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March 2011




Original insight



Automatic for the people: why automation of performance
management is an organisational imperative




                         The automation of performance and talent management
                         processes brings a multitude of benefits, which make it,
                         arguably, a prerequisite for effective people management.
                         A bespoke approach to online performance management
                         allows HR professionals to meet the specific needs of an
                         organisation, thus creating competitive advantage.
Executive summary
98% of ‘best in
                               Employee performance management is a fundamental business process that too many
class’ companies               organisations fail to get right. It is critical to realising the full potential of individuals and
use an employee                maximising business performance. Leading organisations recognise the value of their
performance                    workforce and aspire to create a high performance culture. Most achieve this through the
                               implementation of performance management processes that are underpinned by an online
management                     system.1 The secret to success is to adopt a bespoke approach, implementing a system and
process, versus 59%            process that is the ‘best fit’ for the company rather than ‘best practice’. Our experience shows
                               that what works for one company may fail for another.
of other firms.
                               Despite the advantages of online performance management systems being well-known,
- The Employee Performance     some HR professionals have been slow to respond, preferring to follow rather than lead.
Management Benchmark Report:   There’s also been a reliance on off-the-shelf automated systems that incorporate software
Managing Human Capital for     vendors’ definitions of best practice. This is not the most effective option for the majority of
a Competitive Edge. Aberdeen   larger companies. We argue instead that, when automating performance management, HR
Group, 2006.                   professionals should shape and deploy a process that is tailored to fit the specific needs of their
                               organisation, thus creating competitive advantage.

                               An historical challenge for HR professionals has been getting buy-in from senior executives –
                               with the need to deliver a strong business case demonstrating the return on investment. We’ll
                               set out exactly how implementing the right online solution for performance management can
                               benefit your business and demonstrate what returns you can expect. We’ll also present case
                               study examples of HR practice that employ bespoke automated systems and conclude with a
                               guide for applying this approach.

                               For clarity, we define performance management as a process that establishes a shared
                               understanding of organisational success and an approach to leading and developing people
                               to ensure this is achieved.




                                                                                                   www.etsplc.com      | 2
1. How automating performance
                                     management helps people processes
A huge number
                                  Automating performance management processes makes it easier for companies to align
of employees                      employees’ individual goals with corporate objectives. It makes measuring performance and
are dissatisfied                  assessment simpler and more consistent, and allows companies to see clearly their best and
with performance                  poorest performers. Such insights are invaluable in a climate where headcount reduction is
                                  sadly a necessity for many companies, which equally want to retain their talent.
appraisals. Our
research shows                    When considering the merits of automating performance management though, it’s really
                                  important to convince senior executives to look beyond the bottom line and appreciate the
this is due to the                other, in some cases less tangible, benefits too. By embedding an effective performance
lack of clarity and               management process, companies are demonstrating a willingness to invest in employees.
involvement in                    This will impact directly on retention of high performers, who are keen to plan and develop their
                                  career.
setting goals.
                                  Also, we’ve found many instances where, by going through the automation process, companies
- Performance Management          have taken the opportunity to reassess existing practices. This results in standardisation and
Review: An analysis of the ETS    consistency of performance management processes, is impossible to achieve with an offline
Employee Survey. ETS plc, 2009.   process as too much is open to interpretation by line managers in different business units.

                                  Time to reappraise the appraisal
                                  A large proportion of employees – approximately 40% – remains dissatisfied with their
                                  appraisal process.2

                                  In addition, it seems that line managers too share concerns regarding performance
                                  management processes. Research shows that 61% of managers don’t believe existing
                                  appraisal processes are driving greater performance.3 These figures should worry business
                                  leaders as ineffective appraisals will lead to a dip in employee satisfaction, which has a direct
                                  correlation with business performance.

                                  Companies must get the basics right. Crucial to engaging employees is ensuring they have clear
                                  goals and objectives. Yet 30% of private sector employees don’t know what their company’s
                                  objectives are. Individual and corporate objectives should be aligned – if an employee
                                  understands what is expected of them and how this fits in with company objectives, they are
                                  more likely to be engaged and motivated to perform. Furthermore, alignment of objectives is
                                  also crucial in ensuring your business strategy is ultimately successful.

                                  How do managers and their subordinates benefit?
                                  An automated system can make a huge difference in simplifying performance management by
                                  making it more transparent, giving all involved greater confidence in the process. Employees
                                  are clearer on what’s expected of them and can see how their objectives support organisational
                                  goals, resulting in increased engagement.

                                  With less time spent on functional processes, line managers are free to focus on career
                                  planning, coaching and development for direct reports, making it easier to identify, nurture and
                                  develop talent. A cautionary note here though – it’s important that an online system isn’t seen
                                  by employees or managers as a barrier to face-to-face discussion. It should aid and inform,
                                  rather than replace, performance-related conversations.




                                                                                                    www.etsplc.com      | 3
How do HR professionals benefit?
                        For HR professionals, an automated system means greater accuracy and far less time spent
                        on administration for performance management. This frees them up to develop HR’s role as
Anticipated skills      a strategic business partner. Powerful reporting capabilities of automated systems also make
shortages mean that     identifying trends, skills gaps and benchmarking far quicker and easier.
talent management,
and specifically,       Performance management – the foundation of talent
development of a        management
management and          By embedding an effective online performance management system, organisations are also
leadership pipeline,    helping lay the foundations for a more strategic approach to talent management.
has been identified     Anticipated skills shortages mean that talent management, and specifically the development
as the single biggest   of a management and leadership pipeline, has been identified as the single biggest business
business challenge      challenge facing companies.5 To appreciate the importance of retaining skilled employees,
                        consider the cost to companies of replacing staff, which is 30 - 150% of the employee’s annual
facing companies.       salary. This means, in a firm of 40,000 employees, the difference between having a 15% and
                        25% staff turnover is almost £25 million per year.6

                        A well-integrated automated performance management system will ensure companies base
                        talent decisions on hard facts and data. It’ll also help companies locate potential leaders within
                        their organisation to be developed, and identify successors to critical roles across the business.




