Insight paper. Performance Management: Building the business case

Transcription

1 Insight paper Performance Management: Building the business case

2 Executive summary The need for has become a top priority for many global organisations over the last few years. As organisations were forced to layoff people or eliminate positions through attrition because of the recent global economic downturn, many of these enterprises began to realise how little they really knew about the performance of their employees. Who are our highest - and lowest - performing employees? Are we keeping the right employees? Is there a way to encourage more productivity and better performance from our remaining employees? As executives and human resources leaders asked themselves these questions many decided that improvement was needed. According to an extensive study by talent management industry analysts Bersin & Associates, 40% of the companies surveyed listed as the top priority for A similar view was expressed by over 400 C-level executives surveyed by The Economist Intelligence Unit on behalf of Lumesse in December That interest was not expected to decrease in However, an interest in is not the same thing as a commitment to move forward. Human resources professionals who want to secure approval and funding for technology must make the benefits clear, said Matthew Parker, CEO, Lumesse. Developing a business case document is an essential step toward communicating the value of to senior leaders in an organisation. Lumesse designed this Insight Paper to support HR professionals who are building a business case for either on their own or online using the Business Case Builder application found on the Lumesse website. Performance management can yield significant benefits, but technology is essential for maximising its potential. 1 Talent Management Systems Customer Satisfaction 2010, Bersin & Associates 2 Download the Economist Intelligence Unit/Lumesse report Companies at the Crossroads at 2

3 Why do you need to build a business case? Research shows that is a pressing need for most organisations. According to the CedarCrestone HR systems survey, the top two business challenges for 2009 and 2010 were areas that could be improved through performance management. Almost two-thirds (65%) of those surveyed said the most significant business challenge was to increase productivity, reduce labour costs and still provide superior service levels. The second most significant challenge was attracting, engaging and retaining employees with critical skills and competencies. As a result, 12% of respondents to the CedarCrestone survey said that technology was budgeted for purchase in the next 12 months, and 14% said it was budgeted for in the next 36 months. A majority of survey respondents (59%) indicated that performance management was already in use in their organisations. However, only 11% of those surveyed had a solution that was operating at best-practice level. Achieving a best-practice level is important because organisations that reach this plane have 60% lower costs for overall HR labour and 50% lower HR administrative labour costs. 3 These findings dovetail with the conclusion of the Lumesse Insight Paper 4 that supported by technology can deliver a significant business impact. Even though most HR professionals are familiar with the benefits that performance management can offer, many business leaders are not. That is the main rationale for building a business case to illustrate the difference that performance management technology can make in an organisation. Some adopters of performance management technology may not need to justify its cost because they recognise its value. However, most organisations must identify cost savings as part of justifying any purchase, especially now that costs are more closely scrutinised in the wake of the global economic downturn of CedarCrestone 2008 Value of HR Technologies 4 For more information on the business impact of, please see the Lumesse Insight Paper, Performance Management: Turning good talent into great talent. 5 CedarCrestone 2008 Value of HR Technologies 3

4 Your business case should make clear the benefits of performance management, explain how the support of technology is essential and describe how to move forward with implementation. As leading human capital analysts Bersin & Associates explain in their report The Business Case for Performance Management Systems, 6 the three benefits of are: Efficiency and compliance: A process that is entirely or mostly manual is likely to be filled with inefficiencies. Automation can reduce median cycle times on HR processes from 30 minutes to 10 minutes. It also can result in a 75% reduction in legal or regulatory penalties for lack of compliance. Furthermore, automation of a talent management process can result in 20% savings per process. 7 Process improvements: One significant advantage of automation is offering more self-service capabilities for managers and employees. Process savings range from 20% to over 80%, depending on the process and the technology, and manager self service typically results in savings of 50% or more. 8 Business transformation: Improving business performance through goal alignment and creating a payfor-performance culture are two of the ways that Bersin & Associates believes that can transform an organisation. Research shows that organisations that take the time to develop employees and nurture better performance have double the median revenue per employee. 9 Although identifying the efficiency and process improvement may provide more than enough cost justification for any technology purchase, the business transformation benefits will be the ones that business leaders are most interested in and should figure prominently in the business case you build. What is best practice level for performance management? CedarCrestone s survey of HR professionals found that only 11% of process was functioning at a best practice level, which was defined as: The ability exists to identify and reinforce successful behavior and flag unproductive performance. The goal setting process is automated. Competencies have been identified for key positions, and competency levels are assessed for use in planning, training, and development. Data in the HRMS, financial system, and all talent management applications are available along with performance appraisal results so that analysis on worker performance is possible. High-performing employees are identified for succession planning initiatives. 6 Bersin, Josh. The Business Case for Performance Management Systems: A Handbook for Human Resources Executives and Managers. Bersin and Associates. July CedarCrestone 2008 Value of HR Technologies 8 Ibid. 9 O Leonard. 4

