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.

Mark Smith, Contributor

October 28, 2004

12 Min Read

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.

Align. This step is about ensuring that the recommended actions and plans are put on a clear path toward reaching the goal, objectives, and initiatives set out by executives and management. This enables you to align the workforce with performance goals, which means clearly defining, communicating, and coordinating targets. You'll also need to establish a means of scoring the workforce on their performance, and use rewards and incentives to encourage alignment with goals. With good definitions of performance targets and rewards, you can then inform the workforce and employ key performance indicators (KPIs) and metrics systems to automate notification of how employees and other members of the workforce are doing in terms of alignment with strategic goals.

You can adapt the PerformanceCycle idea to create your own direct method of quickly but effectively establishing a process for continuous performance improvement. The cycle notion can help you put into context many current applications and systems relevant to workforce performance and see where you have gaps that demand attention. You can examine if applications are simply automating existing management processes and methods that need to be altered to improve alignment and performance.

Providing management with the tools to manage performance and giving employees a method with which they can understand, optimize, and align their efforts will benefit your organization. Over time, management will spend less time on simple measurement and more time on using this cycle process to determine the best direction in which to proceed toward better optimization and alignment. Organizations will have the bandwidth to take a more strategic and intelligent approach to workforce management.

Performance, Not Automation

Most HR and IT executives accept that workforce management is a problem, and that new processes are needed. However, we must make sure that the technology isn't devoted only to automating processes for cost efficiency. The new focus must be on the larger goal of ensuring that people operating with their specific business processes are well motivated and prepared to meet business demands.

A workforce management process consists of the following set of activities, which have supporting subordinate processes:

  • Recruit and hire

  • Employ and compensate by setting goals and objectives

  • Train and monitor

  • Reward and provide incentives according to some time interval, such as annual, quarterly, or monthly.

This breakout of the workforce process gives us the outlines of a framework. You can customize such a framework to assess how well your organization manages each of the steps in the process and determine where investment is required to automate and/or improve the outcomes.

Too often, organizations make investment decisions by trying to address everything at once, rather than auditing each of the current processes and steps and finding the precise areas that demand attention — and can bring the largest return. Of course, most organizations are looking at performance management to address the workforce already in place and making use of some level of training and other improvement systems. The cycle approach will help in refocusing goals and objectives; the system of rewards and incentives is the most likely area where workforce performance management can make a difference.

Software Directions

Increasing interest in workforce performance management has brought into the market a variety of applications and tools to support the critical points in the process and performance cycle. Much of the new software is coming from application providers that have been operating under the big enterprise application system radar and have quietly established a following in many global organizations. The movement toward service-oriented applications will surely bring more interesting solutions into the market, including solutions tuned to outsourced and offshore workforces, as time goes on.

Here's a quick profile of four providers that haven't had the high profile of the big HR and ERP application providers, but are becoming key contributors to workforce performance management:

  • Softscape. Providing the larger context of the workforce process is the contribution of this hosted solution provider. Softscape has built out its case management and consulting to provide deeper project-based workforce analysis solutions. The vendor achieves consistency in its applications by integrating them on a common platform.

  • Integrated Performance Systems (IPS). Targeting common workforce process applications, IPS provides a common management and information platform, called IPS iPerform. This application suite provides a common platform and approach for organizations looking at improving human capital performance.

  • Synygy. Driving the theme on "pay for performance" and a heritage in incentive management, Synygy builds out from core offerings focused on employees and incentives and to support strategic objectives. The company has expertise in sales performance areas, like quotas and territory management. However, the company is expanding its Synygy solution suite to support the entire workforce.

  • Workstream. Just as the bigger enterprise applications vendors have focused on consolidating tools and systems into suites, so to have some of the more specialty vendors, such as Workstream. The company has put together an impressive roster of applications under a single portal called TalentCenter, which is focused on recruitment, performance, compensation, and transition management. Workstream believes in an economic and mass adoption model that brings you all of these applications at a very low price.

Time to Get Started

No matter whether you're in finance, operations, or HR, rapidly utilizing your workforce and employees as a strategic human capital asset is critical to competing in the market. Merely operating under the conventional wisdom of HR processes like hiring, benefits, and review management won't enhance the full potential of your workforce. It's time to look at leveraging workforce performance improvement processes and employing the means of leveraging information to support processes, as you have in other operational areas.

Take a good look at hosted, service-oriented applications as a way around the massive resource investments and long deployment cycles typical of enterprise applications. Hosted services don't require upgrades to your existing HR and ERP systems. Don't fall victim to the strong industry and cultural forces against examining new alternatives for adding workforce performance management to your portfolio. The better approach is to do the economic analysis and calculate the risks of not applying IT smarts to improve workforce performance and align it with business objectives.

Workforce performance goes beyond simply HR; it's about building a management practice that addresses human capital assets. The time has come to get on the right path toward addressing an area that has an enormous impact on overall financial and operational performance.

Email the editors at [email protected]

Mark Smith is the CEO and senior vice president of research at Ventana Research, an advisory services and research firm providing insight and education on best practices and technology in performance management.

About the Author(s)

Mark Smith


Mark is responsible for the overall direction of Ventana Research and drives the global research agenda covering both business and technology areas. He defined the blueprint for Information Management and Performance Management as the linking together of people, processes, information and technology across organizations to drive effective results.

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