Start Human Capital System

Anne Sample, senior vice president of human resources at PepsiAmericas bottler PepsiAmericas, believes that creating a culture of accountability in an organization is not about issuing instructions in a conference room or crafting a business plan. of. Without a complete system to ensure that employees are engaged in meaningful and constructive work, any advanced technology introduced by the company will not help. "Translating corporate goals into personal goals is the key to success," says Semper.

A few years ago, companies recognized that improving their financial performance required developing employee accountability. Despite having basic information tools to align the overall goals of the organization with the individual performance of employees, the system has not kept pace with the growing demands of the company. And, by the time management discovers a problem, it's often too late to fix it. "We wanted to take this process out of the HR function and make it an important business tool," said Sampel.

The company instead began using a new human capital performance management system that would integrate individuals into Goals are linked to corporate goals and combine all performance appraisal data. Executives first draft a three- to five-year strategic plan for the company, and a cross-functional team—including representatives from human resources, operations and finance—identifies annual operating goals and communicates them throughout the company. Ultimately, line managers work with employees to focus on achieving specific goals and, in their day-to-day work, ensure that employees meet agreed-upon performance standards.

Specialized software, such as a new system from Authoria, a seller of human capital management software, can help companies set goals, track performance and see how employees are progressing. After employees establish personal goals with the help of their managers, relevant data is entered into the system. After that, the company uses the results of the employee's performance evaluation to judge how productive they are and to determine their compensation.

As a result, the performance goals of more than 90% of the company's salaried employees, including all executive and professional staff, are tightly linked to the company's annual operating plan. "Employees are more diligent and attentive. Businesses are now more collaboratively conducted across the enterprise," says Semper. "The positive effects are like ripples across the company."

And that's it, the company While slashing administrative costs, it has greatly improved employee productivity. From 2002 to 2004, the company's return on capital rose from 6.1% to 7.3%.

Encouraging employee engagement

A growing number of companies are looking to better align their employees' personal goals with company strategy to improve their financial well-being. “Over the past few years, the industry has paid more attention to the relationship between human capital performance management practices and financial health,” said Scott Cohen, who leads talent management practices at Watson Wyatt Worldwide. Executives are interested in how to achieve business goals. They are starting to focus on how employees can create more value in their jobs."

In many cases, business executives are using complex Software systems to tie an individual's performance goals, compensation, and even training to the company's strategic goals. “Everyone is after the same thing—improving performance, and improving financial performance,” Cohen said. “It’s a matter of success or failure.”

The better employees understand the drivers of change, the better the chance of success. In recent years, powerful software tools have emerged on the market that can track performance measurement metrics and link them to individual jobs. Human capital performance management software is designed to address two major issues: how to see the effectiveness of various management measures, and how to better A good link between performance and compensation.

In most cases, performance management initiatives are initiated by the CEO or a senior executive who is familiar with the company's highest goals and policies. Employees only need to choose five or seven of their most important goals to work on and implement them firmly. Measures will do. By understanding the goals chosen by employees at different levels of the company -- which more and more companies have achieved -- members of the organization can understand the steps that need to be taken to achieve the desired results.

Now, every employee knows what the company expects them to do and when, as managers help them "translate" general goals into specific actions and behaviors. Then, relying on job assessments and 360-degree feedback, managers can identify strengths, weaknesses or differences in different employees. Performance management software can provide reports or visual charts showing how well the company is accomplishing its goals.

Nowadays, performance management software is one of the fastest growing segments of the human capital management (HCM) software market. A number of leading vendors of ERP systems and other systems are offering products designed to reduce paperwork, simplify administrative tasks, and simplify the daunting task of tracking HCM data across the company.

“Companies used to focus on the impact of performance management on financial performance,” said Jonathan Hornby, director of performance management in the global strategy group at SAS Institute, a provider of business intelligence solutions. Officers are urging organizations to raise the bar around better managing and understanding costs. Now, others in the company are taking notice and asking whether performance management can also help them better manage their business, not just drive finances. Improved performance."

Achieving Organizational Synergy

When organizations begin to initiate a performance management initiative, they often expect to understand the processes in all areas of the company. "Businesses want to link key performance indicators -- such as company growth, customer satisfaction and operational standards -- to the individual level," Watson Wyatt's Cohen said. They want to see what's going on at every level of the company, even in a highly fragmented global company.

Corning Inc. is a manufacturer of high-tech materials, including glass for LCD TVs and fiber optic cables. The company's performance management program continuously improves productivity by increasing employee accountability within the organization. Since the introduction of the employee accountability system at the end of the last century, the company has gradually perfected the system through several stages of development. The long-established company adopted a 360-degree feedback process for its employees, and then it installed Softscape Inc.'s performance management system to automate the process. Soon, Corning introduced cascading goals, linking employees across every part of the organization. Managers and other employees can use the software to get instant feedback at any time. "We now have end-to-end performance measurement capabilities," said Hank Jonas, the company's manager of organizational effectiveness.

The big challenge for Corning is how to apply this program to its employees around the world. Of the company's more than 24,000 employees, 60 percent are located outside the U.S. headquarters. In such a decentralized environment, it is crucial to ensure a high degree of consistency and standardization of performance evaluation metrics. Corning leverages web-based systems to automate and simplify the complex and time-consuming task of monitoring performance and tracking the achievement of company goals on a global scale.

Since implementing this system, the company has saved nearly $220,000 per year in administrative costs, improved the salary adjustment process, linked each employee's performance and salary to the company's values, and allowed its employees to focus on executing the company key policy.

Get more benefits

Now, some companies are expanding the scope of performance management beyond organizational synergy programs. Take Yale New Haven Health System in the US, which operates three hospitals in Connecticut, among other facilities. Since the late 1990s, companies have used a complex business planning process. In 2004, it purchased SAS' software to create an electronic scorecard that analyzes 31 metrics, including employee turnover, vacancy rates, cost per patient per day, and more. With this scorecard, management can understand how different factors affect the business plan and profit and loss of the company.

“This system allows us to regularly review performance information to understand when goals are being met and when they are not,” said Gayle Capozzalo, executive vice president of strategic systems development. Not only does this system help guide performance reviews and other HR processes, but it greatly controls costs, increases employee accountability, and improves operations across the organization. On some parameters, the improvement in performance reached as much as 30%.

An effective human capital performance management system can bring other benefits to businesses, says Cohen. One of the biggest benefits is in the fallback plan. “We get reliable information on employee performance every day, so we can understand their potential and help them prepare for the future,” he said. In addition, recognizing the deficiencies in the skills and abilities of one's own employees can help a business develop a complete hiring and training strategy. This will also lead to the formation of a new compensation strategy.

Executing a well-designed performance management system requires strong leadership, active participation from all departments, and attention to detail, Cohen said. Treasurers can play an important role in this process, including identifying key performance indicators and helping companies understand the impact of organizational synergy on financial health.

Gartner Consulting's Holinchek emphasizes the importance of understanding and institutionalizing an organization's goals. He believes that attention to detail is required when setting goals: who, what, when, where, why, how. Additionally, goals must be quantifiable, reality-based, and time-bound. By communicating these goals across the organization, companies can create organizational synergy from the top down.

“The ultimate goal is to create a pay-for-performance culture,” he said. “If an organization can correctly identify goals, determine how to quantify them, and understand what makes the business stand out, then it’s bound to lead to better outcomes. A great success."

Reproduced with permission from the September 2005 edition of Business Finance Magazine. Copyright 2005 by Penton Media, Inc. Translated by Jiang Xiaoshan.