude with aguide for applying this approach.

For clarity, we define performance management as a process that establishes a sharedunderstanding of organisational success and an approach to leading and developing peopleto ensure this is achieved.

98% of best inclass companiesuse an employeeperformance

managementprocess, versus 59%of other firms.

- The Employee PerformanceManagement Benchmark Report:Managing Human Capital fora Competitive Edge. AberdeenGroup, 2006.



Automating performance management processes makes it easier for companies to alignemployees individual goals with corporate objectives. It makes measuring performance andassessment simpler and more consistent, and allows companies to see clearly their best andpoorest performers. Such insights are invaluable in a climate where headcount reduction is

sadly a necessity for many companies, which equally want to retain their talent.

When considering the merits of automating performance management though, its reallyimportant to convince senior executives to look beyond the bottom line and appreciate theother, in some cases less tangible, benefits too. By embedding an effective performancemanagement process, companies are demonstrating a willingness to invest in employeesThis will impact directly on retention of high performers, who are keen to plan and developtheir career.

Also, weve found many instances where, by going through the automation process, companieshave taken the opportunity to reassess existing practices. This results in standardisation andconsistency of performance management processes, is impossible to achieve with an offline

process as too much is open to interpretation by line managers in different business units.

Time to reappraise the appraisal

A large proportion of employees approximately 40% remains dissatisfied with theiappraisal process.2

In addition, it seems that line managers too share concerns regarding performancemanagement processes. Research shows that 61% of managers dont believe existingappraisal processes are driving greater performance.3 These figures should worry businessleaders as ineffective appraisals will lead to a dip in employee satisfaction, which has a direccorrelation with business performance.

Companies must get the basics right. Crucial to engaging employees is ensuring they haveclear goals and objectives. Yet 30% of private sector employees dont know what theicompanys objectives are. Individual and corporate objectives should be aligned if anemployee understands what is expected of them and how this fits in with company objectivesthey are more likely to be engaged and motivated to perform. Furthermore, alignment oobjectives is also crucial in ensuring your business strategy is ultimately successful.

How do managers and their subordinates benefit?

An automated system can make a huge difference in simplifying performance managementby making it more transparent, giving all involved greater confidence in the processEmployees are clearer on whats expected of them and can see how their objectives support

organisational goals, resulting in increased engagement.

With less time spent on functional processes, line managers are free to focus on careeplanning, coaching and development for direct reports, making it easier to identify, nurtureand develop talent. A cautionary note here though its important that an online system isnseen by employees or managers as a barrier to face-to-face discussion. It should aid andinform, rather than replace, performance-related conversations.

1. How automating performancemanagement helps people processes

A huge numberof employeesare dissatisfied

with performanceappraisals. Ourresearch shows

this is due to thelack of clarity andinvolvement insetting goals.

- Performance ManagementReview: An analysis of the ETSEmployee Survey. ETS plc, 2009.



How do HR professionals benefit?

For HR professionals, an automated system means greater accuracy and far less time spenton administration for performance management. This frees them up to develop HRs role asa strategic business partner. Powerful reporting capabilities of automated systems also makeidentifying trends, skills gaps and benchmarking far quicker and easier.

Performance management the foundation of talentmanagement

By embedding an effective online performance management system, organisations are alsohelping lay the foundations for a more strategic approach to talent management.

Anticipated skills shortages mean that talent management, and specifically the developmenof a management and leadership pipeline, has been identified as the single biggest businesschallenge facing companies.5 To appreciate the importance of retaining skilled employees,consider the cost to companies of replacing staff, which is 30 - 150% of the employees annuasalary. This means, in a firm of 40,000 employees, the difference between having a 15% and

25% staff turnover is almost 25 million per year.6

A well-integrated automated performance management system will ensure companies basetalent decisions on hard facts and data. Itll also help companies locate potential leaderswithin their organisation to be developed, and identify successors to critical roles across thebusiness.

Anticipated skillsshortages mean that

talent management,and specifically,

development of amanagement andleadership pipeline,has been identifiedas the single biggestbusiness challenge

facing companies.