                                                                                           www.etsplc.com      | 4
Case study 1
                                  An international media company with world-leading businesses in education, business
                                  information and consumer publishing appointed ETS to devise an online talent management
                                  system for its top 250-300 performers. The system was to take over from spreadsheet-based
                                  data capture with managers’ forms returned by email, manual data entry and no facility to
                                  generate reports.

                                  •          The bespoke online solution devised allows straightforward administration access
                                             and easy collation of data via a standardised form, which is then transferred to one
                                             central database

                                  •          Simple file management means instant and consistent communication with managers
                                             about the process, with the intuitive interface prompting managers to access activities
                                             they need to complete

                                  •          A wealth of reporting options are available – reports can be generated centrally or
                                             locally by managers with advanced reporting to both Excel and PDF (Adobe Acrobat).

                                  •         ‘Report Packs’ in high-quality PDF can be generated at the click of a button for
                                  talent review meetings (see figure 1 below)



Figure 1: Online talent management system

                                  Talent review 11                                                   Test user


                Performance                                                          Potential




                                                            Performance

                  Drive                         Leading the business
                  Curiousity
                  Character
                  Inclusive                     Working with others
                  Relationships
                  Responsive
                  Brave                         Living the company values
                  Imaginative
                  Decent
                  Insight                       Leading people
                  Coach
                  Influence
                  Creative                      Thinking differently
                  Strategic
                  Smart

              Mobility          Global                                      Timing               1-2 years

              yes, with a preference for euopre so he / she can             2 years.
              utilise his / her language skills.

              Aspirations                                                   Development plan
              Regional Manager                                              Continue mentoring programme
                                                                            Forum attendance
                                                                            Insights into leadership
              Possible future moves
                    Regional Manager                             Global Manager                                  Director


                                                                                                                            www.etsplc.com   | 5
2. Building a business case for automation
                                 Despite difficult economic conditions, investment in performance management has remained
                                 a top priority for businesses. Research by the Aberdeen Group shows that rather than slow or
                                 stop investment, the struggling economy has served to drive greater investment in performance
                                 management.7 This is because companies are very eager to identify their top talent, create a
                                 high performance culture, better align compensation with performance and increase visibility
                                 and accountability of performance.

                                 Each company developing a business case can use the model set out below to identify
                                 different types of benefits. Just as the best online performance management solution will be
                                 bespoke – as we’ll explain later – so too will the evidence showing the business benefits and
                                 improvements, which are unique to each organisation.

                                 In our experience, often the biggest barrier for HR practitioners has been convincing senior
                                 executives of the business need for automating performance management and the return on
                                 investment offered.

                                 For organisations yet to automate, consider the latest research which reveals that 59% of
                                 companies sampled are already using automated performance management applications,
                                 with a further 13% indicating they plan to implement such systems within the next year.8 If your
                                 company doesn’t fall into either of these categories, there’s a good chance you’ll be left behind
                                 by your competitors.



                                 How does the business benefit?
                                 In analysing how automating performance management can have an impact and create value
                                 for businesses, we can broadly split the benefits into three areas – loosely based on the Bersin
                                 model9:
        Efficiency
        & compliance
                                 Efficiency and compliance

                                 •	       Providing legally defensible employee management
                                          o        Decisions are documented and evidence based
Process
improvement                               o        Electronic log of all performance conversations
                                 •        Reduced administration
                                          o      Appraisal, development forms and evidence stored electronically and
                                                 accessible from any computer – no more lost paperwork
              Business                    o      HR managers and business leaders can access aggregate reports themselves
              transformation &
              performance
                                 Process improvement

                                 •        Increasing employee retention / lower costs associated with losing employees
                                          o        Employees are more fairly recognised and rewarded for their efforts
                                          o        Accurate identification and reward for high performing employees
                                 •        Improvement in employee engagement and development
                                          o      Employees are clearer on objectives and more motivated to achieve
                                          o      Helps managers identify appropriate development areas for individuals
                                 •        Improving efficiency and effectiveness of training
                                          o       Gives insight into specific areas where training is required




                                                                                                    www.etsplc.com     | 6
Business transformation and business performance

                               •        Workforce goal alignment
Organisations                           o       Individual goals clearly aligned to support business goals
automating                     •        Increasing employee productivity and performance
performance                             o        Clear, measurable objectives mean employees are more productive

management can                 •        Improving the leadership pipeline
                                        o       Detailed records of employee skills, attributes and experience, helping
easily realise a                                identify future leaders
50% - 200% return
on investment from             What’s the return on investment?
efficiency and                 A good starting point for illustrating the likely return on investment is efficiency and
compliance alone.              compliance gains. Implementing an effective online process offers indisputable time and
                               cost-saving benefits, which can help build a watertight business case. Processing paper-
- The Business Case for        based appraisal forms is a laborious and lengthy process involving multiple people coding
Performance Management         results and inputting data entry. Manually generating reports is similarly time-consuming for
Systems – Josh Bersin, 2008.   HR teams.

