At Baxter, the process starts with the company's top strategic goals, or what it calls the four Bs: Best Team, Best Investments, Best Partner, and Best Citizen. The executive team creates specific goals under each category--one goal under Best Investments, for example, is to achieve cash flow this year of $1.3 billion to $1.5 billion before capital expenditures. The top 150 executives then devise their own goals, which are aligned with the corporate goals and distributed to employees.

So what does that mean for an employee handling vendor contracts? He could set a goal of enforcing a 60-day payment-due date on certain contracts. Meanwhile, an employee manufacturing medical systems at Baxter may not have any goals related to Best Investments but several that fall under Best Team and Best Citizen.

The employee goals are collected in a performance-management system from SoftScape Inc., which links to Baxter's core PeopleSoft Inc. HR system. An internal Web site gives guidance on how to write and craft goals, and achievement results are fed into the company's performance-review and compensation systems.

Bob Gerber, who manages E-procurement of suppliers at Baxter and reports to the VP of indirect purchasing, uses the process to manage his own career, plus those of the four people who report to him. "The biggest value is the digitization and consistent fashion of performance information," he says. "Historically, we'd put this information into filing cabinets and pull it out once or twice a year. What this process is, really, is a tool that provides me with an opportunity to better understand Baxter's expectations of me and my team."

It did require some adjustment. "There were some people reluctant to change," Gerber says. "But for me, and most of the people who worked for me at the time, it was a short adjustment period." He believes that's because most Baxter employees viewed the process as a sign that the company was committed to its workforce.

The high-tech approach to performance management at Seagate and Baxter is unusual but growing. Employee-performance management is the No. 3 application initiative among HR execs, according to a survey by AMR Research published last month, making it a higher priority than E-learning, employee self-service portals, and software used for procuring contract workers. Initiatives for core HR management and recruiting systems were only slightly more popular than performance management.

That said, HR applications don't top the list of IT priorities at many budget-strapped companies. "With the exception of a handful of companies, I don't think we're anywhere near the enterprise-adoption level of this software," says Robert Maina, a financial analyst with CIBC World Markets. That could change when budgets relax, says Schafer, who predicts that less than 5% of companies use goal-alignment software.

The difficult business environment actually may drive interest in the technology. "A key factor that's caused many of our customers to start thinking about strategic execution, and getting people aligned with it, is the continuing stagnation of the economy," says Paul Schaut, CEO at Performaworks. "Companies realize they have to do more with the same resources or less, but they still must outstrategize the competition."

Seagate, for instance, has trimmed its workforce by 30%, or 18,000 people, during the past two years. Twenty-seven thousand of the remaining workers--mostly manufacturing employees who don't have regular access to PCs--aren't required to participate in goal alignment. For the rest, the process will have a direct impact on compensation: performance appraisals will be based 70% on how well employees achieved goals and 30% on how they went about achieving them (so, for instance, lack of teamwork would diminish the value of an achieved goal).

Goal-alignment software typically falls under the category of employee-performance management and is sold by several specialists in that market. But the market's potential isn't lost on the big guys. PeopleSoft released its first employee-performance application two months ago, and it includes goal alignment. Implementation can cost $500,000 for a large company, plus another $100,000 in service and consulting fees. The biggest risk for business and IT managers is that people won't use the system properly. Employees who procrastinate on goal setting, managers who don't get involved, and companies that don't give guidance on setting goals can all lead to failure.