Is Your Performance Management Tech Limiting Your Outcomes?
Drive organizational wellbeing with holistic performance tech – compensation, learning, and succession planning.
Ed Barry, national managing director of the HR technology consulting practice at Gallagher, explores why the evolution of performance management technology is heading down the wrong path and why organizations should demand holistic technology for this vital HR performance function.
If your performance management technology is just about performance, you’re missing a vital opportunity to drive organizational well-being through compensation, learning, and succession planning.
Performance management technology is evolving with new and useful functions to support organizational strategy. Yet, this evolution is mostly on a stand-alone basis. HR leaders manage performance in silos because the software design often promotes siloed thinking. Employers need a holistic and actionable approach to performance technology that ties performance to compensation, learning and development, and succession.
Most managers see performance reviews as a time-consuming, “check-the-box” policy required by HR or for pay raises dictated by a pre-determined reward pool or adherence to a bell curve of salary increases. Likewise, employees often see little connection between a performance review and their professional growth and career path. No wonder there is no widely accepted technology strategy to support performance management as a multi-faceted component of the organization’s people strategy.
Seeds of Holistic Design
There are nods to holistic thinking in performance solutions. Recognition tech outputs can be loaded into a performance tool to push out information at the time of the review—if the manager thinks to do so. A holistic approach to performance typically requires manual actions, e.g., inputting performance data into a succession planning platform to identify candidates. The result is limited or inconsistent follow-through, leading to lost opportunities associated with valuable talent.
The HR tech market acknowledges the disconnect between components of performance management tools. Although we’re hearing more conversation around holistic software design, e.g., DEI platforms that analyze the risk of people leaving, it is a low priority for service providers focused on sales and implementation. Here are three arguments for a holistic approach to performance technology.
Tie Performance to Compensation to Support Transparency and Equity
In most organizations, there is a philosophical connection between performance and pay. Yet, performance and compensation tools are typically independent solutions. High and low performers should not receive the same percentage pay increase. Yet, we see it all the time—partly because a small salary pool means rewarding one “high” performer penalizes a “good” performer.
Technology that ties compensation to performance flags inequities and helps identify potential manager bias for or against an employee. When pay and performance are linked, organizations can monitor for systemic bias—watching for patterns associated with race or gender.
Employees increasingly know what their colleagues earn thanks to pay transparency regulations and younger generations’ inclination to share salary information. Compensating everyone the same demotivates high performers and reinforces low performers’ ability to be rewarded by doing the minimum. Well-designed performance technology ties compensation to the organization’s compensation philosophy and supports a transparent approach to rewards based on performance assessment using objective data.
Connect Performance to Learning to Grow Talent
Organizations tout employees as their greatest asset (mostly true given that compensation—including benefits—is the largest budget item), but this often becomes lip service during performance reviews. Managers identify areas for improvement but often fail to provide supporting learning and development (L&D) opportunities. So, despite talent shortages and high hiring costs (compared to training), many employers tolerate a mediocre performer or allow good potential talent to leave rather than invest in upskilling or retraining because tying performance to training requires time-consuming manual work.
Best-in-class performance tools should interface with L&D platforms, allowing employees to learn new skills or improve existing ones directly related to performance objectives. For example, when a manager enters a low score in a pre-defined category, it identifies available options (voluntary or required) to improve performance.
This model easily fits jobs with specific and well-defined skill sets where the output (quality and quantity) directly equates with performance. The concept can also work with more complex jobs using soft skills. However, it may require advanced programming to tie performance elements to associated learning opportunities and involve engaging a learning specialist.
Take Performance and Learning to the Next Level With Succession Planning
In a tight labor market, succession planning is even more critical. Employees who don’t see a path forward will likely begin to look elsewhere. Succession planning technology helps track key organizational, team, or individual metrics to identify the next generation of leaders.
There’s a vast array of succession planning tools in the market. Beyond having the right people in the right roles and ready to fill vacancies, distinctive features of succession software include gap identification, talent pools, career pathing, fit recommendations to match jobs to skills, and suggested coaching activities.
As with compensation and L&D, few solutions connect the dots between performance and succession planning, which is ironic given the emphasis on rewards and recognition. Ideally, technology should flag potential successors based on data-driven insights, including performance and L&D experiences. Envision the scenario where a skill gap identified by performance software links to targeted learning initiatives tied to a team or organization-wide growth opportunities.
See More: 3 Ways Tech Can Modernize Your Succession Plan
The Role of APIs
Organizations use API and SSO (single-sign-on) technology to link siloed performance components. Large branded marketplaces provide a digital storefront of curated HR tech stand-alone solutions that integrate with a specific enterprise platform for which employers pay a licensing fee.
Lacking an existing API, employers pay to build a custom API. Standard APIs (built to a pre-defined standard by the technology provider) are less expensive and may be sufficient, especially for smaller employers. Employers wanting more tailored or flexible use of data in multiple platforms should expect to hire a specialist to build a custom API, which can be costly.
See More: How To Optimize Compensation With APIs
Holistic Design Increases Organizational Success
Traditional performance technology typically focuses on siloed administrative and compliance-related functions, e.g., basic compensation, promotions, and terminations—adding little value or insight into organizational well-being. Today’s workplaces are data-driven. Thanks to AI, we’re seeing improvements in predictive analytics in key areas such as attraction and retention. Sadly, performance management is not among these areas.
There is value in a holistic approach to performance in any organization, although the technology best supports organizations with 250-plus employees. Sectors that rely heavily on union labor may find it challenging to implement, and the potential for a big impact is limited.
Performance management technology is central to underutilized compensation, learning and development, and succession planning tools. While APIs and SSO can be effective solutions, organizations should demand a strategic, holistic design that links these functions to the organization’s people strategy. The result will be increased organizational well-being by retaining top talent and eliminating the high cost of talent replacement.
Have you considered using holistic performance tech for better organizational well-being and talent retention? Let us know on Facebook, Twitter, and LinkedIn. We’d love to hear from you!
Image source: Shutterstock
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