BUILDING A BUSINESS CASE FOR PERFORMANCE & DEVELOPMENT PLANNING (PDP) SYSTEMS

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1 iedex online ty Ltd ABN BUILDING A BUSINESS CASE FOR ERFORMANCE & DEVELOMENT LANNING (D) SYSTEMS iedex ty Ltd 2/17 Raglan Street South Melbourne VIC 3205 hone : (03) Fax: (03)

2 CONTENTS ERFORMANCE MANAGEMENT / DEVELOMENT & LANNING... 2 ERFORMANCE MANAGEMENT / DEVELOMENT & LANNING SOLUTIONS... 3 THE IEDEX ERFORMANCE & DEVELOMENT LANNING SOLUTION (D)... 4 ROVING A BUSINESS CASE FOR ERFORMANCE & DEVELOMENT SOLUTIONS... 5 ADMINISTRATIVE EFFICIENCIES AND LEGAL COMLIANCE... 6 ADMINISTRATIVE EFFICIENCIES... 6 LEGAL COMLIANCE... 7 HOW IEDEX CAN HEL WITH ADMINISTRATIVE EFFICIENCIES AND LEGAL COMLIANCE... 9 ENGAGEMENT, RETENTION AND RECRUITMENT ECONOMIES EMLOYEE RETENTION & ENGAGEMENT RECRUITMENT ECONOMIES LEARNING & DEVELOMENT / TRAINING HOW IEDEX CAN HEL WITH ENGAGEMENT, RETENTION AND RECRUITMENT ECONOMIES BUSINESS OUTUT TRANSFORMATION ALIGNMENT OF WORKFORCE TO BUSINESS OBJECTIVES RODUCTIVITY AND ERFORMANCE INCREASES MOTIVATION AND MANAGEMENT OF YOUR LEADERSHI IELINE HOW IEDEX CAN HEL WITH BUSINESS OUTUT TRANSFORMATION LANNING YOUR BUSINESS CASE WHAT THE IEDEX SOLUTION CAN DELIVER Commercial in Confidence iedex ty Ltd age 1 of 24

3 ERFORMANCE MANAGEMENT / DEVELOMENT & LANNING A growing number of companies are becoming aware of the importance of performance management and development to their sustained growth and profitability. Considerable research has been conducted that suggests companies that excel in the area of performance and development management can outperform their competitors by 20% on ROI (Return On Investment), revenue growth and NBT (Net rofit Before Tax). Companies concentrating on performance alone (or the what factor) may obtain short-term benefits through understanding, rewarding and compensating employees who achieve their business objectives. However those companies that combine the what and how factors (capabilities, values and behaviours) succeed in achieving long-term value and sustained growth by developing and retaining their staff, and promoting the right people into the right positions at the right time. It is generally accepted that good management of performance and development involves a combination of: Development of performance goals for individual staff Alignment of those goals across the organisation with business objectives Identification of capability gaps and specifying learning and development requirements Assessment of performance against targets by Managers Employee self-assessment of performance eer / Multi-rater / 360 assessment of performance Succession management of top talent for critical positions, combined with career management for all staff. Collectively these encompass performance management, talent management and succession management. In most organisations determining what an employee has achieved and how an employee has performed will be assessed by their manager and will influence their remuneration and promotion prospects. The manager also plays a key role as coach and career advisor. These responsibilities impact the employee and manager on a personal level and the organisation financially. Commercial in Confidence iedex ty Ltd age 2 of 24

4 ERFORMANCE MANAGEMENT / DEVELOMENT & LANNING SOLUTIONS Implementing a erformance and Development lanning solution provides a structure and process within which to ensure: Your company s performance management process is visible, supported and consistently applied erformance assessment is not merely driven toward annual bonuses or pay increases Your Line Managers have the tools to understand and communicate the business priorities and individual behaviours necessary for success Staff understand how assessments, remuneration and promotions will be applied to make the process fair and equitable. It is only through the use of a strong performance management system that looks at the combination of an employee s performance, capability, behaviours and potential, that important talent management questions can be answered, such as: How your bonus / salary budget is allocated across employees Who gets promoted and to which position Which employees you should be terminating or managing out of your business Which employees are ready to take on increased responsibilities or lead key projects. Commercial in Confidence iedex ty Ltd age 3 of 24