Case study 1

An international media company with world-leading businesses in education, businessinformation and consumer publishing appointed ETS to devise an online talent managementsystem for its top 250-300 performers. The system was to take over from spreadsheet-baseddata capture with managers forms returned by email, manual data entry and no facility to

generate reports.

The bespoke online solution devised allows straightforward administration access andeasy collation of data via a standardised form, which is then transferred to onecentral database

Simple file management means instant and consistent communication with managersabouthe process, with the intuitive interface prompting managers to access activities they needto complete

A wealth of reporting options are available reports can be generated centrally orlocally by managers with advanced reporting to both Excel and PDF (Adobe Acrobat).

Report Packs in high-quality PDF can be generated at the click of a button for talent review

meetings (see figure 1 below)

Figure 1: Online talent management system



2. Building a business case for automation

Despite difficult economic conditions, investment in performance management has remaineda top priority for businesses. Research by the Aberdeen Group shows that rather thanslow or stop investment, the struggling economy has served to drive greater investment inperformance management.7 This is because companies are very eager to identify their top

talent, create a high performance culture, better align compensation with performance andincrease visibility and accountability of performance.

Each company developing a business case can use the model set out below to identifydifferent types of benefits. Just as the best online performance management solution will bebespoke as well explain later so too will the evidence showing the business benefits andimprovements, which are unique to each organisation.

In our experience, often the biggest barrier for HR practitioners has been convincing seniorexecutives of the business need for automating performance management and the return oninvestment offered.

For organisations yet to automate, consider the latest research which reveals that 59% ocompanies sampled are already using automated performance management applicationswith a further 13% indicating they plan to implement such systems within the next year.8 If youcompany doesnt fall into either of these categories, theres a good chance youll be left behindby your competitors.

How does the business benefit?

In analysing how automating performance management can have an impact and createvalue for businesses, we can broadly split the benefits into three areas loosely based on theBersin model9:

Efficiency and compliance Providing legally defensible employee management

o Decisions are documented and evidence based

o Electronic log of all performance conversations

Reduced administration

o Appraisal, development forms and evidence stored electronically and accessiblefrom any computer no more lost paperwork

o HR managers and business leaders can access aggregate reports themselves

Process improvement Increasing employee retention / lower costs associated with losing employees

o Employees are more fairly recognised and rewarded for their efforts

o Accurate identification and reward for high performing employees

Improvement in employee engagement and development

o Employees are clearer on objectives and more motivated to achieve

o Helps managers identify appropriate development areas for individuals

Improving efficiency and effectiveness of training



Business transformation and business performance

Workforce goal alignment

o Individual goals clearly aligned to support business goals

Increasing employee productivity and performance

o Clear, measurable objectives mean employees are more productive

Improving the leadership pipeline

o Detailed records of employee skills, attributes and experience, helpingidentify future leaders

Whats the return on investment?

A good starting point for illustrating the likely return on investment is efficiency andcompliance gains. Implementing an effective online process offers indisputable time andcost-saving benefits, which can help build a watertight business case. Processing paper-based appraisal forms is a laborious and lengthy process involving multiple people codingresults and inputting data entry. Manually generating reports is similarly time-consuming

for HR teams.

Longer term, companies can bank on a return through business performance. Successfullyembedded online systems will result in greater performance gains across all KeyPerformance Indicators.10 It will also help to boost employee engagement and customersatisfaction, which is a key factor in the financial success of an organisation.11

In addition, an automated system allows greater visibility of the contribution madeby individual employees. As well as helping with talent management and informingperformance-related pay decisions, this also has value at a strategic level, giving CEOsgreater insight into how they can operate the business more efficiently and increase profits.

Organisationsautomatingperformancemanagement can

easily realise a50% - 200% returnon investment fromefficiency andcompliance alone.

- The Business Case for Perfor-mance Management Systems Josh Bersin, 2008.



