Originally published August 15, 2007
In the past, performance management initiatives that impacted HR came in one of two flavors. In the first, integrated applications under an enterprise resource planning (ERP) transactional system permitted data to be extracted in a relational table and displayed in a scorecard or dashboard. These interfaces could be configured in various formats such as aligning with the Balanced Scorecard methodology. The challenge in these instances is that the interesting data that would be needed to do this type of analysis was often outside of the SAP or Oracle system. Once it became apparent that gathering the data on a weekly or monthly basis was a burden requiring manual linking or keying of data, the reports would start coming in late. When no one reacted, the reports stopped completely.
The second area involved tying workforce data into the planning and budgeting process. Several leading vendors, including Hyperion and Cognos, developed functionally rich workforce planning solutions that would facilitate the process of planning and forecasting workforce requirements. This was a valuable additional capability that helped with the planning process, but it was accessed by limited users and represented a subset of what could be possible with a broader performance management perspective.
With more than 70% of organizations either planning, rolling out or already benefiting from a business performance management solution (according to the 2007 BPM Pulse Survey), many organizations are getting past the hurdles of a normalized data structure and tying in information from a wide variety of source systems. These organizations are now prepared to take on the next phase of performance management – what we are calling performance management 2.0. When BPM Pulse Survey respondents were asked the question of what departments outside of finance could benefit from enhanced operational analytics, the sales department and HR were the two most frequently mentioned (over 70% and 59%, respectively).
One aspect of sales performance management includes sales compensation management, clearly an HR-related topic. With the variety of variable pay programs, bonuses and special performance incentive programs in sales, it is clear that better understanding and enhanced analytics in this area could be of benefit. As a matter of fact, an ongoing survey being conducted by BPM Partners and Varicent, a sales performance management vendor, identified that more than 80% of respondents felt that sales performance management was difficult or very difficult to administer. This is largely due to the inherent challenges of complex compensation programs and the need for improved systems to manage those activities. Companies such as Varicent are specifically focused on this area.
Another intriguing approach is in what SAS is calling human capital management (HCM). SAS was early to market with a very wide range of business intelligence capabilities including specialized data mining and enhanced reporting to address these issues. Likely due to the early challenges of compiling data from a variety of sources distributed about the enterprise, SAS found limited market interest 5 to 7 years ago. Now, as data is more readily available and in a normalized format, this area is picking up again, and SAS continues to invest in further enhancements. One example involves identifying employees at risk of departure in a large organization. Although some attrition is expected and even healthy for some organizations, the ability to proactively identify employees that are at risk of departure is a very powerful capability because it would enable managers to be proactive in determining whether they want to take steps to avert the loss of the employee.
The overlay of performance management on HR will clearly become more important as companies wade deeper into the waters of performance management 2.0. The companies that successfully take advantage of these capabilities will be stronger organizations and be able to leverage human capital as an even more strategic asset over their competitors.
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