                               Longer term, companies can bank on a return through business performance. Successfully
                               embedded online systems will result in greater performance gains across all Key Performance
                               Indicators.10 It will also help to boost employee engagement and customer satisfaction,
                               which is a key factor in the financial success of an organisation.11

                               In addition, an automated system allows greater visibility of the contribution made by individual
                               employees. As well as helping with talent management and informing performance-related
                               pay decisions, this also has value at a strategic level, giving CEOs greater insight into how
                               they can operate the business more efficiently and increase profits.




                                                                                                   www.etsplc.com      | 7
Case study 2
                                  ETS was appointed by a leading global manufacturing group to streamline its performance
                                  management process. The company, which has manufacturing plants in over 25 countries,
                                  had previously run ad-hoc performance reviews at each site, using location specific – primarily
                                  paper-based – forms. However, this approach offered no consistency of process or data,
                                  and a huge administrative burden on local HR to collate, analyse and report. With no direct
                                  involvement by a central HR function, talent management and succession planning was
                                  enormously difficult and time consuming.

                                  •           ETS implemented a single online performance review form for all locations, covering
                                              5,000 people
                                  •           Central and local HR has real time sight of the process and can monitor participation
                                              levels and manage communications effectively with participants and managers
                                  •           The online system allows real time reporting of data, which helps with both the
                                              qualitative assessment of objectives set, as well as allowing access to information for
                                              talent and succession planning
                                  •           The usability of the online tool and ability to access the process remotely has resulted
                                              in a sharp increase in the level of participation as well as the overall completion rate

Figure 2: Global performance management solution

           Home page

           This page summarises your Performance Development System activities.

           The page is split into three section which together provide access to your: 1. Personal Pro le (My Pro le)
           2. Objectives and 3. Personal Development Plan (PDP) and if you are a manager, to complete your team members’
           activities.

           You will need to complete ‘My Pro le’ and ‘My Objectives’ sections or yourself. If you are a manager you will also need to
           complete the activities under ‘My Team’ at the base of the page.

           Holding you mouse cursor over the information symbol in each section will bring up a box with brief information on each.




            Key to Tra c Light Symbol:
                                                                                                    Your details have been submitted
                  You have no activities to perform          You have activities outstanding        and are awaiting approval

                   All activities are completed



            My personal development plan

                            PDP 2010 : Not submitted

                            PDP 2010 : Submitted and awaiting manager approval



           Add a new team member            My personal development plan

            My team         Status report         Team PDF history
                                            Individual pro le Set meeting date Objectives         Previous        PDP      Show team
                 Sarah Smith                                                                      objectives

                 John Robinson

                 Kathy Simpson




                                                                                                                          www.etsplc.com   | 8
3. Benefits of bespoke when automating
A bespoke or best
fit approach allows    ‘Best fit’ rather than ‘best practice’
a company to keep
                       HR professionals often seek to replicate ‘best practice’ processes, based on accepted industry
processes that         standards. Such an approach is also often favoured by senior management as they are
work and integrate     reassured by implementing a solution that has been used successfully by other organisations
                       and therefore seems to guarantee them success.
aspects of the
business culture,      However, a reliance on best practice is not the best solution for businesses as it fails to take into
which will encourage   account organisational context and specific business needs. While best practice solutions are
                       tried and tested and proven to address a problem or achieve a desired goal, they are rigid and
greater user           confound business goals, existing processes and cultural norms, which can ultimately lead to
adoption.              low adoption from users.

                       As we discuss more in another paper, ‘Beyond best practice: enhancing results with bespoke
                       HR’ ‘Best fit’ solutions take a bespoke approach and are typically based on a combination of
                       business goals, a company’s unique culture and also take into account best practice.


                       Bespoke solutions offer unrivalled flexibility
                       In an increasingly dynamic business environment, what works for a company today, may not
                       work tomorrow – it may need adapting or adding to. Leading organisations are constantly
                       looking to improve and refine their processes in order to ensure they’re at the top of their game.

                       A bespoke or best fit approach allows a company to keep processes that work and integrate
                       aspects of the business culture, which will encourage greater user adoption.

                       Having a bespoke performance management solution is particularly useful for multi-national
                       companies and those with operations in different markets. This allows a system to have a
                       global process put in place but also include the capability to tailor processes at a local level,
                       accounting for cultural and organisational variations.

                       Keep the end user in mind
                       A fundamental consideration when switching to an online performance management system
                       is to ensure you keep the end user front of mind, as getting user adoption is critical to the
                       success of the implementaion. You must engage users in the process, explain why the new
                       system is being implemented, and crucially, what’s in it for them.

                       A bespoke approach allows companies to retain company culture, processes and the unique
                       ‘look and feel’ of the organisation. Incorporating such elements is invaluable in encouraging
                       adoption as it will immediately be more familiar and intuitive for users. A bespoke solution also
                       allows companies to gain a competitive advantage as the system is tailored to meet specific
                       business needs and really fit an organisational structure.




                                                                                            www.etsplc.com       | 9
Case study 3
                                                    ETS worked with a leading high-street entertainment retailer to overhaul its performance
                                                    development review. The organisation had an existing online solution but employee buy-in
                                                    was low due to its complexity and look and feel. The HR team was finding it hard to sell
                                                    the process to stakeholders due to a lack of interest in the process. The organisation also
                                                    ran a 360-degree feedback process using a separate system. Furthermore the performance
                                                    development review offered practically no reporting functions and, as a consequence, the HR
                                                    team were not getting value from the process.

