Purpose
Through my past experiences as a chief data scientist for HR in a Fortune 500 company and a data science consultant, I have gained valuable insights into the performance assessment and talent review process, which are crucial components of effective employee performance management and talent management practices. These insights are timeless and can be applied to various organizations and industries.
my purpose is to share these insights and learnings with a broader audience. My aim is to provide actionable and practical recommendations for anyone who may be involved in conducting performance assessments or talent reviews, or who may be interested in improving their HR and talent management practices.
I believe that sharing these insights and learnings will benefit both individuals and organizations. By understanding the importance of balancing internal equity and individual professional development, as well as increasing the frequency of performance assessments, individuals can develop themselves more effectively, and organizations can better manage and develop their human capital, driving success and growth for the organization as a whole.
Once again, my purpose is to share my experiences, insights and learnings to provide readers with actionable recommendations to improve their HR and talent management practices. My goal is to help individuals and organizations achieve their fullest potential through effective performance assessment and talent review practices, and to ensure that these practices remain a key focus for organizational success.
Introduction
The importance of effective performance management practices for the growth and success of organizations cannot be overstated. With the increasing importance of human capital as a source of competitive advantage, it is essential for organizations to adopt a holistic approach to performance management that fosters employee engagement, promotes learning and development, and drives organizational performance. This article provides insights into the application of people performance analysis in real-world organizational settings, with a particular focus on a case study of the chief data scientist for HR in a Fortune 500 company. The case study highlights the importance of creating a user-friendly digital system, enabling the yardstick method, and increasing the frequency of assessment to make performance management more effective and agile. These insights are in line with the recommendations of leading consulting firms such as McKinsey & Company, Boston Consulting Group (BCG), Mercer, Deloitte, Accenture, and PwC.
Literature review:
In recent years, leading consulting firms such as McKinsey & Company, Boston Consulting Group, Mercer, Deloitte, Accenture, and PwC have published articles and reports on performance management.
McKinsey & Company: "Reinventing performance management" by Brian Elliott and Jay Conger. In this article, the authors argue that traditional performance management practices are ineffective and offer recommendations for a new, feedback-driven approach to performance management.
Boston Consulting Group (BCG): "Performance management is not performance evaluation" by Roberta Fusaro and Katrin Kost. This article emphasizes the importance of a more holistic approach to performance management and offers insights into how companies can use performance management to drive organizational performance.
Mercer: "The future of performance management" by Mercer. In this article, the authors provide insights into the latest trends and best practices in performance management and offer recommendations for creating a more effective and engaging performance management process.
Deloitte: "Reimagining performance management" by Deloitte. This article offers insights into how companies can create a more agile and effective approach to performance management that can foster employee engagement and productivity.
Accenture: "Performance management in the new world of work" by Accenture. In this article, the authors provide insights into the challenges and opportunities of performance management in a rapidly changing world of work and offer recommendations for creating a more effective and agile performance management process.
PwC: "Performance management in the digital age" by PwC. This article discusses the impact of digital technology on performance management and offers insights into how companies can use data analytics and digital tools to improve performance management practices.
Overall, these articles offer a range of insights and recommendations for improving people performance analysis from leading consulting firms. While each article offers unique insights and perspectives, they all share a common goal of helping companies create more effective and agile approaches to performance management that can foster employee engagement and drive organizational performance.
Background:
As the chief data scientist for HR for a Fortune 500 company, I was tasked with conducting a performance assessment and talent review of my team members. These two processes are crucial components of an effective employee performance management strategy. Performance assessment involves evaluating an employee's performance against pre-defined goals and expectations, while talent review assesses an employee's potential for growth and development within the organization. From an HRM and talent management perspective, these processes help to manage and develop human capital within an organization, ensuring that employees are aligned with organizational goals and objectives.
Approaches:
The company had a dedicated performance development cycle that consisted of four stages, with each stage intended to be completed quarterly. The first stage involved setting goals for the team member for the new year. Instead of having the leader/manager set the goals, I had my team members provide their goals, which we then evaluated together and agreed upon. We then loaded the goals into a cumbersome application system, which highlighted the importance of user-friendliness in performance management systems. The second stage was the annual review of the previous year's performance, which included a self-review by the employee, an initial performance assessment by the appraiser, and a performance conversation before a performance calibration was done. The third stage involved development conversations to assess the progress of the team members in reaching their goals and identifying areas for improvement. The fourth stage was a feedback survey where I gave my team members feedback on their final assessment after one year had passed.
Review about Approaches
Upon reflection and observation, it became evident that the feedback received from the employee engagement survey indicated that employees felt disconnected from the performance assessment, while managers felt disconnected from the talent potential review. A literature review of effective performance management practices further supported the need for a more balanced approach, that emphasizes both internal equity and individual professional development.
The current approach to performance assessment and talent review in the company was found to have certain limitations.
Firstly, the performance calibration method placed too much emphasis on internal equity and differentiation of rewards within the division, instead of focusing on individual professional development. This approach could potentially harm the motivation of employees, as they may feel that their career development is less important than the company's internal equity. This is contrary to research that has shown that a focus on individual development leads to higher employee engagement and performance.
