Cloud Based Performance Management

Transcription

1 Cloud Based Performance Management Making the Business Case for Performance Management in the Cloud TM The author of this article was Lucinda Carney a business psychologist with more than 15 years experience in Corporate L&D. You can contact her or another member of the Advance Change team on info@advancechange.com 1

2 What is the Status Quo? Overview: Many businesses are currently operating paper or in house performance management and appraisal systems, when this is the status quo there can seem little reason to change. The system works OK, albeit there is a disproportionate emphasis on admin and paper-chasing but in recent times, reducing administration has not been seen as a compelling reason to invest. Add to this fact, the essential focus on the bottom line encouraging short term behaviours and focus, a move that is even slightly more strategic in terms of HR can be overlooked. Public sector with the changing political pressures and small and medium sized businesses who have been focusing on survival are particularly likely to suffer in this instance. This paper positions the potential ROI of effective performance management to help organisations recognise this as a strategic imperative. Business Issues Urgency Culture Managers are so busy personally chasing urgent results and responding to knee jerk change that they run the risk of forgetting to manage the performance of their people, this leaves people unfocused, disengaged and less productive than they could otherwise be. If the average manager has 6 direct reports and ensures that each one of these is performing to the optimum, this will always achieve more than even the most effective individual manager. Out of date Management Practice With increasing numbers of Generation Y & Z in the workplace, the expectation from the psychological contract is changing. These people expect to be valued, developed and given feedback. Combine lack of 1 to 1 time with their line manager with antiquated, paper-based, appraisals that are dusted off annually and then filed through a process of compliance, it is hardly surprising that businesses are experiencing disengagement & talent drain. The Impact: Quality & consistent people management practice and development has been de-prioritised in favour of task focus, change management or short term survival. People seem to feel that they are working harder with less recognition or support. In some cases this may be true due to downsizing during the recession. But it is likely to be unsustainable, leading to disengagement and burnout as people react to urgency, making short term decisions rather than planning, prevention and continuous improvement. Managers haven t got the skill, confidence or inclination to set clear expectations and manage against them or to grasp performance issues early and turn them around, resulting in higher risk of attrition or even litigation with costly tribunals. 2

3 What is the Solution? 1. Focus on people AND financial performance These two are completely interlinked, particularly when you look at the vast evidence around engagement. Employee engagement was described by the Human Capital Institute in 2010 as being: an accepted leading indicator of next year s financial results. When you consider that the balance sheet is actually a lagging indicator, yet it is seen as the primary driver in most businesses, you can see why it may be useful to focus on engagement as well. 2. Make people management sexy! It has become all about leadership in recent times but consider this fact: it is more dangerous to be undermanaged and over led than over managed and under led. Think of the recent financial crisis as just one example of this. There s a whole generation of new (and experienced) managers out there who know lots about leadership and nothing about how to manage people well. They probably haven t experienced it directly either. We know that people leave managers not companies and that people and performance management is the major driver of employee engagement. Therefore, we need to raise the profile and expectations around good old fashioned people management if we are to get the best out of our people and in turn deliver better results. We respect project management as a profession why not people management? 3. Make performance management business as usual It has been shown that clear goals and regular feedback drive high performance (Locke and Latham;2006). This is not the same as a once yearly performance appraisal that everybody dreads and goes through the motions with. The culture and expectations around this need to be set from the top with no excuses. Everyone should have clear, relevant objectives or targets and receive regular feedback and support around these. The best way to do this is by expecting a culture of regular 1 to 1 s with ongoing coaching around performance against objectives and development, not pure tactical meetings. This supports and challenges staff to give of their best. We wouldn t set a financial budget at the start of the year and expect to meet it if we ignored it for 12 months. Why do we do the same with people? Performance management should be all year round which in turn makes the appraisal relevant, meaningful and engaging rather than the tick box exercise that it can often become. 4. Move performance management to the cloud You have to create a catalyst for behaviour change and it doesn t happen overnight. Outdated paper based systems and processes mean that you have to measure compliance rather than quality which is counterproductive. Moving performance management to the cloud increases visibility and therefore accountability and empowerment. It enables you to recognise those who are acting as people management role models and focuses on the behaviour of those who don t. With paper, performance data is often outdated by the time you have been able to assimilate it. By moving performance management to the cloud you have real time data on performance and development needs which allows you and managers to review/act on it monthly rather than annually keeping individuals motivated and on track. Look around your organisation, we look to streamline and move every other business process online. It makes no sense for performance management to be the laggard when the potential positive impact is so high. 3

