Performance Management: It s a Lot More Than Annual Appraisals WHITEPAPER

Transcription

1 Performance Management: It s a Lot More Than Annual Appraisals WHITEPAPER

2 I want to know what my people can do, not just what their performance score is. CEO, major telecommunications company If you think performance management begins and ends with the annual performance review, think again. Annual performance appraisals have a place, to be sure. Without a consistent and measurable way to manage performance, organizations cannot fairly promote the right people, tie pay to performance or incent people to perform in a constructive way. But if performance appraisals are the sum total of your performance management process, you are missing out on a major opportunity to develop, assess, motivate and promote talent. While there are tools to automate performance reviews and ease the administrative burden, efficiency by itself is not the end game. Making the rating process more efficient is helpful, but by itself has little impact on the business. Successful performance management goes beyond automation and efficient appraisals to employee engagement and retention. True performance management is not the typical once-yearly obligation, to be completed with as little hassle as possible, but a constant and daily driver of business value. This begs the question: What do we mean by performance management? At a basic level, it means understanding your people, and knowing who can step up to the plate when a business need arises. Let s say you re planning an Asian expansion. Do you know what your talent needs will be? Do you have qualified people in your organization who can speak Mandarin? Is anyone willing and eager to relocate? You won t find the answers in annual performance appraisals. Or maybe dozens of experienced engineers working on critical projects are approaching retirement. Do you have development and succession plans in place? Who will fill key positions a month from now, or two years from now? How do you decide who should be developed and what skills and competencies they ll require to successfully take on challenging, business-critical new assignments? Being able to answer questions like these is the essence of performance management. It comes down to knowing the skills, competencies and aspirations of your employees; developing and retaining them; and aligning their efforts with the needs of the organization all year long. Performance management isn t just an HR responsibility. While human resources organizations should help define and steward the process, performance management is not an HR issue. Business managers must own performance management. The most effective model is one in which HR and line managers partner in designing and implementing performance management processes and goals, while business managers take ownership for successfully executing the processes and driving performance excellence. Simply stated, performance management is management. While human resources organizations should help define and steward the process, performance management is not an HR issue. Business managers must own performance management. Performance Management 2

3 Beyond Performance Appraisals For many companies, performance management is a once-annual, one-dimensional event, not a key driver of competitive advantage. The appraisal must be part of the process, but it is not the entire process. To deliver business value, appraisals must be linked to other performance management activities, including employee development plans and formal coaching programs to nurture and cultivate talent. It also requires a systematic way of profiling your talent resources and giving management visibility into vital skills, experience, and credentials that are not typically documented in resumes and personnel files. Finally, performance management requires an alignment between employee goals and corporate goals. According to a study by Bersin & Associates, this systematic approach to performance management is rare (see figure 1). Figure 1: Performance Management Scorecard Companies using standardized or optimized processes Formal coaching programs Consistent development plans Training tied to development goals Aligning individual employee goals with corporate-level goals Setting employee goals Annual performance appraisals 0% % Source: 2008 Talent Management Factbook: Global Trends, Facts, and Strategies in Corporate Talent Management, Karen O Leonard, Principal Analyst, Bersin & Associates, June In partnership with HR Executive magazine, Bersin surveyed 976 corporations, nonprofits, government, and higher educational institutions with 100 or more employees from around the world. Only 57 percent of the nearly 1000 organizations surveyed by Bersin & Associates have a standardized or optimized process for establishing goals for individual employees. Setting individual goals is important, because employees do better when they have a long-term outlook for their performance and development giving them a personal stake in your company s success. Only about 40 percent consistently align individual employee goals with corporate-level goals, an approach that has been well proven through the Balanced Scorecard Collective 1. Approximately 40 percent link training to employee development goals and only one-third of companies use a consistent approach to employee development plans across the organization. Development planning has significant impacts on employee and organizational performance because it compels managers to think about succession, leadership development and competencies. 1 Balanced scorecard is a process for establishing a strategy-focused organization, which sets measurable targets for each operational process and support unit. For more information, visit Performance Management 3

4 For many companies, performance management is a onceannual, one-dimensional event, not a key driver of competitive advantage. The appraisal must be part of the process, but it is not the entire process. Finally, just one-fourth of companies surveyed have well-established coaching programs. Coaching is another area that has a significant impact on the business, enriching the performance of both the employee and coach. After all, the highest performing employees are not necessarily those who work the hardest, or even those who score highest in performance reviews, but the ones who are the most engaged, best trained, and best aligned with the company s objectives. What to Look For in a Performance Management Solution Today s performance management systems should go beyond mere appraisal automation to deliver business value. They should streamline administrative processes to manage performance assessments more efficiently and more securely, but this is just the beginning. It is vital to engage and develop talent and fill critical positions with motivated top performers. This requires a performance management system that meets these seven core requirements: Provide management visibility into the entire talent pool across the enterprise Build the foundation for succession planning and career development Engage and motivate employees, and understand their aspirations Share employee skills and interests that go beyond the appraisal review Make talent management an ongoing process, not an annual obligation Drive decisions on compensation Inform recruiting efforts by identifying the characteristics of high performers Today s performance management systems should go beyond mere appraisal automation to deliver business value. To meet these objectives, a comprehensive performance management system should provide these capabilities: Talent profiles: Talent profiles make all relevant information on employees performance ratings, competencies, skills, compensation, etc. readily accessible and searchable for managers and HR professionals. In addition to resumes and ratings, talent profiles also capture rich, unstructured information to paint a more complete picture of the employee s skills, experience, and aspirations. Information in the talent profile is derived from the HRIS, managers, and, most importantly, from the employees themselves. Manager and employee journals: Automated journaling provides an ongoing process for capturing an employee s achievements, goals, and areas for improvement throughout the year. Satisfactory completion of an assigned task, difficulty with a particular assignment or above-and-beyond performance should be captured in quick journal entries to assist in managing employees day-to-day, and referred to later when preparing quarterly or annual assessments. Performance Management 4

5 Competencies and job profiles: Performance management systems should offer an automated way to match employee competencies and job profiles. Managers and HR professionals should see all information related to each job within the organization, including up-to-date job descriptions, competencies required for success and the pipeline of candidates ready to move into a job. Analytics: Managers and HR professionals should be able to generate reports on key performance metrics to gain critical insight into business and employee trends. For example, they should be able to identify which high performers are flight risks, or whether compensation has been allocated appropriately to reward performance. Easy interface: To ensure its consistent use, the system design must be easy to use for employees and managers and accessible anywhere. Dashboards and dynamic, actionable organizational charts should provide easy access to all relevant information about employees, candidates and jobs. Links to other talent-management functions: Performance management must be tied to talent acquisition, development and succession planning, and compensation. Driving Business Impact While a necessary part of performance management, the annual performance appraisal itself does little, if anything, to improve alignment, accountability, performance or retention. The full performance management process setting well-aligned goals, creating development plans, coaching, assessing performance and then using this assessment information to improve and reward performance is the true driver of organizational effectiveness. To learn more about Performance Management and the Peopleclick Authoria Talent Lifecycle Suite, call or visit us at Performance Management 5