How To Motivate and Retain Key Employees Consistent and Objective Results for Performance Reviews, Succession, and Compensation Management WHITEPAPER
SuccessFactors Calibration How To Motivate and Retain Key Employees Consistent and Objective Results for Performance Reviews, Succession, and Compensation Management The ability to make objective performance, pay, and promotion decisions is a requirement to motivate and retain key employees. Inconsistent or subjective ratings by managers can erode employee loyalty and negatively impact the company s bottom line. Many companies have taken steps to eliminate this inconsistency by calibrating performance ratings, compensation, and succession decisions across the enterprise. But they still struggle because their current processes and tools are ineffective, complex, and time-consuming. This paper will briefly review the challenges that enterprises face when trying to calibrate employee performance review data, and discuss the potential impacts to the business if these processes are not done well. The SuccessFactors Calibration solution will then be introduced, describing the benefits it can provide to employees, managers, and HR representatives. The paper will conclude with a discussion of how Calibration can add objectivity and functionality to the SuccessFactors Performance Review, Compensation Management, and Succession Management modules. What Happens When Managers Don t Rate Objectively When performance reviews are not objectively applied across a company, it negatively impacts both individuals and the organization. By not accurately identifying the highest performers, companies face the risk of rewarding and promoting the wrong people. They may end up placing their average (or even lowest) performers on top of the org chart. Subjective ratings often lead to a perception of unfairness and dissatisfaction with the performance review process. When the least productive workers are over-compensated, top performers feel under-appreciated and may leave for greener pastures. When these high-performing employees leave, businesses are no longer able to execute on their strategic objectives and the costs to replace these highly skilled individuals if they can be found at all can be substantial. The negative impact of uncalibrated data goes far beyond the perceived employee perceptions of unfair or inconstant treatment. With subjective ratings, companies end up distributing bonuses and pay raises to people who don t deserve them. This results in a significant waste of money and a major hit to the company s bottom line ultimately lowering the company s return on its performance management initiatives. 2
Shortcomings of Current Approaches to Calibration Companies know that if their ratings are inconsistent, the results will negatively affect all of their talent decisions. To achieve consistency, these companies have turned to a variety of different tools to calibrate the ratings process and establish a level playing field across teams. Many companies today are still attempting to calibrate their employee data manually. Performance reviews are often completed using a talent management system. Employee information is then extracted out of these systems into spreadsheets, and sent back to the managers. HR then conducts calibration meetings to review the data with managers and discuss how they rated their employees. After the calibration sessions, HR makes adjustments to any ratings that might be incorrect hoping to establish a level of consistency across all employees and make ratings an objective process. But with inadequate or poorly integrated tools, HR teams and managers are simply unable to make the right decisions during these calibration sessions. HR needs the ability to calibrate all employee performance data easily, accurately, and automatically. To do this, they must gather all of the employee data into one place in a consistent format that is conducive for comparing employees objectively, identify which employees were rated incorrectly, and then make the resulting changes easily. Also, current calibration processes are so complex that managers ultimately do not have the time to focus on their employees and understand them better, since these time-consuming processes are diverting their attention from the actual review sessions. Improving Performance Management with Calibration SuccessFactors Calibration provides a simple, automated, and streamlined way to identify the company s true top performers, reward them fairly, and promote them to leadership positions. With the right talent in the proper place, employees are more engaged and motivated, the best are retained, and the ones that are not on the top are identified for development programs. With these capabilities, companies are well positioned to execute on their strategic goals. Making the right calibration decisions requires that managers consider everything about the employees that they need to compare and calibrate. SuccessFactors Calibration tightly integrates with the entire SuccessFactors Business Execution Suite to ensure that managers have easy one-click access to all necessary information, including employee goals, ratings, competencies, compensation plans, and succession history in one, centralized location. SuccessFactors Calibration enables managers and HR to make sense of all of this data by presenting it in an intuitive, graphical format so they can see exactly how employees compare with one another. Presentation formats include bin views for ratings, 9-boxes for performance versus potential, performance versus comparatio (the formula commonly used by compensation professionals to assess the competitiveness of an employee s pay level), and much more. 3
