Annual employee appraisals have become a ‘paperwork’ exercise. And often, it’s viewed as a standalone process that is unconnected to any aspect of business – which is perhaps why employee performance management rarely succeeds. However, if it’s tightly aligned with other HR processes along with the organisational structure and culture, performance management becomes aligned with strategy and goals of the firm.
Here are my thoughts on how employee performance management can make a material impact on the business performance in a firm.
A key objective of performance management is gathering data, but to collect the right information, it’s imperative to first define the data that needs to be collected. So, if assessing whether an individual’s performance has improved year-on-year, there must be a clear understanding of what constitutes improvement, high performance and under performance. This in turn implies that for every employee and role, there must be a core competency framework that provides the parameters of assessment to a granular level.
Logically, the collected data must then be analysed for discernible patterns that provide commercially valuable insight. For example, a firm might find that every six to eight months, employees in the finance department leave the organisation. On further examination, it may emerge that departures typically take place soon after salary reviews and it’s mostly the high performers who look for other opportunities. If such a pattern occurs, it must raise a number of questions – is the salary structure of the firm not on par with the industry? Is the firm not offering career prospects? Is the firm not effectively communicating growth opportunities to employees? Are there any wider commercial developments or trends that are impacting the job market? Answers to these questions will then enable the firm to take remedial action.
The knowledge derived from appraisals must then be proactively applied to current business issues that may need resolving as well as pre-empting potential future problems. The biggest value of such an approach is that it provides the firm with the ability to look forward and help it to achieve tangible business objectives. This holds true for all HR-related interventions. Take recruitment – a candidate interview highlights that while the individual does not fit the requirement of the role in question, in six months’ time when the firm’s office opens in the Middle East, the applicant’s language skills and experience of that market would be beneficial to the regional office. Therefore the candidate is offered the opportunity to apply for an entirely different position.
Enterprise resource planning (ERP) systems help rationalise the complexity of performance management and strategic HR management. They facilitate integrated performance management, enabling HR teams to comprehensively encompass all elements of the practice – from policy, competence frameworks, skills analysis, feedback mechanisms and salary and reward structures through to continuous monitoring and evaluation – all of which is inextricably linked to execution of business strategy and realisation of business ambitions. This is impossible to undertake manually.