                                                    •                ETS devised a combined 360-degree feedback and performance development
                                                                     review (PDR) solution
                                                    •                The look and feel incorporated the organisation’s very specific brand identity,
                                                                     enhancing usability and increasing its appeal to users
                                                    •                The process was more streamlined and intuitive making objective-setting, monitoring
                                                                     and interim reviews more straightforward
                                                    •                The solution featured powerful administration tool to monitor, track and promote use
                                                                     of the process among employees
                                                    •                360-degree feedback reports reflecting the brand’s unique image could be
                                                                     generated, which included a one page summary enabling quick identification of the
                                                                     key findings of the report
                                                    •                ETS introduced HR level reporting enabling sharing of reports with the business and
                                                                     easy extraction of data from the system
Figure 3: Performance management for high-street entertainment retailer


      brandb                           you rock                                                                                                                         b
                                                                                                                                                                       log out

      details for:                                  jane simpson
      currently based in:                           london
      began working with brand:                     6 june 2009
      completed:                                    not yet approved


       page 2: objectives                                                                                                                                             info
      please use the star ratings to rate the values.

                     Flexible                                           Energetic                                   Thoughtful                            Creative




                                                                                                           deadline                  revised
        objective                             action                    desired outcome                                    status                              edit   delete
                                                                                                           date                      deadline     comments

       keep the intranet      get an updated list of publishers and     the intranet is always up to     01 january 2011   started                             edit   delete
       current, ensuring      check ther training needs, send details   date, providing accurate
       that all publishers    of key publishers to head o ce            information and that
       are fully trained      support for contact. update hr pages      publishers take more
       and that pages         and ensure that the front page is         responsibility for their own
       are always up to       updated, espcially the brand b in the     pages, so that marthe is not
       date.                  news section and in the what’s on         the only point of contact for
                              section.                                  any it related issues.

       develop the voice      continue to contact colleagues to         the voice is easily accessible   11 january 2011   started                             edit   delete
       to ensure that it is   write articles, put the voice on the      both in stores and at home,
       always fresh.          intranet (training required). keep        in paper home and online.
       continue to            doing surveys to gauge interest and       the voice contines to be an
       publish the voice      update accordingly.                       interesting read.
       on the internet
       and publish a
       version on the
       intranet.



                        save & go back                         exit without saving                               save & exit                    save & continue


                                                                                                                                                       www.etsplc.com            | 10
4. Where to start with automation?
                      The role of HR is increasingly strategic and it’s time that the approach to people management
                      processes reflected this shift away from an administrational function. Implementing an
                      automated performance management system can help facilitate this change, while also
                      offering tremendous flexibility and scope for business benefits. However, for these reasons, it
                      can be difficult to know where you should start with automation.

                      With this in mind, we have outlined a five step implementation strategy process that we follow,
                      which is essential when planning and embedding a bespoke online performance management
                      system:


Figure 4: Implementation strategy – taking a bespoke approach




      Align       De ne          Develop               Deliver            Enhance




                      Align

                      •       Understand the organisational context, underlying business drivers and broader
                              organisational culture – such knowledge is critical when identifying key design
                              principles and success factors for the project
                      •       Identify and agree the scope of the project including the timescale to achieve your
                              identified critical success factors
                      •       Engage key stakeholders to ensure engagement and buy-in from the outset

                      Define

                      •       Develop the project scope and define the solution, seeking input from relevant
                              stakeholders
                      •       Scope specific requirements of the solution based on best practice techniques and
                              undertake organisational research to inform design
                      •       Assemble project team and run definition workshops with representation from
                              across the business to define system requirements and associated reports and
                              outputs
                      •       Ensure ‘best fit’ solutions are underpinned by best practice advice that draws on
                              relevant research and latest trends




                                                                                       www.etsplc.com     | 11
Develop

•    Ensure all systems and processes are developed in line with the solution specification
     and incorporate regular project reviews and note changes
•    The completed design should be validated across the business before signing off.
     This validation process should include subject matter expert reviews, thorough user
     acceptance and quality testing
•    Agree, design and deliver the supporting processes and materials required for the
     roll-out of the solution (e.g. training documentation)


Deliver

•    When introducing the new solution to your business, ensure the associated
     communications and training are timely, targeted and effective
•    Ensure that you’re familiar with all elements of the solution and are able to answer
     questions from across the business
•    Hold a project review meeting to discuss the project to date and document what has
     worked well and what improvements may be needed

Enhance

•    Use the reporting from your solution to gain insight into your workforce.
•    Analyse and interpret your results, using the data to inform strategic people focused
     decision making that delivers tangible business improvements.
•    Evaluation is fundamental to defining the success of any process. You must be able
     to demonstrate the value of the project to your business, identifying exactly where it
     has had an impact




                                                              www.etsplc.com      | 12
Conclusion
                          The number of organisations automating their performance management processes continues
                          to grow at pace. Of those not yet using automated systems, there is widespread awareness
                          of the benefits that it offers and as research has shown, there is a resolve to automate soon.
                          The biggest challenge for these organisations remains convincing senior management of the
                          business benefits and getting their buy-in. As we’ve demonstrated though, there is a very clear
                          business case for doing so, with substantial return on investment, streamlined and more time
                          efficient people processes and, most importantly, a positive impact on business performance.

                          About ETS
                          This Original Insight report was written by Hannah Stratford, a Business Psychologist and the
                          Head of Business Psychology at ETS. Hannah works with high profile clients to help them
                          leverage strategic value from performance and talent management, employee research and
                          leadership assessment and development programmes. Dominic Wake and Ben Egan also
                          contributed to the content of this report.