4 Performance Management & Employee Engagement Traditionally, people or HR related projects have been the poor relations when it comes to justifying strategic spend. However, there is an increasing and compelling argument for this with the evidence for employee engagement alone. This is common knowledge amongst most HR professionals, but if you need to make the link overt for the benefit of other decision makers, the information below could be helpful: Employee engagement is a term that has replaced employee opinion surveys in leading companies. It is one of the few people related measures that has been unequivocally correlated with business profitability along with other positive outcomes such as customer satisfaction and in the NHS with better patient outcomes including reduced mortality rates. Engagement as an attitude drives loyalty towards company values or a willingness to go the extra mile. As a process, it is a structured and best practice approach to people and performance management such as setting clear objectives, regular feedback and review and ongoing support through coaching. This best practice approach is ideally delivered through line managers using a user friendly performance management tool such as Actus. Individual outcomes of engagement include increased clarity, motivation and a sense of being valued leading to higher performance, increased ownership, innovation and continuous improvement. These outcomes can be directly measured using an engagement survey. So in short, business outcomes are many but all result in increased profits. The 7 key engagement drivers: 1. The nature of the work itself, it needs to be challenging, creative and varied as well as being a good fit for the skills of the individual. 2. A perception that the work undertaken is important, with clear purpose and meaning that can be linked to the organisations values and goals.*. 3. Clarity of expectation and regular feedback on progress.*. 4. Opportunities for learning and career progress including access to development and training.*. 5. A quality relationship with the line manager where the individual feels that they are listened to and understood as an individual. *. 6. Timely recognition and feedback on performance acting as a reward in itself.*. 7. Visible and inspirational senior managers who lead by example. there is evidence that improving engagement correlates with improving performance and this is at the heart of our argument why employee engagement matters to the UK. Macleod Review (2009) * Can be directly supported by using a well-designed cloud based performance management system 4

5 Building the Business Case If you want to make the case for improving performance management buy in your organisation, it is worth building a business case that could be used to measure the impact against recognised business metrics. There are actually many ways in which the return on investment to a business can be tangibly measured, the table below gives just some of the indicators that could be benchmarked and measured. Clearly there are also a number of intangible payoffs too which shouldn t be underestimated. It depends on the nature of your business as to which of the measures below can easily be used to benchmark actual ROI and are likely to be the most persuasive. Align & drive financial results Cascade & monitor achievement of stretch performance goals throughout the business More timely and effective cascade of objectives accelerates goal achievement Ability to re-distribute reward in line with performance Customer Satisfaction Increased employee engagement drives customer engagement & retention which can be tracked. Cascade accountability for key customer KPI s to enhance Net Promoter Score Track accountabilities for project delivery and reduce cost of non conformance. Process Reduced admin time setting & chasing paper based appraisals More effective cascade of objectives Increased compliance with people processes & reduced risk of litigation e.g. fewer tribunal claims Employees Reduce voluntary attrition, retain talent Increased employee engagement Better and more timely use of development spend measure increase in key skills Table based on the balanced scorecard by Kaplan & Norton 5