Case study 2

ETS was appointed by a leading global manufacturing group to streamline its performancemanagement process. The company, which has manufacturing plants in over 25 countrieshad previously run ad-hoc performance reviews at each site, using location specific primarilypaper-based forms. However, this approach offered no consistency of process or data,

and a huge administrative burden on local HR to collate, analyse and report. With no directinvolvement by a central HR function, talent management and succession planning wasenormously difficult and time consuming.

ETS implemented a single online performance review form for all locations, covering 5,000people

Central and local HR has real time sight of the process and can monitor participationlevels and manage communications effectively with participants and managers

The online system allows real time reporting of data, which helps with both the qualitativeassessment of objectives set, as well as allowing access to information for talent andsuccession planning

The usability of the online tool and ability to access the process remotely has resulted in asharp increase in the level of participation as well as the overall completion rate

Figure 2: Global performance management solution



Best fit rather than best practice

HR professionals often seek to replicate best practice processes, based on accepted industry

standards. Such an approach is also often favoured by senior management as they arereassured by implementing a solution that has been used successfully by other organisationsand therefore seems to guarantee them success.

However, a reliance on best practice is not the best solution for businesses as it fails to takeinto account organisational context and specific business needs. While best practice solutionsare tried and tested and proven to address a problem or achieve a desired goal, they are rigidand confound business goals, existing processes and cultural norms, which can ultimatelylead to low adoption from users.

As we discuss more in another paper, Beyond best practice: enhancing results with bespokeHR Best fit solutions take a bespoke approach and are typically based on a combination ofbusiness goals, a companys unique culture and also take into account best practice.

Bespoke solutions offer unrivalled flexibility

In an increasingly dynamic business environment, what works for a company today, may nowork tomorrow it may need adapting or adding to. Leading organisations are constantlylooking to improve and refine their processes in order to ensure theyre at the top of theigame.

A bespoke or best fit approach allows a company to keep processes that work and integrateaspects of the business culture, which will encourage greater user adoption.

Having a bespoke performance management solution is particularly useful for multi-national

companies and those with operations in different markets. This allows a system to have aglobal process put in place but also include the capability to tailor processes at a local level,accounting for cultural and organisational variations.

Keep the end user in mind

A fundamental consideration when switching to an online performance management systemis to ensure you keep the end user front of mind, as getting user adoption is critical to thesuccess of the implementaion. You must engage users in the process, explain why the newsystem is being implemented, and crucially, whats in it for them.

A bespoke approach allows companies to retain company culture, processes and the unique

look and feel of the organisation. Incorporating such elements is invaluable in encouragingadoption as it will immediately be more familiar and intuitive for users. A bespoke solutionalso allows companies to gain a competitive advantage as the system is tailored to meetspecific business needs and really fit an organisational structure.

3. Benefits of bespoke when automating

A bespoke or bestfit approach allowsa company to keepprocesses that

work and integrateaspects of thebusiness culture,

which will encouragegreater useradoption.



Case study 3

ETS worked with a leading high-street entertainment retailer to overhaul its performancedevelopment review. The organisation had an existing online solution but employee buy-in was low due to its complexity and look and feel. The HR team was finding it hard to sethe process to stakeholders due to a lack of interest in the process. The organisation also

ran a 360-degree feedback process using a separate system. Furthermore the performancedevelopment review offered practically no reporting functions and, as a consequence, the HRteam were not getting value from the process.

ETS devised a combined 360-degree feedback and performance development review (PDRsolution

The look and feel incorporated the organisations very specific brand identity, enhancingusability and increasing its appeal to users

The process was more streamlined and intuitive making objective-setting, monitoring andinterim reviews more straightforward

The solution featured powerful administration tool to monitor, track and promote use of the

process among employees

360-degree feedback reports reflecting the brands unique image could be generated,which included a one page summary enabling quick identification of the key findings of thereport

ETS introduced HR level reporting enabling sharing of reports with the business and easyextraction of data from the system

Figure 3: Performance management for high-street entertainment retailer



The role of HR is increasingly strategic and its time that the approach to people managementprocesses reflected this shift away from an administrational function. Implementing anautomated performance management system can help facilitate this change, while alsooffering tremendous flexibility and scope for business benefits. However, for these reasons, i

can be difficult to know where you should start with automation.