                          To contact Hannah or Dominic about this report, please send an email to dominic.wake@
                          etsplc.com or call +44 (0)1932 219949.

                          ETS provides business-focused consultancy and custom-designed technology to meet the
                          performance management, employee research and 360-degree feedback needs of world-
                          leading companies. We combine innovative technology solutions with practical experience to
                          designed a solution that fits your business needs.

                          ETS delivers our clients’ ‘ideal world’, which means that our solutions exactly match each
                          client’s corporate culture and processes: we listen to you needs; we do not expect you to bend
                          to our solutions. Where appropriate, we develop the new processes needed to meet your
                          people objectives. Where it is possible, we can integrate with, and automate, any existing HR
                          processes so that new and old work together.




Expert Training Systems
123 New Zealand Avenue
Walton-on-Thames
Surrey KT12 1QA

www.etsplc.com
info@etsplc.com

HR means business blog
www.etsplc.com/blog

Twitter
@etsplc

                                                                                           www.etsplc.com     | 13
References

1 The Employee Performance Management Benchmark Report: Managing Human Capital for
a Competitive Edge. Aberdeen Group 2006.

2 Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009.

3 The Business Case for Performance Management Systems – Josh Bersin 2008.

4 Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009.

5 High-Impact Talent Management: Trends, Best Practices and Industry Solutions. Bersin &
Associates 2007.

6 Cornell.edu/research – Aberdeen group 2008.

7 Aberdeen Group – Employee Performance Management 2009 – Jayson Sabba

8 CedarCredstone 2010 – 2011 HR Systems Survey.

9 The Business Case for Performance Management Systems – Josh Bersin 200833.

10 Aberdeen Group – Managing Employee Performance 2008.

11 Aberdeen Group – Employee Performance Management 2009 – Jayson Sabba.




                                                               www.etsplc.com     | 14

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Automatic for the people: why automation of performance management is an organisational imperative