5 THE IEDEX ERFORMANCE & DEVELOMENT LANNING SOLUTION (D) The iedex D tool allows customers to: Align individual goals to business objectives which, in turn, are linked to specified strategic outcomes Improve business sustainability by managing key individual capabilities and defined behaviours Manage learning and development spend more effectively by targeting capability gaps Retain talent through disciplined career management which accurately identifies an individual s readiness for transfer / promotion Govern the performance and development process through controlled workflows with access to real time rates of completion at each stage and reliable evidence to support salary / bonus payments Obtain both staff and management commitment to business performance through individual achievement. Item Development of performance goals for individual staff Alignment of those goals across the organisation with business objectives Identifying capability gaps and specifying learning and development requirements iedex D can help Assessment of performance against targets by Managers Employee self-assessment of performance eer / multi-rater / 360 assesment of performance Succession management of top talent for critical positions combined with career management for all staff How your bonus / salary budget is allocated across employees Future Release Who gets promoted and to which position Which employees you should be terminating or managing out of your business Employees ready to take on increased responsibilities or lead key projects Commercial in Confidence iedex ty Ltd age 4 of 24

6 ROVING A BUSINESS CASE FOR ERFORMANCE & DEVELOMENT SOLUTIONS In this paper we will discuss how to build a business case for your D solution based on three key areas: Business Output Transformation Executive Driver ROI = 5-10X Engagement, Retention and Recruitment Economies Organisational Driver ROI = 2-4X Administrative Efficiencies and Legal Compliance HR Driver ROI = 0.5-2X Figure 1 - ROI Key Areas by Driver Administrative Efficiencies and Legal Compliance (expected Return on Investment 0.5 to 2X) Engagement, Retention and Recruitment Economies (expected Return on Investment 2 to 4X) Business Output Transformation (expected Return on Investment 5 to 10X). Commercial in Confidence iedex ty Ltd age 5 of 24

7 ADMINISTRATIVE EFFICIENCIES AND LEGAL COMLIANCE Often the easiest business case to prove is one for administrative efficiencies and legal compliance. Most businesses can quantify the costs and times involved and find the associated savings will more than justify an investment in a performance management system. These benefits are typically driven and managed by Human Resources and can expect an ROI of 0.5 to 2X. ADMINISTRATIVE EFFICIENCIES A good performance management system will allow you to automate many manual processes: Tracking learning & development recorded in performance plans Capturing career development aspirations and utilising this information to assist recruitment Communicating and aligning values and behaviours to those desired by the business Identifying staff suitable to fill critical positions (succession planning) Communicating and managing progression incentives Governance of the compliance by staff and managers undertaking performance and development planning, succession planning, incentive processes. While the time saving alone from this automation can be enough to justify your investment, additional benefits can be recognised through: Staff and line managers working toward your business objectives and not focusing on administrative tasks Reduced errors in the performance management process Reduced tracking, locating and following up on lost or never completed planning documentation Commercial in Confidence iedex ty Ltd age 6 of 24

8 No longer needing to manually consolidate data held in all the plan documentation related to employees progression, learning and development, career aspirations and ratings Ensuring a consistent performance rating system is applied to all of your employees Visibility of the performance and development process, real-time Enabling managers and staff to see the status and editing of plans and reviews through each iteration Understanding your organisational learning and development requirements and planning, budgeting and negotiating whole of business training deals Auditing adherence to HR policies and procedures. Additionally, by providing your line managers with guidelines for salary increases, bonus and incentive payments, you ensure your staff are appropriately recognised for their performance and you better manage your remuneration and compensation spending. LEGAL COMLIANCE Under the current Australian Industrial Relations (and coming Fair Work Australia) laws, having the ability to prove the following is essential: Visible, equitable management processes that align performance with compensation and promotional decisions A consistent, defensible process that assists managers with their employee s performance management and supports any termination decisions with effective documentation. The inability to provide documented proof of poor performance, and the action that was taken to discuss remedial action with employees, can lead to legal action with significant adverse financial implications for organisations and potential damage to business reputation. Commercial in Confidence iedex ty Ltd age 7 of 24