6 What value will the right Performance Management system bring? Productivity: Removal of paper based processes and high administrative burden for HR Transitions objective setting from a once yearly paperwork exercise to a way of working, increasing focus on key business goals Performance reports available at a click of a button, saving time Aligns the whole organisation to focus on key company objectives Increased visibility of individual high or low performance Profitability: Promotes year-round focus on key business result areas Enables recognition of high performance with or without aligned pay Reduces attrition and supports retention Allows optimisation of training spend and results Engagement: Improves clarity of role and focus on what is expected Increases accountability and empowerment through employee involvement Embeds and encourages best people management practice e.g. monthly 1to1 s and regular appraisal Encourages feedback and recognition using social media driven approach Compliance: Improves data protection and makes audit easy Records all employee meetings, evidencing use of process Logs and flags expiry dates for time critical qualifications Securely hosted, removing the need for local storage Greener!: Dramatically reduces the amount of paper involved in performance management Reduces the company s carbon footprint 6

7 What does the status quo cost? Examples of common business costs or risks that may be positively affected by using online performance management and improving engagement within your business: Average cost of attrition of 1 person based on a salary of 25,000; considering lost productivity; recruitment time and costs; training and 30,000 Average cost of HR and administrative time running and collating paper based systems for up to 500 people 7,800 Cost of absenteeism in the UK per employee Average cost for an employer to defend themselves at a tribunal (regardless of whether they win or not) 8,500 Fines for data protection breaches 500 up to 500,000 Average spend per head on stationery 17 per month (Sources include: CIPD; Corporate research forum, Institute for fiscal studies & Wikipedia) If creating a best practice management culture with the support of well designed performance management software were to increase productivity or profitability by 1% next year what would that value be? In Cap Gemini, when completion of performance reviews by people managers climbed from a low of 53% to 92.5% the following year, business productivity shot up. What to look for in Performance Management Software Is it intuitive & easy to use? If manager s won t use it the ROI will be lost Does it empower employees & managers Gen Y want involvement, systems that are locked down or done to them disempower and disengage Is it cloud based and accessible from all devices? People expect instant access from a multitude of devices, the more accessible it is the more it will be used Support materials/expertise in how to embed the behavioural change you want to effect a behavioural change which means people need to buy into Why you are introducing this. Ability to record more than just appraisals e.g s and development. The more reasons people see for them to access the system over the course of the year, the greater their focus on achieving the business targets Remember, software alone will not deliver you an ROI, great performance management behaviours will. Make sure your software supports those behaviours! 7

8 Case Study: Siemens Enterprise Communications Business Issues: Declining market, pressure on margin, strong competitive marketing activity, challenges getting product to market, declining service revenues and poor customer service ratings, significant organisational and cultural change. Financial The Impact: Attrition rates in Sales & Marketing of 18%, low morale & average on target performance of 68% at half year. Average employee engagement scores of 3.3% Action: Implementation of electronic performance management and appraisal system Supported by: Clear communication on rationale to gain buy-in Timely cascade of organisational objectives Management training Customer 104% EBIT target at year end Average on target sales performance increase of 24% Process Est 18 days Admin/HR time saved chasing appraisal, running reports, planning training & monitoring qualifications Base retention rates of 85% Customer complaints below 5% Employees Increase in employee engagement score from 3.3 to 3.6, Reduced attrition from 18% to 8% in 12 months Without a doubt, the introduction of the electronic performance management system helped us to achieve our business targets for two years on the trot in incredibly difficult times for the company. I believe that this has become one of our essential IT systems that genuinely drives management behaviours and business performance and continues to be an excellent investment. Graham Walker - Managing Director I have a team of 12 and the demands of the PMP really caused me some challenges in physically getting round them so I have to admit to being pretty cynical to start with. However, I really understood the value last year when an ex-employee was recommended to drop tribunal proceedings as we could prove that we had treated him consistently and fairly using the data from this tool. Mike O Sullivan - Manager 8

9 For related articles on people and performance management please visit our website TM Make Actus TM the driving force in your organisation... 9