1/5/2011

Peak Performance
Technology helps measure and manage employee performance.

Whether the impetus is finding engineers in Alaska or cutting turnover in 50 countries worldwide, organizations are getting serious about applying metrics, measurement and workforce performance management to achieve both individual and organizational goals.

To help automate that process, many companies are choosing workforce performance management (WPM) suite systems to link performance metrics to compensation, measure employee performance and track goals, and then automatically feed these data to compensation, learning, succession planning, recruiting and other HR systems. A few sophisticated solutions feed into financial/operations systems, and more will do so in the future.

The WPM systems also help employees gain insight into their goals, training and standing within the organization, monitor their progress and offer feedback.

“Businesses are much more metrics-oriented and investing in business intelligence and analytics—they want to align individual performances with the measures they’ve put in place for the business,” says analyst Paul Hamerman, vice president for enterprise applications at Forrester Research in Cambridge, Mass. Those metrics then get connected to both performance-based compensation and programs for retaining top performers. “Companies are looking at performance as a mission-critical process to improve the business performance,” Hamerman adds.

With labor costs making up as much as 60 percent of operational expenses, improving workforce performance by just 1 percent adds significant benefits to the bottom line, says Farhana Alarakhiya, director of analytic applications at Cognos, a software company based in

Ottawa, Canada. Yet, some HR departments may take three weeks to three months to compile a head count by department. “Many in HR don’t even have access to base metrics they can trust and that don’t take an army to determine,” says Alarakhiya.

But that is changing. Performance management metrics and efforts are so critical to corporate well-being that several industry analysts predict they’ll become part of Wall Street critiques and corporate annual reports within the next five years. Such metrics, for example, might capture information about an organization’s performance by manager or region, improvement from one year over the previous year, or productivity by work unit or position.

HR professionals are finding that the right technology can be a critical factor in creating a performance management system that promotes business success.

The Growth of WPM

Delivered either as a licensed software package or as a hosted service called Software as a Service, today’s WPM systems exceed traditional annual performance appraisals by sharing information across an organization and integrating various HR systems, such as review and reward components.

Many organizations adopted WPM systems following unsuccessful attempts to cobble together stand-alone or so-called best-of-breed solutions. “Organizations today do a lot around workforce performance, but in many cases it’s not brought together in a single process—[such as] the performance appraisal linked to the right job requirements for a new position,” says Mark Smith, executive vice president at Ventana Research, a market research firm in San Mateo, Calif.

While experts estimate that less than 20 percent of organizations currently have some sort of automated performance management system, a study by Framingham, Mass.-based IDC Corp. found that the applications/services market for WPM is growing by about 16.5 percent annually, with the amount to be spent in 2009 projected at $1.8 billion.

Tying Performance To Key Results

At Anchorage, Alaska-based ASCG Inc., metrics or hard numbers/dollars-based measurements, such as sales generated or sales per client, are known as “key results.” These results make up the quantifiable piece of the performance evaluation that drives business at the engineering/architect firm, now with 700 employees throughout the western United States, says Juliana Cobb, chief administrative officer and corporate counsel (and former HR director).

“Key results are very metrics-based, very financial-based objectives that are tied to corporate objectives,” says Cobb. “We tie metrics into our bonuses and compensation reviews—everything ties back to the dollars.”

Until this year, ASCG maintained this information on paper, but the company now uses a web-based appraisal/performance system from Halogen Software. Partially at ASCG’s urging, Halogen added a metrics component to its eAppraisal product, which now has the capacity to measure key performance indicators. Since ASCG does work for many federal agencies, having these metrics is useful because it simplifies the process of consolidating information required by the U.S. Office of Federal Contract Compliance Programs.

Next, ASCG plans to add Halogen’s eSuccession component to its WPM suite to aid the company, not in replacing employees but in retaining them by identifying star performers as well as training opportunities for employees with various rankings. “We’re suffering from the inability to recruit engineers,” says Cobb. “And it’s going to be this way for the next 10 years, so we need to retain as many as we can and develop them.”

Getting a Global Perspective

At Quintiles Transnational, which tests pharmaceuticals and medical devices, and supplies staff to other firms, the fact that employees were being appraised using dozens of different processes and systems (and sometimes not at all) was a huge issue. In its global employee survey, the company found that its 17,000 employees—spread across 50 countries—ranked their managers, job engagement and proper compensation as top issues.

“Looking at this we were able to confront the brutal facts of what was going on in the organization and [what] needed to change,” explains Tim Toterhi, director of global learning and development strategies at Quintiles, in Research Triangle Park, N.C. “With people using different paper processes, different systems [some homegrown] and different languages, it was hard to get a handle on who was getting a review, if it was of quality, and whether the objectives were smart or had any meaning to the organization.”

After a thorough selection process in 2004–05, Quintiles opted for performance and talent management software—delivered online as a hosted service—from SuccessFactors, based in San Mateo, Calif. In 2005, the system helped reduce employee turnover by 7 or 8 percentage points, Toterhi says. Currently, Quintiles is adding the ability for employees and managers to automatically capture coaching and feedback data throughout the year—no more once-a-year notes on performance that get lost in drawers, Toterhi says.

WPM developer Lawson Software enhanced its own WPM process in the wake of a global merger following Lawson’s 2006 acquisition of Swedish developer Intentia International, which more than tripled Lawson’s workforce from 1,400 employees to about 5,000.

“We didn’t have any way to compile [appraisal data] and apply that to things like target training,” says Kristen Trecker, SPHR, senior vice president of HR at St. Paul, Minn.-based Lawson. Instead, appraisals were “an internal piece between employee and manager, documenting what they had done, looking backward. I wanted to use that information to help us planning forward.”

Although Lawson’s implementation is still under way, Trecker is already using data generated by its WPM system to fine-tune hiring guidelines as the company increases recruitment. For example, the data showed a strong correlation between employees rated as “A” performers and competencies such as good communication, follow-up with customers and a focus on improving processes.

Trecker says adopting an automated WPM process has aided Lawson’s merger with Intentia International. Now software developers employed in the United States and Europe are rated using the same criteria.

“It’s one of the things that’s going to bring together the two organizations,” Trecker says.

Connie Winkler, who regularly writes about HR and technology management from Seattle, has authored two books on technology careers.