Workforce Performance Management Much More Than Performance

Workforce Performance Management

Much More Than Performance Appraisals!Aileen MacMillan, Research Analyst, HR.com

December 2004

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Copyright 2004 HR.com

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Agenda

� Trends

� Performance Management continuum

� Benefits & ROI

�Marketplace and vendor offerings

�What do we want to achieve?

� Planning to avoid pitfalls

�Case studies

� The future?

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Employee Performance Management-Overview

� A variety of performance management philosophies results in avariety of practices

� The role of technology – it’s not just about the system, it is abouthow it is used

“ Most people aim at nothing and hit it with amazing accuracy”

Dr. Tony Allesandra

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Definition of Workforce Performance Management

�Continuous process

�Goal is to improve business results

� Achieved by improving performance of the workforce of anorganization

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Current Trends

�One of the top five trends for senior HR professionals

�WPM solutions can significantly drive employee performance andcorporate results

� Traditionally, still a very manual process, annual event, disjointed

� Focus on accountability and visibility

� Trend towards integration

� Increasing interest in pay for performance processes andsuccession planning

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WorkUSA 2004 Study

� Surveyed 1,191 employees across all industries

� 90% reported being involved in a performance managementprogram WorkUSA® 2004

44%Feel workers are held accountable fortheir performance

54%Feel their company sets highperformance standards

39%Understood how their job fit with thecompany’s overall goals

Less than 40%Felt their system established clearperformance goals, included honestfeedback and capitalized on technology

30%Felt performance management processhelped improve performance

WorkUSA® 2004

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Watson Wyatt Study Results

Watson Wyatt’s Human Capital Index®2001/2002 and Work Canada®2002 and 2004

IncreaseCompany terminates poorperformers whose performancedoes not improve

IncreaseCompany helps poor performersimprove

IncreaseTop performers are paid betterthan average performers

IncreaseCompany promotes the mostcompetent employees

Effect on ShareholderValue

Practice

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Trends in WPM implementation-Cedar 2004 Workforce Technologies Survey 7th Annual Edition

� Cedar 2004 Workforce Technologies Survey 7th Annual Edition.

�

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Employee Performance Management Maturity Model

� Departmental metrics

� Paper or Word/Excel files

� Manual and/or e-mail

1. Reacting

4. Orchestrating

3. Anticipating

2. Coping

• Cross-functional metrics

• Consistent tools andmethodology

• Project managed by HR

• Clear alignment and visibility

• Focus on performance andbehaviors

• Driven by HR, lives in LOB

• Enterprise-wide alignment withfinancial and operationalprocesses

• Driven from the top

Source: AMR Research, 2003

This is where most largeorganizations are today.

This is where most largeorganizations are today.

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Components of WPM

�Components:

� Appraisal and assessment

� Support and coaching

� Alignment of goals

�Development planning

� Skill identification

� Identification of training needs including certification

� Succession planning

� Tracking and reporting

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Return on Investment

� “Among the specific drivers of high sales vs. targets that ISR’sanalysis uncovered was communication, including communicationof objectives and performance against those objectives.”

ISR Case Study “Bottom Line is Better by Engaging Employees” 2003

Organizations with culture aligned with business strategyoutperform those that are not aligned

“The New Corporate Cultures” Deal and Kennedy

Watson Wyatt and WorkCanada study summarized key elementsthey identified important to the effective implementation of WPM.

-linking: pm and business strategy

: leadership and accountability

: appraisal results and reward and recognition

: performance and development planning Watson Wyatt’s Human Capital Index®2001/2002 and Work Canada®2002 and 2004

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DDI Study

“The most effective performance management systemsare characterized by their consistent use throughout theorganization, their integration with other systems, seniormanagement involvement, employee involvement, and

their links to organizational strategy”DDI “Managing Performance: Building Accountability for Organizational Success, Executive Summary”

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Strategic Benefits

� Increased efficiency

�Consistency of process

� Improved quality of reviews

�Maintain and track accountability

�Documentation to reduce disputes

� Increased alignment

� Ability to identify and keep top performers, identify training needsand accurately link performance to compensation

� Improved productivity and bottom line results

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Overview of the WPM Marketplace