9 Acme ty Ltd has 1,000 employees and uses a paper based performance management process. This involves the following manual processes: o 1,000 manual forms to be completed by each staff member and their Line Manager (est: 2 hours per form, 2,000 hours) o Of the forms that are returned to HR each will need to be reviewed, collated and documented, filed (est: 15mins per form, 250 hours) o Those missing will need to be tracked down and located (est: 10% missing, I hour per form, 100 hours) o A spreadsheet will be created to check and track items (est: 30 mins per form, 500 hours) o All tasks repeated for mid and end of year review cycles (est: another 2,850 hours) This comes to 5,700 hours or over 700 days. By implementing an online performance management solution, Acme is planning on reducing this effort by just 50%. Acme can now choose to save the equivalent of one employee s annual salary or better utilise its HR staff by undertaking a review of the data held within the plans, and helping line managers to address the actions required from the process, rather than administering the process and then having no time to help line managers. A transformation like this creates a shift from HR being administrative in nature to being a strategic partner with the business. By using the iedex D solution, the following administration is automated for you. lans and performance journals are available automatically to staff and managers reminders are sent to encourage compliance lans pass between staff and managers automatically through process workflow Standard templates for all D components are available Data can be pre-filled to create consistency and to streamline your process Learning and development options can be selected without needing additional paperwork. Commercial in Confidence iedex ty Ltd age 8 of 24

10 HOW IEDEX CAN HEL WITH ADMINISTRATIVE EFFICIENCIES AND LEGAL COMLIANCE Item Track learning & development recorded in performance plans Capturing career development aspirations and utilising this information to assist recruitment Communicating and aligning values and behaviour to those desired by the business Identifying staff suitable to fill critical positions (succession planning) Communicating and managing progression incentives Staff and line managers working toward your business objectives and not focusing on administrative tasks Reduced errors in the performance management process Tracking, locating and following up on lost or never completed planning documentation Consolidation of data held in plan documentation related to employees progression, learning and development, career aspirations and ratings Ensuring a consistent performance rating system is applied to all of your employees Visibility of the performance and development process, real-time Governance of the performance and development, succession planning, incentive process Enabling managers and staff to see the status and editing of plans and reviews through each iteration Understanding your organisational learning and development requirements and planning, budgeting and negotiating whole of business training deals iedex D can help Auditing adherence to HR policies and procedures Visible, equitable management processes that align performance with compensation and promotional decisions A consistent, defensible process that assists managers with their employee's performance management Defending termination decisions Commercial in Confidence iedex ty Ltd age 9 of 24

11 ENGAGEMENT, RETENTION AND RECRUITMENT ECONOMIES Significant bottom line savings can be made by increasing employee engagement and retention, identifying existing staff for internal recruitment opportunities and proactively managing your training budget. These benefits are typically driven and managed by Human Resources and Line Managers across your organisation and can expect an ROI of 2 to 4X. Replacing staff is expensive with assessments ranging from 1.0 to 2.5X their annual salary made up of the following component estimates: Recruitment costs: 50% - 100% Induction costs: 20% - 40% Getting up to speed time: 40% - 100% It pays to keep your key talent engaged. reventing the loss of just one valuable employee can justify the implementation of a good online performance management system. EMLOYEE RETENTION & ENGAGEMENT Implementing a erformance Management system can increase your employee retention in a number of ways: When employees know what is expected of them (their goals) and understand the level of competence and behaviours the organisation associates with their position, they feel more committed and aligned Employees understand the financial commitment associated with implementing a contemporary system to manage their goals, aspirations and development needs. They see this as a direct commitment from the organisation to their personal development Commercial in Confidence iedex ty Ltd age 10 of 24

