Employee Performance Management
Much More Than Performance Appraisals!
Aileen MacMillan, Research Analyst, HR.com
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Employee Performance Management
Overview
• A variety of performance management philosophies results
in a variety of practices
• The role of technology
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Agenda
• Trends
• What do we want to achieve?
• Performance Management continuum
• Marketplace and vendor offerings
• Planning to avoid pitfalls
• Two case studies
• ROI
• The future?
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Current Trends
• One of the top five trends for senior HR professionals
• Significantly drive employee performance and corporate
results
• Traditionally, still a very manual process
• Increasing interest in pay for performance processes and
succession planning
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Components
• 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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Benefits
• Higher profits
• Better cash flow
• Stronger stock market performance
• Improved productivity
Hewitt Associates, 1994
Organizations with culture aligned with business strategy
outperform those that are not aligned
“The New Corporate Cultures” (Deal and Kennedy)
• Higher returns on investment and stock price increase
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“The most effective performance management
systems are characterized by their consistent
use throughout the organization, their
integration with other systems, senior
management involvement, employee
involvement, and their links to organizational
strategy”
DDI “Managing Performance: Building Accountability for Organizational
Success, Executive Summary”
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Employee Performance Management Maturity
Model
4. Orchestrating
3. Anticipating
2. Coping
• Enterprise-wide alignment with
financial and operational
processes
• Driven from the top
• Clear alignment and visibility
• Focus on performance and
behaviors
• Driven by HR, lives in LOB
• Cross-functional metrics
• Consistent tools and
methodology
• Project managed by HR
This is where most large
organizations are today.
1. Reacting
• Departmental metrics
• Paper or Word/Excel
files
• Manual and/or e-mail
Source: AMR Research, 2003
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Moving From Paper to Technology
• Increased effectiveness
• Ability to measure results
• Maintain and track accountability
• Ensure appraisals are related to day to day activities
• Link to organizational objectives
• Ensure consistency
• Identify training
• Accurately link performance ratings to compensation
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Overview of the EPM 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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Overview of the EPM Marketplace
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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 modules or full integration
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What Do We Want to Achieve?
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Avoiding Pitfalls
• Ensure support from the top of the organization
• Develop a strategic plan
• Develop a forecasted budget
• Update job descriptions
• Transparency and trust
• Identify actionable items for each goal
• Link individual goals with organizational goals
• Build in accountability
• Provide appropriate training
• Determine if tied to compensation management
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Change Management
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Case Study – City Public Service
• City Public Service (CPS), the nation’s largest municipally-
owned energy company, located in San Antonio, TX
• Just over 4,000 employees
• Strong commitment to encouraging employee performance
• Purchase of an EPM software solution seen as a key initiative
to support 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 to a 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
a period of 60 days
• Annual merit increases awarded approximately one month
later
• Eliminated work load of approximately four different
personnel allowing 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
and incentive 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
communication system in place
• Identification of personal goals, performance goals and
competencies
• System to identify accountabilities and responsibilities by
process
• R = Responsible
• A = Accountable
• C = Consulted
• I = Informed
• Safeguards to ensure fairness and consistency of pay for
performance
• Gradual implementation of change
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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
Develop a strategic plan
Build in accountability
Link individual goals with organizational goals
Provide appropriate training
Update job descriptions
Determine if tied to compensation management
**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 ask
questions up front
• Consider your future needs
• Make sure your infrastructure will support the software
• Get to know your vendor
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Return on Investment
• Increased efficiency
• Ability to identify and keep top performers
• Significantly reduced grievances
• Increased clarity and accountability
• Consistency of process
• More formalized process
• Improved quality of reviews
• Increased alignment
• Employee satisfaction
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Future of EPM Software
• Trend towards consolidation
• “EPM software market will demonstrate at least a 15%
compound annual growth rate through 2008”
Gartner, 2004 EPM MarketScope
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Aileen MacMillan
HR.com
amacmillan@hr.com
End of Presentation