Performance Management: Current Trends

Recent research reveals that the majority of organizations are utilizing performance management systems / performance management software and many are in the process of revamping their first generation systems. According to Development Dimensions International (DDI), performance management systems are active in 91% of 3,600+ organizations studied. This article will review the current trends in performance management, and how companies worldwide are making changes.

Performance Management - A Definition

According to SHRM (the Society for Human Resource Management), "performance management is the organized method of monitoring results of work activities, collecting and evaluating performance to determine achievement of goals, and using performance information to make decisions, allocate resources and communicate whether objectives are met."

It is likely the majority of employees equate "performance management" to their performance appraisal form and yearly discussion with their manager about "how they are doing in their job." But things are changing in this area of HR.

Performance Management - Current Trends

Strategic HR - The Link Between Employee Performance Management and Organizational Performance

Increasingly companies are focusing on "strategic HR," aligning human resources initiatives with the overall goals of the organization to improve business success. Aligning Employee Performance Management (EPM) with Corporate Performance Management (CPM) has the following effects:

90% of companies surveyed, perceive improved management of their workforce as key to gaining competitive advantage.

- "Employee Performance Management: The Aligned, Performance Driven Workforce," AberdeenGroup, 2005


Organizations are aligning their employee performance goals with corporate performance goals through technology solutions.

Increased Integration of HR Functions

Research shows there is a clear movement to integrate the traditional siloed HR functions into a more holistic, strategic approach to human capital management. Some integration opportunities include:

• Aligning employee goals with corporate goals (as described above)


• Linking reward and recognition programs to performance
• Targeting learning and development toward performance gaps
• Identifying skills and competencies of top performers for retention and succession planning

Increased Automation of Performance Management and HR Functions

Integrating traditional HR functions, has given rise to an increased need to automate them. Connecting the functions at their integration points into clean, close-looped systems eliminating duplication of data and streamlining reporting processes is the charge for many organizations.

According to CIO Magazine article "Strategic HR Integration" (August 15, 2005) strategic HR integration offers ROI opportunities in "connecting disparate HR systems into a cohesive whole." When selecting external applications from vendors, companies need to make sure they are "connection-oriented."

Online performance management systems

59% of HR executives identify improvement of HCM (Human Capital Management) technology as a key response to their business challenges. Main areas of focus:

• hiring management solutions
• pre-employment assessment
• employee self-service
• performance management

- "The HR Executive's Agenda: The 2005 Benchmark Report:", AberdeenGroup, 2005


However, with all this focus on online systems,

More than half (52%) of companies surveyed in 2005, are stuck in paper-based performance evaluation systems with annual reviews.

- "Employee Performance Management: The Aligned, Performance Driven Workforce," AberdeenGroup, 2005


As companies transition to online performance management systems, some key ingredients are:

• Scalability - able to deploy on large scale with solid security
• Employee self-service - managers and employees able to access systems anytime, any place, on-demand
• Integration - ability to connect with other HR systems

Increased Communication Regarding Employee Performance

With increasing use of performance management technology, managers and employees more easily communicate regarding performance issues. Annual performance reviews are being replaced with more frequent schedules (quarterly, monthly, etc.). In addition, performance management technology enables organizations to include feedback from a variety of audiences. Such 360-degree feedback is internal (supervisors, peers, subordinates) and external (customers, vendors, etc.).

Employees Perceptions A recent Watson Wyatt survey of 113 Canadian organizations and 3,000 employees revealed the following of their employees:

• Only 29% feel their companies do a good job of identifying and rewarding top performers
• Only 27% feel there is a clear link between performance and pay
• Only 24% feel their companies manage poor performers so their work improves

A new Hay Insight Research report is a little more favorable, however still shows room for improvement. Below are some highlights from their research database of approximately 1.2 million employees in over 400 organizations worldwide:

Less than 50% of employees believe their organizations adequately address poor performance.

Clearly it is a challenge for most companies large or small to manage the performance of their employees . . . especially in the eyes of those employees. However, those organizations making the connection between employee performance and organizational performance are taking steps to integrate once disparate hr functions with online systems that offer long term ROI towards organizational and individual employee success.