Answering the Productivity Question of Performance Management Software
One of the most oft-cited benefits of performance management software is the capability to boost productivity within the organizations that leverage it. Indeed, some of the most successful businesses in the world (e.g. Google, GE, Wal-Mart, etc.) all use some form of formal performance management automation to drive productivity and enable success within their organizations. For instance, Gap Gemini introduced a new performance management software solution in FY2003 and subsequently increased appraisal uptake from 53 percent to 92.5 percent—noting a significant increase in the company's productivity during the same period. Yet Cap Gemini and these other large enterprises are not alone in these benefits. In fact, as CedarCrestone's research indicates, performance management software solutions strongly correlate with higher growth in operating income across the board.
Unfortunately, far too many companies are failing to realize the full potential of their productivity gains when it comes to performance management applications. The problem for many organizations is, as Gartner puts it, "[utilizing] performance appraisal/assessment solutions to improve organizational performance, rather than simply record it"—a key issue that has yet to fully take hold. To help remedy this, we've provided this short list as a primer to the potential productivity boosts that can be achieved.
1) Performance Management Software Heightens Performance Data Visibility
While indicative of software functionality that revolves around best-of-breed performance management applications, 2009 research from Aberdeen highlights that "a performance management system with strong reporting capabilities is a critical enabler—empowering leaders and managers to make better business decisions". Nevertheless, even with a less-than-stellar reporting function, automating the performance management process can pay dividends in terms of information visibility. In large part the reason for this is that it enables employees and managers to gain instant access to performance histories, benchmarks and trends. Whereas paper-based systems typically involve a lengthy and convoluted process for performance data retrieval (often involving several layers of approval and unnecessary HR department involvement), performance management software applications allow for on-demand search and access capabilities. As such, at any given moment in time organizations can have targeted business intelligence on the top and bottom-performing employees—insight that can be leveraged for rewards, training interventions, and disciplinary action when and where needed.
2) Performance Management Software Aligns Employee and Organizational Goals
Though somewhat self-serving, research from SumTotal has shown that 50+ percent of work time is lost due to the misdirection of work activities and goal misalignment of employees and the companies they work for. However, as the research report states, nearly 35 percent of that lost productivity can be gained back if the right systems are in place. Specifically, by leveraging performance management software in conjunction with business intelligence in the form of balanced scorecards, employees are much more likely to be aligned with the business' strategic goals and direction. In fact, according to Bain & Co. the balanced scorecard is the sixth most used HR management tool in the world. Further, this scorecard approach has been defined as a core differentiating feature of world-class companies according to research by the Hackett Group. Coupling that scorecard functionality with a performance management system (that features goal tracking, real-time interim reporting and cascading functionality) means that high level goals of the balanced scorecard can then be translated into the annual goals of each employee—fostering an organization-wide understanding of company direction and priorities.
3) Performance Management Software Improves the Talent Pipeline
While undoubtedly dependent on a number of factors, a well-designed Performance Management System (PMS) can increase the uptake of the performance management process. This means that increasing numbers of employees can be assessed for strengths and weaknesses; targeted interventions can be developed to address performance deficiencies; and the organization can gain insight into the company's talent bench strength. In turn, this information can be fed directly into a succession planning process—enabling quick identification of high performers and a near-constant development of the talent pipeline. Short-term, the benefit to this pipeline improvement is the reduction in dependency on external recruiting activities—fueled by the fact that employees can now be better developed for current and future roles. Longer term, by investing in these technologies, employees can gain a deeper understanding of their own performance issues, accolades, and avenues—insight that has been shown to link performance management and employee engagement. As for the payoff for employee engagement; consulting stalwart the Hay Group found a fully 43 percent gain in productivity for those employees who went from disengaged to engaged.
4) Performance Management Software Hones the Appraisal Process
Still, perhaps the most salient way in which performance management software can drive productivity gains is through the improvement of the actual appraisal process. Indeed, with features such as built-in wizards, best practice knowledge banks, and coaching tools, performance management applications reduce the time and effort that managers must dedicate to the appraisal process—specifically by optimizing the processes for performance management data routing, approval processing, storage, dissemination, workflows, indexing, and access. Furthermore, best-of-breed performance management systems bring the additional capabilities of: personal development plan (PDP) generation (which has been shown by the Corporate Leadership Council to be the 2nd most influential development tool organizations can deploy); writing assistance for appraisal preparation; soft skill development for communication and conflict resolution; and compliance functionality to handle the complex legal implications of the evaluation process itself. Aside from the low-level efficiency gains these feature sets provide most notably the reduction in managerial administrative burden, while the performance management software also offers the opportunity for managers to shift focus back into more strategic activities.
Final Thoughts on Performance Management Software Productivity
As can be seen by the above points, it is becoming increasingly evident that the implementation of a performance management software system can increase organizational productivity. In fact, the factors of greater appraisal uptake, employee/organization goal alignment, data visibility, and increased efficiency are just the tip of the iceberg in terms of the benefits that automating the performance appraisal process can bring. However, the automated performance solutions that are the hallmarks of the HR software industry can vary widely in the feature sets, automation and reporting they provide. Some focus almost entirely on competencies—tying numerous, and often disparate, performance factors together to create a comprehensive view of how an employee is doing. On the other hand, certain performance management systems are designed to be social and driven by the goal of continuous improvement. As such, before committing to purchase a specific automated performance management solution, it is imperative that organizations assess their needs and culture to determine exactly which option would suit them best.
With features such as built-in wizards, best practice knowledge banks, and coaching tools, performance management software applications reduce the time and effort that managers must dedicate to the appraisal process—specifically by optimizing the processes for performance data routing, storage, dissemination, workflows, indexing and access.