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10/28/2004
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People Power

Organizations can only go so far to improve performance before they must address their most important asset: the workforce. Competitive forces are pushing managers to look beyond HR and ERP systems and embrace performance management.

Times are changing for the human resources (HR) function. The days of serving in merely an operational role are disappearing into a cloud of buzzwords: human capital management, talent management, employee performance management, and workforce performance management. What does all of this change mean? I believe the shift is important and deserves careful thought by both business and IT professionals focused on making performance management work in their organizations.

We've seen significant investment in the automation and improvement of business processes for other operations, such as sales, call centers, and manufacturing. In the best cases, these efforts have brought value and efficiency. Unfortunately, the technology and implementation investment has been aimed deeply into operational functions that generate revenue, incur operational cost, and figure prominently in profitability equations. The primary objects have been customers, products, and services. Yet, who actually performs the tasks critical to your success in these functions? Your employees and your organization's greater workforce!

The past decade of business process and IT innovation has done little to help organizations manage their human capital. The focus on ERP, CRM, and other processes and systems has in many cases left HR with little in the way of tools to manage the workforce effectively. The methods and processes employed to improve workforce and employee performance management have been mostly cumbersome, manual processes.

Operational efficiency is really only one piece of the larger business performance puzzle. The most important asset that operates and manages your organization is the employee and overall workforce. So, it's probably time to assess your investment and commitment to them. Why? Well, having a motivated and satisfied workforce and engaged employees that know that their efforts and responsibilities are aligned with strategic objectives can have significant impact to your overall business performance.

Fixing a Problem

Workforce performance management might sound like a good value proposition: but we must consider first why organizations have fallen short. The mission of maximizing performance is ultimately about aligning people and processes with the organization's goals and objectives. Most organizations don't have a good plan to make this happen, much less a clear way of executing this mission. Companies typically have difficulty looking internally and assessing their existing knowledge of the majority of employees. It's hard to gain visibility into what they do and enable employees to understand how their efforts affect the business and its operations. This is a problem.

To fix the problem, many organizations first confront a simple the lack of a clear definition for the process of managing, let alone improving workforce performance. Unfortunately, the applications industry and the organizations it serves have generally focused solely on the HR organization's activities and operations to provide things like employee self-service. HR's focus has been on internal automation and outsourcing of payroll, procurement, benefits, and other activities. These operational steps are important but don't really amount to a strategic effort to raise the value of the employee or other workforce to the organization. Pushed aside by more intense focus on priorities higher on the list for executives, HR's current state has left a large void in workforce management leadership. The result is that the workforce struggles to maintain alignment with the organization's key objectives.

The recent evolution and suite consolidation of enterprise applications business has only compounded the problem. The current state of ERP software from the likes of Oracle, PeopleSoft, and SAP reveals limited advancement and innovation in HR management systems (HRMS). Vendors have bundled their HR solutions into larger suites that are cumbersome to implement due to sizeable underlying infrastructure requirements that must be met first - and are difficult to deploy to the workforce in a user-friendly fashion. In most cases, workforce automation and performance management applications aren't offered without incurring the cost of a massive investment upgrade in existing systems. Workforce performance management features generally can't operate independently of the underlying HR or ERP systems.

In fact, for most organizations, the time, capital, and resources required to adopt the ERP vendors' employee and workforce performance applications are so high that IT management knows it can't get anything accomplished in less than two years. Needless to say, such a timetable is a problem given the demands of current business cycles. As with other functions, organizations have sought solutions outside the traditional purchase, implement, and deploy approach. For many HR and IT executives, the hosted application service model, which looks at software as a service, provides a path to lower risk and higher value.

Nonetheless, the competitive need for effective, high-caliber employees has brought organizations to the stark realization that they must focus on building a performance management process and framework for their human capital. Such efforts shouldn't necessarily distract from the longstanding focus on leveraging existing ERP and HR systems. However, to improve workforce performance management, companies may have to be willing to step beyond conventional wisdom - and beyond the functional restrictions of current ERP and HR systems.

Where to Start?

How do you begin to manage your workforce and drive better employee performance? You must first have a common definition of the mission. Here's one that I use: "Workforce performance management is the practice of managing effectiveness and value of employees to the organization through understanding, optimizing, and aligning the workforce to reach optimal performance."

This mission statement means that the goal of maximizing the value of human capital assets becomes attainable when you can enable employees to improve their performance by intrinsically linking their behavior in business processes to results. The mission statement also tells the organization that employee performance and managing the workforce to achieve optimal outcomes is a critical initiative. As I suggested earlier, the key points of the workforce performance mission statement haven't been taken seriously by most finance and operational executives. However, I believe we're at a point where minds are changing; the transition has begun toward an embrace of workforce performance management as critical to the organization's success.

Cycle of Improvement

To accomplish workforce performance management in a timely and efficient fashion, you must determine a process and methodology for assessing your commitment to your new and existing employees. The value of leveraging your human capital assets may be clear, but until you can define an improvement path, you're sitting still and not progressing. I'd like to put forward the performance improvement process that we use at Ventana Research, called the "PerformanceCycle," and discuss this in the context of your workforce.

Understand. In this step, the focus is on processing employees' historical performance. Here, you examine the workforce employees and their relevant contributions to the organization. This step typically includes modeling and accessing employee and workforce, then discovering and interacting with information about employees within the context of their roles in the organization.

Optimize. This step is where you plan for future actions and decisions that can drive performance improvement. When you "optimize," you find paths to improve future employee behavior. At this step, various parts of the organization come together to collaborate and plan how to improve the value of both the workforce as a whole and individual employees in particular. This step typically includes projecting through forecasting and planning, collaborating on best actions, integrating analytic results into the organization's processes, and overall, providing direct action on how to improve performance.

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