  • 1. March 2011 Original insight Automatic for the people: why automation of performance management is an organisational imperative The automation of performance and talent management processes brings a multitude of benefits, which make it, arguably, a prerequisite for effective people management. A bespoke approach to online performance management allows HR professionals to meet the specific needs of an organisation, thus creating competitive advantage.
  • 2. Executive summary 98% of ‘best in Employee performance management is a fundamental business process that too many class’ companies organisations fail to get right. It is critical to realising the full potential of individuals and use an employee maximising business performance. Leading organisations recognise the value of their performance workforce and aspire to create a high performance culture. Most achieve this through the implementation of performance management processes that are underpinned by an online management system.1 The secret to success is to adopt a bespoke approach, implementing a system and process, versus 59% process that is the ‘best fit’ for the company rather than ‘best practice’. Our experience shows that what works for one company may fail for another. of other firms. Despite the advantages of online performance management systems being well-known, - The Employee Performance some HR professionals have been slow to respond, preferring to follow rather than lead. Management Benchmark Report: There’s also been a reliance on off-the-shelf automated systems that incorporate software Managing Human Capital for vendors’ definitions of best practice. This is not the most effective option for the majority of a Competitive Edge. Aberdeen larger companies. We argue instead that, when automating performance management, HR Group, 2006. professionals should shape and deploy a process that is tailored to fit the specific needs of their organisation, thus creating competitive advantage. An historical challenge for HR professionals has been getting buy-in from senior executives – with the need to deliver a strong business case demonstrating the return on investment. We’ll set out exactly how implementing the right online solution for performance management can benefit your business and demonstrate what returns you can expect. We’ll also present case study examples of HR practice that employ bespoke automated systems and conclude with a guide for applying this approach. For clarity, we define performance management as a process that establishes a shared understanding of organisational success and an approach to leading and developing people to ensure this is achieved. www.etsplc.com | 2
  • 3. 1. How automating performance management helps people processes A huge number Automating performance management processes makes it easier for companies to align of employees employees’ individual goals with corporate objectives. It makes measuring performance and are dissatisfied assessment simpler and more consistent, and allows companies to see clearly their best and with performance poorest performers. Such insights are invaluable in a climate where headcount reduction is sadly a necessity for many companies, which equally want to retain their talent. appraisals. Our research shows When considering the merits of automating performance management though, it’s really important to convince senior executives to look beyond the bottom line and appreciate the this is due to the other, in some cases less tangible, benefits too. By embedding an effective performance lack of clarity and management process, companies are demonstrating a willingness to invest in employees. involvement in This will impact directly on retention of high performers, who are keen to plan and develop their career. setting goals. Also, we’ve found many instances where, by going through the automation process, companies - Performance Management have taken the opportunity to reassess existing practices. This results in standardisation and Review: An analysis of the ETS consistency of performance management processes, is impossible to achieve with an offline Employee Survey. ETS plc, 2009. process as too much is open to interpretation by line managers in different business units. Time to reappraise the appraisal A large proportion of employees – approximately 40% – remains dissatisfied with their appraisal process.2 In addition, it seems that line managers too share concerns regarding performance management processes. Research shows that 61% of managers don’t believe existing appraisal processes are driving greater performance.3 These figures should worry business leaders as ineffective appraisals will lead to a dip in employee satisfaction, which has a direct correlation with business performance. Companies must get the basics right. Crucial to engaging employees is ensuring they have clear goals and objectives. Yet 30% of private sector employees don’t know what their company’s objectives are. Individual and corporate objectives should be aligned – if an employee understands what is expected of them and how this fits in with company objectives, they are more likely to be engaged and motivated to perform. Furthermore, alignment of objectives is also crucial in ensuring your business strategy is ultimately successful. How do managers and their subordinates benefit? An automated system can make a huge difference in simplifying performance management by making it more transparent, giving all involved greater confidence in the process. Employees are clearer on what’s expected of them and can see how their objectives support organisational goals, resulting in increased engagement. With less time spent on functional processes, line managers are free to focus on career planning, coaching and development for direct reports, making it easier to identify, nurture and develop talent. A cautionary note here though – it’s important that an online system isn’t seen by employees or managers as a barrier to face-to-face discussion. It should aid and inform, rather than replace, performance-related conversations. www.etsplc.com | 3
  • 4. How do HR professionals benefit? For HR professionals, an automated system means greater accuracy and far less time spent on administration for performance management. This frees them up to develop HR’s role as Anticipated skills a strategic business partner. Powerful reporting capabilities of automated systems also make shortages mean that identifying trends, skills gaps and benchmarking far quicker and easier. talent management, and specifically, Performance management – the foundation of talent development of a management management and By embedding an effective online performance management system, organisations are also leadership pipeline, helping lay the foundations for a more strategic approach to talent management. has been identified Anticipated skills shortages mean that talent management, and specifically the development as the single biggest of a management and leadership pipeline, has been identified as the single biggest business business challenge challenge facing companies.5 To appreciate the importance of retaining skilled employees, consider the cost to companies of replacing staff, which is 30 - 150% of the employee’s annual facing companies. salary. This means, in a firm of 40,000 employees, the difference between having a 15% and 25% staff turnover is almost £25 million per year.6 A well-integrated automated performance management system will ensure companies base talent decisions on hard facts and data. It’ll also help companies locate potential leaders within their organisation to be developed, and identify successors to critical roles across the business. www.etsplc.com | 4
  • 5. Case study 1 An international media company with world-leading businesses in education, business information and consumer publishing appointed ETS to devise an online talent management system for its top 250-300 performers. The system was to take over from spreadsheet-based data capture with managers’ forms returned by email, manual data entry and no facility to generate reports. • The bespoke online solution devised allows straightforward administration access and easy collation of data via a standardised form, which is then transferred to one central database • Simple file management means instant and consistent communication with managers about the process, with the intuitive interface prompting managers to access activities they need to complete • A wealth of reporting options are available – reports can be generated centrally or locally by managers with advanced reporting to both Excel and PDF (Adobe Acrobat). • ‘Report Packs’ in high-quality PDF can be generated at the click of a button for talent review meetings (see figure 1 below) Figure 1: Online talent management system Talent review 11 Test user Performance Potential Performance Drive Leading the business Curiousity Character Inclusive Working with others Relationships Responsive Brave Living the company values Imaginative Decent Insight Leading people Coach Influence Creative Thinking differently Strategic Smart Mobility Global Timing 1-2 years yes, with a preference for euopre so he / she can 2 years. utilise his / her language skills. Aspirations Development plan Regional Manager Continue mentoring programme Forum attendance Insights into leadership Possible future moves Regional Manager Global Manager Director www.etsplc.com | 5
