by Performance management as a continuous communication process between an employee and his/her immediate supervisor, determining clear objectives and clarity with regards to the following:
- How the employee’s job contributes to the objectives of the company
- The employee’s key performance areas
- What are the standards and expectations in terms of the key performance areas?
- Measurement of key performance areas
- How performance can be improved
- Barriers to performing optimally
Managers use performance management systems to assess and reward the behavior of their employees. Additionally, a strategic human resource management function handles the recruiting, interviewing, hiring and development of all personnel required to ensure your company can achieve its goals. The relationship between performance management and strategic planning links day-to-day operations with your company’s vision.
Defining Personal Development Goals
An individual establishes her personal goals by aligning her development activities to the organization’s needs. For example, a strategic HR department can publish self-assessment tools that allow an employee to determine how she rates in terms of attributes. These attributes might include accountability, reliability, integrity and customer-centric behavior. Performance gaps may reveal a need to improve in one or more areas. Establishing a specific, measurable and attainable goal makes it easier for an employee to achieve her objective. Goals should also be realistic and time constrained. To complete the process, managers usually require employees to submit a development plan.
Setting Organizational Goals
As part of the strategic planning process, an organization defines its goals and objectives. For example, a company may decide to focus on specific IT trends such as cloud computing, data security and global markets. As a result, strategic direction may dictate whether a company maintains research and development spending. This impacts the HR department’s ability to attract and retain top talent.
Managing Change
Ensuring an organization’s capability to provide critical services usually requires assessing the entire workforce against a defined competency model for each role. Work usually involves a combination of technical and professional skills. For example, if a business needs to make a shift from doing business one way to transforming to using new processes and technology, skill in change management becomes a priority. Managers need to recognize, through performance management processes, individuals who can act as leaders and help others achieve strategic goals.
Providing Training
Strategic HR management allows you to recognize the need to offer training and development opportunities that ensure personnel can respond to challenges both now and in the future. Workshops, seminars and self-paced podcasts, videos and job aids can help prepare employees to address problems in the workplace. By analyzing performance review results, HR administrators identify problem areas, such as communication, collaboration and business acumen. Then, they can offer learning and development options. Or, if all employees appear to lack technical knowledge about a new infrastructure, the success of the entire company may depend on addressing performance gaps.
Keep score
One way to formalize the link between strategic planning and performance management is through the implementation of a balanced scorecard, which involves creating indicators of individual performance along four separate “perspectives” of an organization’s success. For the case of a bank, consider the following:
- Financial (cost control, sales growth rate, profit growth rate)
- Customer (service product quality, customer satisfaction, service timing)
- Internal process (information delivery, interaction between employees and clients, standard operation process)
- Learning and growth (corporate image, competitiveness, employee satisfaction).
Ensure HR does what it is supposed to do
The HR function can and should play a critical role in creating and implementing the human resource management practices and performance management strategies that will allow the organization to realize its mission and vision. Specifically, the HR function can make the following contributions:
- Communicate knowledge of strategic plan. The HR function is a good conduit to communicate the various components of the strategic plan (e.g., mission, vision, and objectives) to all the employees.
- Outline knowledge, skills, and abilities (KSAs) needed for strategy implementation. The HR function, through job analyses and the resulting job descriptions, serves as a repository of knowledge regarding what KSAs are needed for a successful implementation of the strategic plan. Thus, the HR function is in a unique situation to provide information about whether the current workforce has the KSAs needed to support the strategic plan, and if not, to offer suggestions about what types of employees should be hired and what types of plans (for example, training and development initiatives) should be put in place to develop the needed KSAs internally.
- Propose compensation systems. The HR function can provide useful information on what type of compensation system should be implemented to motivate employees to support the strategic plan.
- Criteria: Behavioral criteria versus results criteria
- Participation: Low employee participation vs. high employee participation
- Temporal dimension: Short-term criteria versus long-term criteria
- Level of criteria: Individual criteria versus team/group criteria
- System orientation: Developmental orientation versus administrative orientation
- Compensation: Pay for performance (that is, merit-based) vs. pay for tenure/position