12 The process of performance management in itself prompts better communication and relationships between Line Managers and their staff. This can be further enhanced by providing communication resources within the tool itself, such as behavioural descriptors to support assessments, or guidelines for completing the planning and review task competently By articulating and publishing the behavioural and competency standards of each role within the organisation : o Recruitment can be more targeted to get the right person in the right position and so increasing the potential for success within that role o Talented employees can be recognised and favourably compensated o Line Managers have the tools to identify and manage poor performers out of the business. Research shows that without adequate process support, payroll costs increase because Line Managers have no water-tight basis for refusing pay increases or bonuses to poor performers By recognising and fulfilling the development and coaching needs of staff, you provide them with growth and promotional opportunities. RECRUITMENT ECONOMIES Many recruiting firms conduct competency and behavioural assessments prior to recommending candidates. With a performance and development system in place you can improve return on your recruitment investment by informing recruiting agencies of the following for each position: o o o o The competency levels necessary and the behavioural requirements High performer profiles erformance of past candidates to refine selection criteria and processes Detailed online position descriptions. Commercial in Confidence iedex ty Ltd age 11 of 24

13 Online performance management systems allow you to identify your leadership pipeline. This has substantial benefits to organisations: o o By knowing who is ready to aspire to a new role you can internally recruit and save the cost of external recruitment, induction costs and reduce the time taken to be fully productive By using reliable career development processes, succession and talent management, you can retain your key talent. These benefits are particularly important when restructuring your organisation and multiple role and position changes are required. Online performance management systems will enable you to identify your key talent, view their career aspirations to fill new positions internally, move staff to different locations and make redundancy decisions easier. LEARNING & DEVELOMENT / TRAINING For many employees learning and development opportunities relate to formal training. Research suggests however that employees develop best through ongoing coaching and on-the-job training. An online performance management system encourages Line Managers to coach and develop their staff in line with role requirements and business objectives Studies show that most businesses spend approximately 2 4% of their payroll budget on training. Selected training programs are often chosen reactively (as the need arises) or historically (what was needed in prior years). With learning and development needs documented in an online performance management system, training programs can be: o o o roactively managed to address confirmed development priorities in a more timely manner Managed more efficiently and, in some cases at lower cost, through bulk training contracts and with development scheduled at convenient times within the business cycle Redeployment of training funds from obsolete to confirmed priority training programs. Commercial in Confidence iedex ty Ltd age 12 of 24

14 Acme ty Ltd has 1,000 employees. Internal research has told them they lose 5 key employees each year. This equates to an annual unwanted turnover rate of 0.5% (5/1000) and they estimate it is costing them approximately: o $650,000 (average salary of $65,000 x 2 (made up of recruitment, induction and getting up to speed costs) x 5 employees) each year. Acme wants to reduce this unwanted turnover and improve their key talent retention. By implementing an online performance management solution they anticipate reducing their unwanted turnover rate to 0.4% or 4 employees. This reduces their annual unwanted turnover costs to: o $520,000 (average salary of $65,000 x 2 (made up of recruitment, induction and getting up to speed costs) x 4). This represents an annual saving of approximately $130,000. Additionally an online performance management solution will help you: Retain key staff allowing their experience to work in favour of your business through better decision making, more streamlined work processing and improved mentoring for new staff when you do need to recruit externally Improve the Employer of Choice rating of your business when measured according to employee engagement criteria Direct the learning and development budget and effort to meet defined needs rather than perceived needs to drive productivity upward and turnover down. Commercial in Confidence iedex ty Ltd age 13 of 24

15 HOW IEDEX CAN HEL WITH ENGAGEMENT, RETENTION AND RECRUITMENT ECONOMIES Item Employees know level of competence and behaviours expected of them Employees see commitment of online system from organisation to their development rovide behavioural descriptors to support assessments, or guidelines for completing plans and reviews competently Target recruitment to get the right person for the right job Recognise your talented employees Manage progression incentives and poor performers rovide staff with growth and promotional opportunities Identify your leadership pipeline roactively manage development priorities iedex D can help Cost effective bulk training contracts Redeployment of training funds from obsolete to confirmed priority training programs Commercial in Confidence iedex ty Ltd age 14 of 24

16 BUSINESS OUTUT TRANSFORMATION Research indicates that effective performance management can increase your business output or productivity by up to 45%. This is due to a number of factors such as: Alignment of the work of every employee with your business objectives roductivity and performance increases linked to fair incentives, improved job / role fit and improved career management Motivation and management of your leadership pipeline. These benefits are typically driven and managed by the Executive Leadership team and can expect an ROI of 5 to 10X. Figure 2 below shows how this productivity growth is achieved, by using your staff more effectively in these three areas (Alignment, roductivity and Motivation). Figure 2 Increased business output through effective performance management Commercial in Confidence iedex ty Ltd age 15 of 24