  • 6. 2. Building a business case for automation Despite difficult economic conditions, investment in performance management has remained a top priority for businesses. Research by the Aberdeen Group shows that rather than slow or stop investment, the struggling economy has served to drive greater investment in performance management.7 This is because companies are very eager to identify their top talent, create a high performance culture, better align compensation with performance and increase visibility and accountability of performance. Each company developing a business case can use the model set out below to identify different types of benefits. Just as the best online performance management solution will be bespoke – as we’ll explain later – so too will the evidence showing the business benefits and improvements, which are unique to each organisation. In our experience, often the biggest barrier for HR practitioners has been convincing senior executives of the business need for automating performance management and the return on investment offered. For organisations yet to automate, consider the latest research which reveals that 59% of companies sampled are already using automated performance management applications, with a further 13% indicating they plan to implement such systems within the next year.8 If your company doesn’t fall into either of these categories, there’s a good chance you’ll be left behind by your competitors. How does the business benefit? In analysing how automating performance management can have an impact and create value for businesses, we can broadly split the benefits into three areas – loosely based on the Bersin model9: Efficiency & compliance Efficiency and compliance • Providing legally defensible employee management o Decisions are documented and evidence based Process improvement o Electronic log of all performance conversations • Reduced administration o Appraisal, development forms and evidence stored electronically and accessible from any computer – no more lost paperwork Business o HR managers and business leaders can access aggregate reports themselves transformation & performance Process improvement • Increasing employee retention / lower costs associated with losing employees o Employees are more fairly recognised and rewarded for their efforts o Accurate identification and reward for high performing employees • Improvement in employee engagement and development o Employees are clearer on objectives and more motivated to achieve o Helps managers identify appropriate development areas for individuals • Improving efficiency and effectiveness of training o Gives insight into specific areas where training is required www.etsplc.com | 6
  • 7. Business transformation and business performance • Workforce goal alignment Organisations o Individual goals clearly aligned to support business goals automating • Increasing employee productivity and performance performance o Clear, measurable objectives mean employees are more productive management can • Improving the leadership pipeline o Detailed records of employee skills, attributes and experience, helping easily realise a identify future leaders 50% - 200% return on investment from What’s the return on investment? efficiency and A good starting point for illustrating the likely return on investment is efficiency and compliance alone. compliance gains. Implementing an effective online process offers indisputable time and cost-saving benefits, which can help build a watertight business case. Processing paper- - The Business Case for based appraisal forms is a laborious and lengthy process involving multiple people coding Performance Management results and inputting data entry. Manually generating reports is similarly time-consuming for Systems – Josh Bersin, 2008. HR teams. Longer term, companies can bank on a return through business performance. Successfully embedded online systems will result in greater performance gains across all Key Performance Indicators.10 It will also help to boost employee engagement and customer satisfaction, which is a key factor in the financial success of an organisation.11 In addition, an automated system allows greater visibility of the contribution made by individual employees. As well as helping with talent management and informing performance-related pay decisions, this also has value at a strategic level, giving CEOs greater insight into how they can operate the business more efficiently and increase profits. www.etsplc.com | 7
  • 8. Case study 2 ETS was appointed by a leading global manufacturing group to streamline its performance management process. The company, which has manufacturing plants in over 25 countries, had previously run ad-hoc performance reviews at each site, using location specific – primarily paper-based – forms. However, this approach offered no consistency of process or data, and a huge administrative burden on local HR to collate, analyse and report. With no direct involvement by a central HR function, talent management and succession planning was enormously difficult and time consuming. • ETS implemented a single online performance review form for all locations, covering 5,000 people • Central and local HR has real time sight of the process and can monitor participation levels and manage communications effectively with participants and managers • The online system allows real time reporting of data, which helps with both the qualitative assessment of objectives set, as well as allowing access to information for talent and succession planning • The usability of the online tool and ability to access the process remotely has resulted in a sharp increase in the level of participation as well as the overall completion rate Figure 2: Global performance management solution Home page This page summarises your Performance Development System activities. The page is split into three section which together provide access to your: 1. Personal Pro le (My Pro le) 2. Objectives and 3. Personal Development Plan (PDP) and if you are a manager, to complete your team members’ activities. You will need to complete ‘My Pro le’ and ‘My Objectives’ sections or yourself. If you are a manager you will also need to complete the activities under ‘My Team’ at the base of the page. Holding you mouse cursor over the information symbol in each section will bring up a box with brief information on each. Key to Tra c Light Symbol: Your details have been submitted You have no activities to perform You have activities outstanding and are awaiting approval All activities are completed My personal development plan PDP 2010 : Not submitted PDP 2010 : Submitted and awaiting manager approval Add a new team member My personal development plan My team Status report Team PDF history Individual pro le Set meeting date Objectives Previous PDP Show team Sarah Smith objectives John Robinson Kathy Simpson www.etsplc.com | 8
  • 9. 3. Benefits of bespoke when automating A bespoke or best fit approach allows ‘Best fit’ rather than ‘best practice’ a company to keep HR professionals often seek to replicate ‘best practice’ processes, based on accepted industry processes that standards. Such an approach is also often favoured by senior management as they are work and integrate reassured by implementing a solution that has been used successfully by other organisations and therefore seems to guarantee them success. aspects of the business culture, However, a reliance on best practice is not the best solution for businesses as it fails to take into which will encourage account organisational context and specific business needs. While best practice solutions are tried and tested and proven to address a problem or achieve a desired goal, they are rigid and greater user confound business goals, existing processes and cultural norms, which can ultimately lead to adoption. low adoption from users. As we discuss more in another paper, ‘Beyond best practice: enhancing results with bespoke HR’ ‘Best fit’ solutions take a bespoke approach and are typically based on a combination of business goals, a company’s unique culture and also take into account best practice. Bespoke solutions offer unrivalled flexibility In an increasingly dynamic business environment, what works for a company today, may not work tomorrow – it may need adapting or adding to. Leading organisations are constantly looking to improve and refine their processes in order to ensure they’re at the top of their game. A bespoke or best fit approach allows a company to keep processes that work and integrate aspects of the business culture, which will encourage greater user adoption. Having a bespoke performance management solution is particularly useful for multi-national companies and those with operations in different markets. This allows a system to have a global process put in place but also include the capability to tailor processes at a local level, accounting for cultural and organisational variations. Keep the end user in mind A fundamental consideration when switching to an online performance management system is to ensure you keep the end user front of mind, as getting user adoption is critical to the success of the implementaion. You must engage users in the process, explain why the new system is being implemented, and crucially, what’s in it for them. A bespoke approach allows companies to retain company culture, processes and the unique ‘look and feel’ of the organisation. Incorporating such elements is invaluable in encouraging adoption as it will immediately be more familiar and intuitive for users. A bespoke solution also allows companies to gain a competitive advantage as the system is tailored to meet specific business needs and really fit an organisational structure. www.etsplc.com | 9