�Larger players, including ERP and HRIS vendors

�Niche or Best of Breed players

�Single solution

�Suite of integrated modules

�Build your own solutions

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Goal SettingPerformance Monitoring

FeedbackCoaching

PerformanceAppraisal

Reward

DevelopmentPlanning

Classic HR Performance Management System

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Capabilities

�Cascading and linked goals

�Competencies

�Central dashboard

�Configurable workflow

� Appraisal preparation support

�Manager support/coaching tips

� Extensive reporting options

� 360° feedback or multi rater feedback

� Links to other systems or full integration

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Change Management

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Avoiding Pitfalls

� Ensure support from the top of the organization

�Develop a strategic plan

�Update job descriptions, performance management processes

� Build in accountability

� Transparency and trust

� Provide appropriate training

� Link individual goals with organizational goals

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Case Study – City Public Service

�City Public Service (CPS), one of the nation’s largest municipally-owned energy companies, located in San Antonio, TX

� Just over 4,000 employees

� Strong commitment to encouraging employee performance

� Purchase of an WPM software solution seen as a key initiative tosupport the performance management process

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Guiding Principles

� To move from a paper-based to a paperless system

�Decrease administrative time

� Allow tracking and alignment of goals

� Ensure quality evaluations

� Increase feedback related to competencies

� Provide effective performance management data

� To move from an anniversary date appraisal completion process toa common completion date

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Steps Taken

�Only 45 days from purchase to the “go live” date

� A variety of levels of computer literacy amongst employees

Steps taken:

� Began with sound performance management processes in place

�Customization of solution to fit specifications

� Formation of an implementation team

�Development of a detailed implementation plan

�Utilization of train the trainer program

�Designation of software support representatives

�Clarification of roles and responsibilities

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Results

�Completion of 1,983 salaried employees annual appraisals in aperiod of 60 days

� Annual merit increases awarded approximately one month later

� Eliminated work load of approximately four different personnelallowing them to focus on other HR functions

� Improved on time completion rates

� Increased consistency of process

�Reduction in need for storage space

� Substantial reduction in future administrative time

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Case Study – Sears, Roebuck and Co.

� Employs about 220,000 Associates, in over 3000 locations

� Performance Management is a daily process

� Formal reviews are conducted for all Associates once a year

� Performance review process is tied to the calculation of merit andincentive payments

�Review process tied to Talent Management Process

�Custom developed web tool

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Guiding Principles

Fundamental belief rewards are tied to performance

Streamlined way to manage process

Consistent communication to Associates

Reporting and management of performance initiatives

Accurate calculation of pay

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Steps Taken

� Strong performance management process and communicationsystem in place

� Identification of personal goals, performance goals andcompetencies

� Safeguards to ensure fairness and consistency of pay forperformance

�Gradual implementation of change

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Steps Taken-RACI Process

� System to identify accountabilities and responsibilities by process

�R = Responsible

� A = Accountable

�C = Consulted

� I = Informed

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Results

� Identification and refinement of key performance measures

�Greater understanding of employee skill level

� Increased accountability and personal responsibility

� Increased clarity around performance scores

� Improved consistency amongst performance expectations

� Fairness of pay for performance

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Common Elements

Support from the top of the organization

Development of a strategic plan

Accountability built in

Linked individual goals with organizational goals

Provided appropriate training

Updated data and processes

**Ongoing communication, value and trust**

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Tips From Current Users

� Ensure sound performance management practices are in place:

“a software solution will not replace proper supervision”

�Roll out the process step by step

� Thoroughly research before making a buying decision

“go in with your eyes open – have clear expectations and askquestions up front”

�Consider your future needs

�Get to know your vendor

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Future of WPM Software

� Trend towards consolidation

�More integration with financial data

� “EPM software market will demonstrate at least a 15% compoundannual growth rate through 2008” Gartner, 2004 EPM MarketScope

� Approximately 30% using WPM, approximately another 20%budgeting for this in next 12 months, and approximately another20% of participants are budgeting for this within 3 years.

Cedar 2004 Survey

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Contact Information

Aileen MacMillanHR.com

[email protected]

Business

Workforce Performance Management Much More Than Performance