5 What should be included in your business case? The goals of your business case for are to secure executive approval and funding for technology. To accomplish these goals, your business case should tell the story of the ideal future state of in your organisation, as well as provide a roadmap for how to get there. Based on input from Lumesse consultants, partners and clients, as well as research from industry analysts, we recommend that your business case include these six elements: Section 1: Executive summary This is possibly the most critical section. Even if your audience does not read the entire document, they will read this section, and, as a result, you must explain in one or two pages the critical business need for supported by technology. This may seem like a daunting task, but it shouldn t overwhelm you. Simply reduce it to a few basic elements: State clearly why organisations are adopting performance management technology. Explain why the current state of is insufficient. Show a few examples of the benefits that automation and efficiency could add to the process. Discuss, in the highest-level terms, how to move forward. Section 2: Statement of the problem Make sure that this section accurately describes what you hope to accomplish, including the benefits. Depending on the part of the world where your organisation operates, external demographic factors may make the need for even more significant. These include: Declining birth rates Retirement of experienced workers Education shortfalls Increased demand for skilled workers Employee attitude shifts This section should also go beyond identifying problems and begin discussing the benefits of change, including the need to retain high-performing and highpotential employees, align goals, engage employees, gather better employee data and develop consistent global processes. Section 3: The current state of This section should accurately describe your current state and its inefficiencies. It should also clearly explain how the addition of technology will facilitate the success of in your organisation. According to global management consultants McKinsey & Company, creating a performance-driven culture is at the heart of creating a competitive advantage in the 21st century. 10 Your business case should describe how your organisation will create a performance-driven culture and why technology support is needed. 10 How do I create a distinctive performance culture? McKinsey & Company. 5

6 Section 4: The proposed solution This section should address the system and functionality, the rollout schedule, staffing costs and cost justification. If you are having difficulty answering the specifics needed in this section, let a Lumesse representative help you. pmtool@lumesse.com or look on the last page of this document for other contact information. Ideally, you should build performance management to complement existing business strategies. If you are not sure which business strategies you should focus on, look in your company s annual report or other sources of business strategy and direction. If you are looking for examples that would justify the costs, consider the following: The cost of a manual or inefficient performance management process: Lost productivity from manual or inefficient performance management has a cost to an organisation. If managers can spend less time completing forms and moving paper, they can spend more time on revenue-generating work. The revenue lost to employee turnover: Calculate the cost of employee output lost for every day a position is vacant as a result of voluntary employee turnover. You can focus on the employee population as whole or focus on critical roles such as top sales or technical employees who drive your organisation s success. Section 5: How performance management will benefit your organisation This section should provide specific details about how will benefit various stakeholders in your organisation, including employees, line managers, executives and HR. Focus as much as possible on hard costs in describing ways that technology can deliver financial benefits. You should also explain how will deliver a business impact, including examples such as: Performance differential: Contrast the performance of an average employee versus a topperforming employee. Before-and-after contrast: If could increase employee productivity and revenue, what impact would that have on your organisation? Most organisations would see dramatic bottom-line results from even a modest increase of 2 to 3 percent in corporate revenue. Section 6: Next steps This section should provide details about implementation and governance, and how any risks will be mitigated. You should also clearly explain what help you need from executive management. 6

7 Presenting your business case Here are a few final suggestions to help you successfully present your business case to the leaders in your organisation: Because the goal of the document is to be persuasive, consider using a personal tone, suitable for communicating peer-to-peer with other leaders in your organisation. Depending on the culture of your organisation, the business case you present may be a 20-page printed document or a single-page overview. It might even be a PowerPoint presentation. Understand how executives in your organisation prefer to communicate, and provide the information in the appropriate format. Demonstrate confidence by being prepared to discuss the platform you have chosen, how it will be implemented and cost specifics. 11 Conclusion Building a business case for is about telling the story of the future. How will performance management that is supported by technology transform your organisation? A business case built properly will explain how and help you obtain the necessary funding and resources to move forward with implementation. It is also crucial to inform senior executives of this new system and to enlist their full support for the rollout. If you prepare your document with your organisation s existing business strategies in mind, you will greatly increase the chances of success, said Lumesse CEO, Parker. Is your organisation growing, expanding into new markets or developing new products? Your business case should address these areas specifically. Finally, it s important to showcase higher-level business benefits in areas such as retention, engagement, employee satisfaction and leadership. Concrete examples that illustrate how technology will have a positive impact on these areas will go a long way toward making your business case a success. If you are looking for help in writing your business case or you just want to save development time, Lumesse invites you to use the online Business Case Builder for Performance Management. Simply answer 23 questions in about 20 minutes and download a business case document that is mostly complete and ready for you to customise. The tool is available at: 11 Bersin, Josh. The Business Case for Performance Management Systems: A Handbook for Human Resources Executives and Managers. Bersin and Associates. July

8 About Lumesse is the only global company making talent management solutions work locally. We help customers around the world to implement successful local talent management initiatives that identify, nurture and develop the right people, in the right place, at the right time. Our multi-cultural background and presence means we understand how to deliver talent solutions that work the way our customers work, as individuals and as teams, because no two people, organisations or cultures are the same. We regard differences as strengths, not as obstacles. 1,700 customers work with us in over 70 countries because they recognise that commitment, innovation and value only come from people. We help customers to unlock and inspire that human potential in their businesses. Our integrated talent management solutions are comprehensive, intuitive, secure and fully internationalised into over 50 languages. We have Lumesse offices and partners in more than 40 countries, covering EMEA, the Americas and Asia-Pacific. To find your nearest office and talk to someone who speaks your language, visit: /get-in-touch Lumesse AS All rights reserved. Unless explicitly permitted by Lumesse AS or by applicable copyright law, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or otherwise.