Success Factors Calibration provides a wide variety of benefits to today s enterprises: Business Benefits. By accurately calibrating performance, compensation, and succession across all geographic locations managers can be objective in how employees are assessed, awarded pay raises, and promoted to leadership positions. Calibration enables companies to identify, retain, and motivate their top performers. It also helps identify employees that would benefit from additional training or development opportunities, and protects the bottom line by reducing the risk of overcompensation. HR Benefits. The SuccessFactors Calibration module streamlines the setup, administration, and management of all calibration processes, enabling HR to focus on more strategic activities. Manager Benefits. SuccessFactors Calibration provides HR with the ability to coach managers on how to rate more subjectively and effectively. With proper training, managers can have more meaningful, objective dialogues with their employees without being burdened by the administrative complexity of the performance review process. Using Calibration to Enhance other SuccessFactors Performance Management Modules Many companies have already achieved great results with their SuccessFactors Compensation Management, Succession Management, and Performance Review modules. But without calibration, they might not be driving these solutions to their full potential. The reality is that users of these systems are not always consistent in their decision making processes. SuccessFactors Calibration provides an excellent opportunity to add the power of objectivity across all of these well-received solutions. The SuccessFactors Calibration module is an integrated part of the entire SuccessFactors Business Execution suite there are no error-prone uploads and data feeds to integrate data across all of the company s performance management solutions. With SuccessFactors tightly integrated set of performance management solutions, all employee data is automatically available across the customer s Calibration, Performance Review, Compensation Management, and Succession Management modules. Also, changes made in Calibration are securely written back to these other modules. SuccessFactors Calibration adds significant value to the following Business Execution Suite modules: SuccessFactors Performance Review. Performance ratings drive nearly every critical talent decision in the company. Calibration can eliminate managers bias and make sure ratings are driven purely by employee performance. The SuccessFactors Calibration module will ensure these decisions are objective, well-informed, and driven by data and not simple gut feel. SuccessFactors Succession Management. Calibration enables enterprises to easily identify top performers. Companies can fill their leadership positions with the best people across teams, without relying on subjective judgment calls. It has been estimated that top performers are up to three times more productive than other employees. Having those that are capable in management positions is a huge boost to the achievement of the enterprise s business goals. SuccessFactors Compensation Management. Knowing who top employees are enables companies to distribute compensation budgets correctly, which motivates and retains the best. Accurate compensation management will also improve the company s bottom line. 4
Figure 1. SuccessFactors Calibration empowers companies to measure performance accurately, compensate and promote the right individuals, and identify training opportunities for employees needing further development. Summary SuccessFactors Calibration completely transforms calibration into a simple and effective process, bringing true objectivity to performance, pay, and succession decisions. With SuccessFactors Calibration, HR can finally support executives with the right and accurate data to make key people decisions regarding compensation, promotion, and development. With the right talent in the right place companies will be well positioned to execute on their strategic goals. 5
WHITEPAPER SuccessFactors Global Headquarters 1500 Fashion Island Blvd. Suite 300 San Mateo, CA 94404, USA TOLL FREE 800 809 9920 PHONE 650 645 2000 FAX 650 645 2099 EMEA +45 33 349 349 APAC +612 9238 6680 successfactors.com San Mateo, California Boston, Massachusetts San Francisco, California Copenhagen, Denmark Paris, France Munich, Germany Zürich, Switzerland London, United Kingdom Beijing, China Hong Kong, China Tokyo, Japan Manila, Phillipines Singapore Seoul, South Korea Sao Paulo, Brazil Mexico City, Mexico Dublin, Ireland Shanghai, China Bangalore, India Brisbane, Australia Sydney, Australia