Secondly, the frequency of the performance assessment, conducted quarterly, could lead to memory recency bias, which may only highlight the most recent performance, overlooking an employee's overall performance for the entire year. Research has shown that high-frequency feedback and agile performance management can lead to better engagement and higher levels of performance.
In retrospect, a better approach would have been to place emphasis on the yardstick method of performance assessment, followed by a transparent bell curve performance calibration, which would help to reinforce the company's core values of fairness and collective work. This would allow the employee to understand their exact performance gap and develop a professional development pathway to improve. In addition, increasing the frequency of performance assessment would help managers provide agile feedback, which would allow for dynamic capture of performance reviews. By balancing internal equity with individual professional development, employees would feel more motivated and supported, leading to higher levels of engagement and performance.
It is important to note that the success of these approaches depends heavily on the use of a user-friendly digital system that can effectively capture and analyze the data. In this way, the company can leverage data-driven intelligence and AI to enhance performance management practices, while still maintaining a focus on individual development and growth.
Technology Stack:
Several technology stacks can help organizations create a better-integrated system with STATA to make performance management an intelligent agile way of doing so.
Here are some examples of technology stacks that can be used to support performance management:
- AWS: Amazon Web Services (AWS) provides a range of cloud-based services that can help organizations store, analyze, and manage performance data. AWS provides a scalable and secure infrastructure for performance management applications.
- Google Cloud Platform: Google Cloud Platform provides a range of services, including data analytics, machine learning, and application development that can be leveraged to create a more intelligent and agile performance management system.
- Microsoft Azure: Microsoft Azure provides a range of cloud-based services that can help organizations create a more efficient and effective performance management system. Azure provides services for data analytics, machine learning, and application development.
- SAP SuccessFactors: SAP SuccessFactors is a cloud-based human resource management system that includes performance management tools. It provides a user-friendly interface that makes it easy for managers to conduct performance assessments, set goals, and provide feedback to employees.
- Oracle HCM Cloud: Oracle HCM Cloud is a cloud-based human capital management system that includes performance management tools. It provides an intuitive interface that makes it easy for managers to conduct performance assessments, set goals, and provide feedback to employees.
Overall, performance management is an essential component of effective HRM and talent management practices. By adopting a more agile and user-friendly digital system that enables the yardstick method and increases the frequency of assessment, organizations can create a more effective and engaging performance management process. This, in turn, can lead to improved employee engagement, productivity, and a substantial impact on a company's financial performance.
Business impact
The implementation of an agile and effective approach to performance management can lead to a substantial impact on a company's financial performance. For instance, consider a financial institution with 20,000 headcounts that adopts a more effective approach to performance management. Assuming a revenue per employee of $100,000, the company's revenue would increase by $9.2 million, based on a 46% increase in revenue per employee as reported by Deloitte. This increase in revenue could also result in lower costs associated with employee turnover, which can be significant. Based on estimates from the Society for Human Resource Management, replacing an employee can cost up to 60% of their salary for jobs that pay less than $75,000 per year. Assuming an average salary of $60,000, the cost of replacing a single employee would be $36,000, resulting in a potential cost savings of up to $2.2 million for the financial institution, assuming a 10% reduction in turnover rate resulting from increased employee engagement. Additionally, the increase in productivity resulting from a more effective approach to performance management can lead to further cost savings. For instance, if the financial institution had an operating margin of 20% and was able to achieve a 15% increase in productivity, this would result in a $9.2 million increase in profit. These examples highlight the significant impact that an effective approach to performance management can have on a company's top and bottom line.
In conclusion, this article has provided valuable insights into the importance of effective performance management practices for organizations, with a focus on people performance analysis. Through the case study of the chief data scientist for HR in a Fortune 500 company, this article has highlighted the limitations of traditional performance management practices and offered recommendations for a more balanced and agile approach. By emphasizing both internal equity and individual professional development, and increasing the frequency of assessment, organizations can create a more effective and engaging performance management process that can drive employee engagement and productivity, and have a substantial impact on a company's financial performance. The technology stacks provided can also support the creation of an integrated system for performance management. These recommendations are based on rigorous analysis and research, and can be applied to other companies facing similar recruitment challenges.
Disclaimer
It is important to note that the quantified numbers have been masked to protect the identity of the company. However, the findings and recommendations are based on rigorous analysis and research and can be applied to other companies facing similar recruitment challenges.
Citations:
Elliott, B., & Conger, J. (2016). Reinventing performance management. McKinsey & Company. https://www.mckinsey.com/business-functions/organization/our-insights/reinventing-performance-management
Fusaro, R., & Kost, K. (2018). Performance management is not performance evaluation. Boston Consulting Group. https://www.bcg.com/en-mena/publications/2018/performance-management-not-evaluation.aspx
Mercer. (n.d.). The future of performance management. https://www.mercer.com/our-thinking/career/the-future-of-performance-management.html
Deloitte. (n.d.). Reimagining performance management. https://www2.deloitte.com/us/en/pages/human-capital/articles/performance-management-21st-century.html
Accenture. (2019). Performance management in the new world of work. https://www.accenture.com/us-en/insights/human-capital/performance-management
PwC. (2019). Performance management in the digital age. https://www.pwc.com/gx/en/services/people-organisation/publications/performance-management-digital-age.html