17 ALIGNMENT OF WORKFORCE TO BUSINESS OBJECTIVES By implementing an automated performance management system you create the ability to align your entire workforce toward common business objectives. Driving your workforce with goals framed around cost reduction, revenue growth, customer retention or establishment of new products, projects or subsidiaries is now able to be documented and tracked. This allows businesses to: Ensure all individual effort is aligned to business goals and effectively monitored during the year Highlight employees or business units with misaligned goals and redirect their efforts Encourage improved engagement through all employees understanding their contribution to the overall objectives Not only manage performance objectives but also the skills and behaviours aligned to business priorities, goals and values Increase responsiveness to business transformation or changes in direction through individual goal alignment to business objectives. RODUCTIVITY AND ERFORMANCE INCREASES A good online performance management system allows businesses to clearly separate their star employees from the pack, and from underperforming staff. Once this has been achieved, productivity and performance increases can be driven by: Making the best use of key talent by ensuring they are challenged in their roles and fully engaged in the business Effective succession planning Shedding persistent poor performers rogression validation Accurate alignment of incentives with performance and effort Inspiring your best achievers to perform at an even higher level by implementing pay for performance, incentive and bonus programs. Commercial in Confidence iedex ty Ltd age 16 of 24

18 MOTIVATION AND MANAGEMENT OF YOUR LEADERSHI IELINE By using a performance management system you will identify the key talent across your business, commonly recognised as one of the biggest areas of concern for HR executives today. This allows you to plan and manage their development as successors to critical roles. Figures 3 below highlights the issues most troubling to HR Executives, at the top of the list are Gaps in Leadership ipeline. % of Respondents Gaps in Leadership ipeline Creating a erformance Driven Difficulty Filling Key ositions Rapid Hiring Due to Growth Skills Gap in Critical ositions New Skills for roduct and Retirement of Key Workers Retention in Key ositions 27% 27% 24% 23% 16% 38% 46% 51% Figure 3 Issues laguing HR Executives Implementing a good online performance management solution is fundamental to establishing a strong talent and succession management pipeline: roviding upward feedback to improve leadership Encouraging staff to apply for roles matching their career aspirations Ensuring critical roles have successors, with development plans identified, monitored and continuously evaluated Commercial in Confidence iedex ty Ltd age 17 of 24

19 Recruiting internally for leadership positions Allocating training budget to your key talent where it will have the biggest business impact utting your key talent onto projects that strengthen their expertise and ready them for promotion. Acme ty Ltd currently has 1,000 employees across a number of locations throughout Australia. They recently acquired a new subsidiary office in New Zealand with completely different processes, products, culture and systems in place. They anticipate that the finalised merger of the two companies and culture will take two years and are using their performance management system to help drive the changes. By using the system they are able to: o Set operational goals for employees and Line Managers vital to the success of the merger o Use the pre-fill (or forced population) features of their system to ensure the goals, behaviours, competencies and values of the merged organisation are enforced at all levels o Track the progress of the merger goals and see which business areas are on target and those that are not o Identify employees engaged and on track with the merger and those who are not By driving the change through their performance management system, Acme ty Ltd anticipate the merger project timeline with shorten from 3 years to 2 years generating huge savings and allowing the merged business to seek new business opportunities earlier. External recruitment to fill leadership gaps costs big money. By identifying and managing your talent pool and smoothing internal succession into critical leadership roles, your business can add a substantial amount to its bottom line. Commercial in Confidence iedex ty Ltd age 18 of 24

20 HOW IEDEX CAN HEL WITH BUSINESS OUTUT TRANSFORMATION Item Alignment of employee's work with business objectives roductivity and performance increases linked to fair incentives Improved job / role fit and career management Motivation and management of your leadership pipeline Making the best use of key talent by ensuring they are challenged in their roles and fully engaged Effective succession planning Shedding persistant poor performers rogression validation Accurate alignment of incentives with performance and effort Inspire best achievers to perform at an even higher level by implementing pay for performance, incentive and bonus programs Upward feedback to improve leadership Staff being encouraged for roles matching their career aspirations Ensure critical roles have successors, with development plans identified, monitored and continuously evaluated iedex D can help Interally recruit for leadership positions Allocate training budget to your key talent where it will have the biggest business impact ut your key talent onto projects that strengthen their expertise and ready them for promotion Commercial in Confidence iedex ty Ltd age 19 of 24