With this in mind, we have outlined a five step implementation strategy process that wefollow, which is essential when planning and embedding a bespoke online performancemanagement system:

Align

Understand the organisational context, underlying business drivers and broader

organisational culture such knowledge is critical when identifying key design principlesand success factors for the project

Identify and agree the scope of the project including the timescale to achieve your identifiedcritical success factors

Engage key stakeholders to ensure engagement and buy-in from the outset

Define

Develop the project scope and define the solution, seeking input from relevantstakehoders

Scope specific requirements of the solution based on best practice techniques and undertakeorganisational research to inform design

Assemble project team and run definition workshops with representation from across thebusiness to define system requirements and associated reports and outputs

Ensure best fit solutions are underpinned by best practice advice that draws on relevantresearch and latest trends

4. Where to start with automation?

Figure 4: Implementation strategy taking a bespoke approach



Develop

Ensure all systems and processes are developed in line with the solution specification andincorporate regular project reviews and note changes

The completed design should be validated across the business before signing off.

This validation process should include subject matter expert reviews, through useracceptance and quality testing

Agree, design and deliver the supporting processes and materials required for the roll-ouof the solution (e.g. training documentation)

Deliver

When introducing the new solution to your business, ensure the associated communicationsand training are timely, targeted and effective

Ensure that youre familiar with all elements of the solution and are able to answerquestions from across the business

Hold a project review meeting to discuss the project to date and document what has worked

well and what improvements may be needed

Enhance

Use the reporting from your solution to gain insight into your workforce.

Analyse and interpret your results, using the data to inform strategic people focuseddecision making that delivers tangible business improvements.

Evaluation is fundamental to defining the success of any process. You must be able todemonstrate the value of the project to your business, identifying exactly where it has hadan impact



Conclusion

The number of organisations automating their performance management processes continuesto grow at pace. Of those not yet using automated systems, there is widespread awarenessof the benefits that it offers and as research has shown, there is a resolve to automate soon.The biggest challenge for these organisations remains convincing senior management of the

business benefits and getting their buy-in. As weve demonstrated though, there is a very cleabusiness case for doing so, with substantial return on investment, streamlined and more timeefficient people processes and, most importantly, a positive impact on business performance

About ETS

Dominic Wake and Ben Egan also contributed to the content of this report.

To contact Dominic about this report, please send an email to [email protected] orcall +44 (0)1932 219949.

ETS provides business-focused consultancy and custom-designed technology to meet the

performance management, employee research and 360-degree feedback needs of world-leading companies. We combine innovative technology solutions with practical experience todesigned a solution that fits your business needs.

ETS delivers our clients ideal world, which means that our solutions exactly match eachclients corporate culture and processes: we listen to you needs; we do not expect you to bendto our solutions. Where appropriate, we develop the new processes needed to meet youpeople objectives. Where it is possible, we can integrate with, and automate, any existing HRprocesses so that new and old work together.

Expert Training Systems plc (ETS)Hersham Place Technology Park

41-61 Molesey RoadHershamWalton-on-ThamesSurrey KT12 [email protected]

HR means business blogwww.etsplc.com/blog

Twitter@etsplc


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References

1. The Employee Performance Management Benchmark Report: Managing Human Capital for aCompetitive Edge. Aberdeen Group 2006.

2. Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009.

3. The Business Case for Performance Management Systems Josh Bersin 2008.

4. Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009.

5. High-Impact Talent Management: Trends, Best Practices and Industry Solutions. Bersin & Associates2007.

6. Cornell.edu/research Aberdeen group 2008.

7. Aberdeen Group Employee Performance Management 2009 Jayson Sabba

8. CedarCredstone 2010 2011 HR Systems Survey.

9. The Business Case for Performance Management Systems Josh Bersin 200833.

10. Aberdeen Group Managing Employee Performance 2008.

11. Aberdeen Group Employee Performance Management 2009 Jayson Sabba.

Automating Performance Management

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