The practice of pay for performance has proven very effective since HR and management professionals began implementing ‘management by objectives’ (MBOs). It’s fairly predictable that if talented professionals are given clear objectives, and a strong enough financial incentive, they will work hard to achieve them.
But the process of managing performance is a lot more complex than just balancing objectives and incentives. Motivated professionals will pursue aggressive means to achieve challenging objectives if the right incentives are in place. But what does the objective tell employees about how to achieve the desired result? News reports have shown that recent corporate and financial industry collapses have been caused not by the failure to meet objectives, but by the overly aggressive pursuit of results – and compensation systems that actually rewarded bad behavior. One of my earlier posts discussed how Talent Management is different from other ERP and HCM processes because it’s possible to automate the process without achieving any beneficial business result – you can end up with a ‘garbage in, garbage out’ scenario if the decisions made about talent aren’t accurate and equitable.
SAP has taken a closer look at Performance Management, and made significant changes in Enhancement Package 4 which should help managers make better decisions while engaging with this process. For starters, there’s a new user experience that is much improved over previous releases. We’re also providing improved integration to other talent management processes: appraisal results feed a comprehensive Talent Profile that provides a more complete, three-dimensional view of an employee. Support tools like profile matchup allow managers to check an employee’s suitability for jobs further along in their career path. Calibration tools provide real-time simulations of the Compensation impact of Performance appraisal results. Additionally, there is better support for companies to centrally define not just objectives, but corporate values – and cascade them to the entire organization.
Cascaded goals and values can also support employees who create their own objectives, which they can now align back to goals assigned by management. This highlights the relevance of the individual goal to the organizational strategy.
As seen in the screen shot below from the Talent Management Specialist role in Enhancement Package 4, there is a very simple process for creating corporate values centrally and cascading them to the organization. In the system, values differ from corporate goals in that they do not have specific KPIs for measurement:
As Nish Pangali, an SAP Product Manager in this area puts it: “Core values are fundamental to a company’s culture. But our customers want them to be codified in employee goals and objectives, not just printed on the back of their ID badges”.
Enhancement Package 4 Performance Management gives some strong support for achieving corporate targets while staying focused on corporate values, with a user experience that makes managers and employees alike more comfortable with the overall process.