  • 10. Case study 3 ETS worked with a leading high-street entertainment retailer to overhaul its performance development review. The organisation had an existing online solution but employee buy-in was low due to its complexity and look and feel. The HR team was finding it hard to sell the process to stakeholders due to a lack of interest in the process. The organisation also ran a 360-degree feedback process using a separate system. Furthermore the performance development review offered practically no reporting functions and, as a consequence, the HR team were not getting value from the process. • ETS devised a combined 360-degree feedback and performance development review (PDR) solution • The look and feel incorporated the organisation’s very specific brand identity, enhancing usability and increasing its appeal to users • The process was more streamlined and intuitive making objective-setting, monitoring and interim reviews more straightforward • The solution featured powerful administration tool to monitor, track and promote use of the process among employees • 360-degree feedback reports reflecting the brand’s unique image could be generated, which included a one page summary enabling quick identification of the key findings of the report • ETS introduced HR level reporting enabling sharing of reports with the business and easy extraction of data from the system Figure 3: Performance management for high-street entertainment retailer brandb you rock b log out details for: jane simpson currently based in: london began working with brand: 6 june 2009 completed: not yet approved page 2: objectives info please use the star ratings to rate the values. Flexible Energetic Thoughtful Creative deadline revised objective action desired outcome status edit delete date deadline comments keep the intranet get an updated list of publishers and the intranet is always up to 01 january 2011 started edit delete current, ensuring check ther training needs, send details date, providing accurate that all publishers of key publishers to head o ce information and that are fully trained support for contact. update hr pages publishers take more and that pages and ensure that the front page is responsibility for their own are always up to updated, espcially the brand b in the pages, so that marthe is not date. news section and in the what’s on the only point of contact for section. any it related issues. develop the voice continue to contact colleagues to the voice is easily accessible 11 january 2011 started edit delete to ensure that it is write articles, put the voice on the both in stores and at home, always fresh. intranet (training required). keep in paper home and online. continue to doing surveys to gauge interest and the voice contines to be an publish the voice update accordingly. interesting read. on the internet and publish a version on the intranet. save & go back exit without saving save & exit save & continue www.etsplc.com | 10
  • 11. 4. Where to start with automation? The role of HR is increasingly strategic and it’s time that the approach to people management processes reflected this shift away from an administrational function. Implementing an automated performance management system can help facilitate this change, while also offering tremendous flexibility and scope for business benefits. However, for these reasons, it can be difficult to know where you should start with automation. With this in mind, we have outlined a five step implementation strategy process that we follow, which is essential when planning and embedding a bespoke online performance management system: Figure 4: Implementation strategy – taking a bespoke approach Align De ne Develop Deliver Enhance Align • Understand the organisational context, underlying business drivers and broader organisational culture – such knowledge is critical when identifying key design principles and success factors for the project • Identify and agree the scope of the project including the timescale to achieve your identified critical success factors • Engage key stakeholders to ensure engagement and buy-in from the outset Define • Develop the project scope and define the solution, seeking input from relevant stakeholders • Scope specific requirements of the solution based on best practice techniques and undertake organisational research to inform design • Assemble project team and run definition workshops with representation from across the business to define system requirements and associated reports and outputs • Ensure ‘best fit’ solutions are underpinned by best practice advice that draws on relevant research and latest trends www.etsplc.com | 11
  • 12. Develop • Ensure all systems and processes are developed in line with the solution specification and incorporate regular project reviews and note changes • The completed design should be validated across the business before signing off. This validation process should include subject matter expert reviews, thorough user acceptance and quality testing • Agree, design and deliver the supporting processes and materials required for the roll-out of the solution (e.g. training documentation) Deliver • When introducing the new solution to your business, ensure the associated communications and training are timely, targeted and effective • Ensure that you’re familiar with all elements of the solution and are able to answer questions from across the business • Hold a project review meeting to discuss the project to date and document what has worked well and what improvements may be needed Enhance • Use the reporting from your solution to gain insight into your workforce. • Analyse and interpret your results, using the data to inform strategic people focused decision making that delivers tangible business improvements. • Evaluation is fundamental to defining the success of any process. You must be able to demonstrate the value of the project to your business, identifying exactly where it has had an impact www.etsplc.com | 12
  • 13. Conclusion The number of organisations automating their performance management processes continues to grow at pace. Of those not yet using automated systems, there is widespread awareness of the benefits that it offers and as research has shown, there is a resolve to automate soon. The biggest challenge for these organisations remains convincing senior management of the business benefits and getting their buy-in. As we’ve demonstrated though, there is a very clear business case for doing so, with substantial return on investment, streamlined and more time efficient people processes and, most importantly, a positive impact on business performance. About ETS This Original Insight report was written by Hannah Stratford, a Business Psychologist and the Head of Business Psychology at ETS. Hannah works with high profile clients to help them leverage strategic value from performance and talent management, employee research and leadership assessment and development programmes. Dominic Wake and Ben Egan also contributed to the content of this report. To contact Hannah or Dominic about this report, please send an email to dominic.wake@ etsplc.com or call +44 (0)1932 219949. ETS provides business-focused consultancy and custom-designed technology to meet the performance management, employee research and 360-degree feedback needs of world- leading companies. We combine innovative technology solutions with practical experience to designed a solution that fits your business needs. ETS delivers our clients’ ‘ideal world’, which means that our solutions exactly match each client’s corporate culture and processes: we listen to you needs; we do not expect you to bend to our solutions. Where appropriate, we develop the new processes needed to meet your people objectives. Where it is possible, we can integrate with, and automate, any existing HR processes so that new and old work together. Expert Training Systems 123 New Zealand Avenue Walton-on-Thames Surrey KT12 1QA www.etsplc.com info@etsplc.com HR means business blog www.etsplc.com/blog Twitter @etsplc www.etsplc.com | 13
  • 14. References 1 The Employee Performance Management Benchmark Report: Managing Human Capital for a Competitive Edge. Aberdeen Group 2006. 2 Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009. 3 The Business Case for Performance Management Systems – Josh Bersin 2008. 4 Performance Management Review: An analysis of the ETS Employee Survey. ETS plc 2009. 5 High-Impact Talent Management: Trends, Best Practices and Industry Solutions. Bersin & Associates 2007. 6 Cornell.edu/research – Aberdeen group 2008. 7 Aberdeen Group – Employee Performance Management 2009 – Jayson Sabba 8 CedarCredstone 2010 – 2011 HR Systems Survey. 9 The Business Case for Performance Management Systems – Josh Bersin 200833. 10 Aberdeen Group – Managing Employee Performance 2008. 11 Aberdeen Group – Employee Performance Management 2009 – Jayson Sabba. www.etsplc.com | 14