Performance management appraisals are usually completed when an annual increase is imminent but their impact on an organisation is much greater than merely establishing employees' performance and rewarding them accordingly - the systems that enable performance appraisals also drive workforce development and ensure staff are suitably qualified to perform the tasks they are assigned. Data is key to the effectiveness of this process, however.
Explains Peter Ibbotson, CEO of Praxima Africa Payroll Systems, an outsourcer of payroll and managed payroll solutions: "Just as sales are assessed over a period of time and help define the strategic policies and direction of companies, so the value and contribution of human capital to the performance and success of a company must be gauged and focused to ensure organisational objectives can be met, short-term tactical and long-term strategic goals are achieved and the sustainability of the business is assured. However, the data needed to make these assessments is not always readily available.
"Companies tend to focus on assessing the individual, which is of limited value. Praxima has found that market demand for, and trend toward the use of an integrated HR and payroll solution underlines this failing and the need to store relational information in a single repository. Data from across the organisation needs to be integrated and structured so that it can be extracted in a meaningful way to give the manager a view of not only an individual or group's performance but of the performance of the department and company and how the company's human capital contributed - or not - to its success."
Assessing individual and organisational performance
Typically, data collected for the personnel profiles used for performance appraisals will include: employees' qualifications (formal qualifications and experience); their ability to operate specific tools, such as a spreadsheet or other application necessary to the position; what they are remunerated, what their key performance requirements are; how they perform; and how they perform based on analysis over time.
To improve performance and develop the skills profile of an organisation, appraisals should measure performance against the identified job requirements, determine the gap between the skills available and those needed for the job, and put a training or recruitment intervention in place to harmonise the two. Often, however, organisations have not got as far as establishing the key requirements for the various jobs or positions that must be filled in their organisation. This can leave an organisation at a severe disadvantage in terms of managing risk and ensuring business sustainability.
"How a company performs depends on the calibre of its workforce," says Ibbotson. "Executives need to ensure workforce development is aligned to the growth and other strategic objectives of the company, while managers need to be able to make smart decisions around researching business lines, departments or projects. They also need to be able to see where performance is lagging and why.
"Take sport, for example," he explains. "In the past, fans would make assumptions based on their own knowledge of the team and individual players' performance and, of course, their gut instinct. Today, risk is minimised (especially if fans are the betting sort) as large amounts of statistics are available and team and individual shortcomings can more easily be identified. The value is not only to the managers, coaches and betting fans - players, like employees, can better manage themselves with this data at their fingertips."
In organisations with advanced HR policies, the key performance requirements (usually five to eight) of jobs will be identified. The achievement of these requirements will be recorded and compared over time to see if staff meet requirements consistently, where performance is affected or impacted by events (other than the individual's performance) and how it can be improved.
The ability to understand and assess information is enhanced by the integration of data, allowing the user to extract the relevant information and link it to actual, individual and team performance, or even by region, season, etc. In this way, the manager or executive can isolate or pinpoint business performance patterns that provide some insight into 'why' and 'how' human capital contributes to business success and what must be done to enhance organisational performance.
"However," Ibbotson notes, "human capital reporting is still a relatively new field. Organisations are still coming to grips with what is required. While there is currently no such thing as best practice, some good practice definitely exists. One of the challenges is to go through a formalised review process - where the organisation is properly reviewed to see how well it is doing, not just how its individual employees are performing.
"The key is to know what to record. Performance requirements differ from organisation to organisation and will depend where the organisation is in its growth phase and how it is positioned within its particular industry. Praxima, as an outsourced and managed payroll provider with customers in many business segments, has a general overview of the industry and can assist in terms of identifying what to record and how to develop an HR policy in alignment with the organisation's strategy."
Start small and do it right
"Recording this type of information is critical," says Ibbotson. "If an organisation is not already doing it, my advice is that they start small and do it right. Companies can be overwhelmed with collecting data and be paralysed into doing nothing. How the data is dealt with, what is actually done with the data, how it is stored and structured, and how easy it is to extract are all essential to getting value from this exercise.
"Exit interviews are a good point of departure, giving managers a good idea why staff are leaving, while building a skills profile of the organisation will begin with doing a skills audit and establishing the key performance requirements of the jobs within an organisation," he notes.
From this data, companies will be able to see if staff are suitably qualified to perform tasks, where the skills gaps exist and what training is needed. For example, some low-level abilities, such as telephone and language skills may be lacking across the organisation or in the front line of business. This will only be identified if the performance of a whole group is measured, rather than just an individual.
Succession planning, which concerns mid and senior management, can also be better managed with the right data and reporting systems in place.
For example, managers can see where there is a dearth of particular resources; check where there may be a problem with regards to age and experience; or even where there is a high turnover of resources in a particular job, allowing them to make smart decisions.
"By consistently collecting data intelligently and integrating it to deliver real value, companies will over time build a rich, textured picture of the organisation and its human resources. An organisation is only as good at the people it employs and knowing what skills are needed and being able to build that resource base is of inestimable value to a company that hopes to ensure sustainable growth and competitive advantage," Ibbotson concludes.
For more information contact Peter Ibbotson, CEO, Praxima Africa Payroll Systems, +27 (0) 11 314 5661, firstname.lastname@example.org