|
|||
|
|
|
||||||
|
Full Speed Ahead
The market for performance-management software is booming. But as three large companies can attest, successfully implementing these tools requires a road map for success.
When it comes to technology, performance management, it seems, has never had a hallowed place on the HR "to do" list. After all, who really enjoys bugging managers to complete their performance reviews, much less deal with the potential hassles of putting a robust, effective enterprise-wide performance-management system into place? As evidence of that thinking, performance management clearly is one of the last of the major HR processes showing up on the HR-tech radar screen. But, according to a recent study and some experiences from companies that have implemented performance-management systems recently, performance management is in the throes of morphing from a blip to big deal. In a comprehensive report entitled Performance Management 2006: Market Analysis, Trends, Best Practices, and Vendor Profiles, Bersin & Associates, an Oakland, Calif., consulting firm that focuses on performance and learning management, found PM to be the hottest topic on the minds of HR and training managers. In fact, when Bersin asked 553 HR and training managers what their top priorities were for 2006, performance management was No. 1, spiking a 67 percent result (leadership development, at 64 percent, and succession planning, at 61 percent, were the two others). Also as a result of its study, Bersin & Associates analysts estimate that the nascent, yet rapidly growing PM application market is at $136 million in license revenue (as of June 2006), but will have expanded by 40 percent by year's end, based on purchasing plans and vendor estimates. "When it comes to demand, we're seeing the tip of the iceberg," says Josh Bersin, president of Bersin & Associates. Of course, the report also means that many companies will be shopping for and deploying performance-management applications in the upcoming years. Many HR practitioners are well aware that when it comes to technology, the "garbage-in, garbage-out" dictum still applies. In this case, that means to successfully implement a new, automated performance-management system, employers often need to fix or adjust their PM processes (if they even exist) on the front end. An "Extreme Makeover"
Indisputable shifts in workforce demographics are making all aspects of talent management critically important -- from hiring smarter to identifying and cultivating management prospects to ensuring the development of competitively important skills throughout the organization, says Bersin. "Technology finally makes it possible, and even practical, to automate these processes," Bersin adds. "Solutions are available now to increase employee engagement, improve succession planning and align talent requirements with learning investments." Interestingly, the study also revealed some telling statistics on the state of PM technology from a competitive standpoint. In short, it's a wide-open playing field. Of the 21 vendors included in the study, none held a significant lead in market share at the time the study was completed, in May. SuccessFactors in San Mateo, Calif., had the highest market share based on revenue (17.5 percent), while Ottawa-based Halogen Software had the largest number of live client sites (20.7 percent) and Oracle had the largest share of licensed users (17.8 percent). However, as the report notes, these market-share leaders represent relatively small revenues and customer bases. Only 11 percent of the 553 organizations surveyed have vendor-provided solutions, and 41 percent of those implementations had occurred within the last year. Overall, 58 percent still had paper-based performance management, while 7 percent had no PM process in place at all. "Most performance-management automation is done through Microsoft Word or Excel, templates and hacked-together Web sites," Bersin says. "Of the respondents, only a third had an enterprise-wide process in place." Of the companies that do have enterprise-wide processes in place, many say they've enjoyed positive business results and competitive advantage. Prior to 2005, Arrow Electronics, an $11.2 billion Fortune 500 provider of electronic components and computer products, followed a fragmented, non-tech approach to performance management. Kevin Tarrant, vice president of global organization effectiveness, says the situation was very typical, in the sense that many different systems and processes were used for performance management. "Some country locations had no process at all," says Tarrant, noting that Arrow operates in 53 countries. "We didn't even have a common definition of performance management. Our year-end performance review was an isolated event, and not integrated into talent management systems." Plus, Arrow's overall PM processes had little employee input, taking a more "top down" view. The company also had varying competency models at its locations around the globe. "There wasn't much investment in performance management either, so that was the good news," Tarrant says with a laugh. "We had no previous implementation failures." To get from point A to point Z as quickly as possible -- what Tarrant calls a "leapfrog" strategy -- Arrow turned to SuccessFactors to deliver a performance-management system as part of an overall talent-management suite. "We wanted an 'extreme makeover,' if you will," says Tarrant, adding that four years ago, complete solutions just didn't exist. So far, Arrow has rolled out its new PM system to its senior managers throughout North America, with pilot programs set for Europe and a company-wide implementation planned for 2007. Feedback so far has been extremely positive, says Tarrant. He says companies considering a performance-management implementation must treat the situation more as a change-management challenge. "When selecting a program manager for an implementation, make sure he or she has a background in change management," he says. In fact, he adds, the change-management issues are critical. For example, some managers may not be used to having a "dialogue" during a performance review, because their idea of a performance review is more of a one-sided conversation. "That might sound like a little thing, but in those cases, many managers want to avoid the conversation entirely, so they put it off. Or they tend not to rate their subordinates as tough as they should, because they don't have the right words to say what they want to say," Tarrant says. With components called Writing Assistant and Coaching Aide built into the software, a manager can literally cut and paste pre-loaded words into a review, and use them as the basis for discussion, he adds. "Is it too automated? No, it's giving people the right information to be effective," Tarrant says. David Silverstein, CEO of Breakthrough Management Group, a global performance-improvement consulting firm in Longmont, Colo., says success depends on asking the right questions before implementation. "To set up an effective performance-management system, the first thing you have to ask is, 'Why are we doing it?' " says Silverstein, who has helped several client companies manage their PM implementations. "It sounds so simplistic, but it's the thing to do. You have to get that answer before you can take the next step." As for the sudden technology boom in performance management, Silverstein says the No. 1 trap is vendors overselling how technology can save the day. "It's a real commitment maintaining the technology, but it still takes human beings to decide what the right metrics are," he says. "If we are over-promised and then find ourselves overwhelmed, that's a problem." His advice: For most companies, launch a new performance management application within a business unit, one that has a very well disciplined, well motivated leader. "That way, you can get out the kinks, and then start to roll it out to the rest of the businesses," he says. "If you are too excited, too gung-ho up front, it can lead to problems." Creating a Common Language