21 LANNING YOUR BUSINESS CASE 1. Identify the business drivers and major challenges Administrative Efficiencies and Legal Compliance Engagement, Retention, Recruitment Economies Business Output Transformation 2. Current performance management process Determine its limitations Map proposed new process Identify benefits of new process 3. Current HR system (if relevant) Why this solution doesn t meet your needs (strengths / weaknesses analysis) Why the new solution is a better fit (strengths / weaknesses analysis) 4. roposed Solution Recommended implementation strategy Estimate of cost roject team required 5. Benefits Administrative Efficiencies and Legal Compliance Engagement, Retention Recruitment Economies Business Output Transformation Benefits of new process Return on Investment (ROI) / ayback analysis 6. Next Steps / Executive Sponsorship Commercial in Confidence iedex ty Ltd age 20 of 24

22 WHAT THE IEDEX SOLUTION CAN DELIVER Item Development of performance goals for individual staff Alignment of those goals across the organisation with business objectives Identifying capability gaps and specifying learning and development requirements Assessment of performance against targets by Managers Employee self-assessment of performance eer / multi-rater / 360 assesment of performance Succession management of top talent for critical positions combined with career management for all staff How your bonus / salary budget is allocated across employees Who gets promoted and to which position Which employees you should be terminating or managing out of your business Employees ready to take on increased responsibilities or lead key projects Track learning & development recorded in performance plans Capturing career development aspirations and utilising this information to assist recruitment Communicating and aligning values and behaviour to those desired by the business Identifying staff suitable to fill critical positions (succession planning) Communicating and managing progression incentives Staff and line managers working toward your business objectives and not focusing on administrative tasks iedex D can help Future Release Reduced errors in the performance management process Tracking, locating and following up on lost or never completed planning documentation Consolidation of data held in plan documentation related to employees progression, learning and development, career aspirations and ratings Commercial in Confidence iedex ty Ltd age 21 of 24

23 Item Ensuring a consistent performance rating system is applied to all of your employees Visibility of the performance and development process, real-time Governance of the performance and development, succession planning, incentive process Enabling managers and staff to see the status and editing of plans and reviews through each iteration Understanding your organisational learning and development requirements and planning, budgeting and negotiating whole of business training deals Auditing adherence to HR policies and procedures Visible, equitable management processes that align performance with compensation and promotional decisions A consistent, defensible process that assists managers with their employee's performance management Defending termination decisions Employees know level of competence and behaviours expected of them Employees see commitment of online system from organisation to their development rovide behavioural descriptors to support assessments, or guidelines for completing plans and reviews competently Target recruitment to get the right person for the right job Recognise your talented employees Manage progression incentives and poor performers rovide staff with growth and promotional opportunities Identify your leadership pipeline roactively manage development priorities iedex D can help Cost effective bulk training contracts Redeployment of training funds from obsolete to confirmed priority training programs Commercial in Confidence iedex ty Ltd age 22 of 24

24 Item Alignment of employee's work with business objectives roductivity and performance increases linked to fair incentives Improved job / role fit and career management Motivation and management of your leadership pipeline Making the best use of key talent by ensuring they are challenged in their roles and fully engaged Effective succession planning Shedding persistant poor performers rogression validation Accurate alignment of incentives with performance and effort Inspire best achievers to perform at an even higher level by implementing pay for performance, incentive and bonus programs Upward feedback to improve leadership Staff being encouraged for roles matching their career aspirations Ensure critical roles have successors, with development plans identified, monitored and continuously evaluated iedex D can help Interally recruit for leadership positions Allocate training budget to your key talent where it will have the biggest business impact ut your key talent onto projects that strengthen their expertise and ready them for promotion Commercial in Confidence iedex ty Ltd age 23 of 24

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