The folks at Tyco International Ltd. had a different hurdle. You might say it was performance management with a twist. Based in Bermuda, Tyco is a global, diversified company that provides products and services to customers in four business segments: fire and security, electronics, health care and engineered products and services. It had 2005 revenues of $40 billion, with approximately 250,000 employees worldwide. Despite its mammoth size, Tyco has no centralized human resource information system across its global organization (in fact, Tyco has 20 HRIS systems in the United States alone). So how did one of the world's largest companies successfully implement an enterprise-wide performance-management system? For starters, instead of relying on a traditional data feed from the HRIS, Tyco relied on an innovative approach for deploying a performance-management system, applying a "self-registration" model. In order to launch this system, PM users self-registered and in doing so, defined their managerial and organizational reporting relationships. That data was in turn used as the basis for the performance-management system (since the data did not exist in a centralized HRIS database). In this case, Tyco partnered with Kenexa in Wayne, Pa., which actually focuses more on talent acquisition and retention solutions. With Kenexa's help, Tyco created an integrated talent-management platform and established a unified performance-management process for the entire organization. Tyco, which was embroiled in controversy earlier this decade after a series of accounting irregularities involving former chairman and CEO Dennis Kozlowski was uncovered, wanted to embark on a fresh start. Its new management team put together a plan to move Tyco from a "holding company culture" of constant acquisition to that of an operating discipline. One of the key factors Tyco identified to make this transition possible was having the right talent in the right positions. But no common mechanism for sharing talent existed across the company and, without an enterprise-wide HRIS, Tyco lacked a common repository for performance-management data. "One of the things we agreed was that world-class companies cross-pollinate talent across their organizations," says Shaun Zitting, director of organizational development, who is based in Tyco's U.S. headquarters in Princeton, N.J. "We had no mechanism for sharing talent and recognized that the only way we could talk about people in a logical way was to develop a common process for managing employees across all of our businesses." Charged with implementing an enterprise-wide approach to performance management, Zitting worked with HR teams across the organization's four business segments to define and develop the new process. After pulling together best practices within the company, as well as benchmarking other organizations, Tyco introduced Performance Matters, a global performance-management process. "We rolled this process out globally, translated it into 10 languages and trained 500 HR professionals who, in turn, trained nearly 20,000 managers on how to use this new process to manage employee performance," Zitting says. "While our people appreciated the emphasis on performance management, it created new demand for a common repository of this information across the business segments. We had no simple way to systematically analyze performance-management data. We realized that we had philosophically equipped the organization to drive performance and to help people improve, but we still lacked a common vehicle for sharing talent." When Tyco began to inculcate the Performance Matters process, determining the completeness and quality of performance-management data entailed collecting and analyzing hundreds of forms. Without a "systems approach," the process of matching talent with open positions was inefficient and manually cumbersome. Tyco recognized Web-based performance management as a potentially viable solution. By moving its process online, the organization would have a centralized repository for information, be able to rapidly and efficiently search for qualified candidates for open positions, have a more concise and comprehensive view of talent in the organization, and establish consistency across every Tyco business unit. Kenexa implemented the self-registration model, whereby users enter information via a Web site utilizing a series of drop-down menus and free- form text boxes that capture essential information about themselves. "One challenge other organizations face when implementing an online performance-management solution is ensuring that all the key data structures needed for the performance-management process, such as reporting relationships, are globally available," says Julian Kaufmann, Tyco's vice president for leadership and organizational development. "Often, HR has to go out in the field to collect and maintain this data." With its self-registration solution, Tyco managed to avoid such complexity, he says. A Focused Organization
At Fallon Community Health Plan, a Worcester, Mass.-based health-care services company, the results of a company-wide employee engagement survey conducted last year revealed some serious concerns about the company's antiquated performance-management process, says Linda St. John, FCHP's senior director of HR. St. John and her team held focus groups to determine what employees and managers wanted in their next employee evaluation. Three themes were identified: simplify, educate and automate. These results led the company to transform its manual, paper-driven process for managing employee performance evaluations to a Web-based solution from Softscape, in Wayland, Mass. "Our overarching mission for a new performance-evaluation system was to increase workforce productivity by aligning corporate and individual goals that would result in improved business performance," St. John says. After reviewing solutions from myriad vendors in the market, FCHP selected Softscape's integrated performance-management system, called Apex. "Softscape partnered with us; they helped us redesign our system, not just replicate it," St. John says. After the initial rollout of Softscape's performance-management system in 2005, 95 percent of FCHP's managers completed their performance evaluations on time, a major improvement from the previous year. St. John explains that with the automated system, FCHP also was able to streamline its performance evaluation process. As a result, she says, the 600-employee organization is now better focused on what differentiates it from its competitors. "If we're all working toward those competencies that are tied to our organizational objectives, business improvement will follow," she says. In the end, says Bersin, the technology is just a conduit to make the process work, but only if the process is a good one. "The biggest mistake a company can make is to believe the software is going to create a good process," he says. "This isn't accounting, where technology can do much of the work. A real lesson is that performance management is more important than most processes, because if you get it wrong, it can really irritate people. It's a serious move, and requires planning, change management and training."
October 2, 2006 Copyright 2006© LRP Publications |
||||||
Print
Email
Write to the Editor
Reprints
|
||||
|
||||
|
||||
|
© Copyright 2010 LRP Publications. All rights reserved.
|
||||